Trading firms working in derivatives markets will likely have to do some extra work to streamline and then advance their securities operations to be compliant with the industry’s uncleared margin rules (UMR), governing uncleared derivative transactions.
So says Eric Bolisay, head of derivatives strategic operations at T. Rowe Price, during a video interview with FTF News, during FTF’s CMD Ops 2019 Nov. 20, 2019.
Operations for derivative transactions will not be slowing down in 2020, which may prove to be one of the busiest ever as firms hit their stride to meet complex UMR deadlines.
Firms will need to leverage tools and implement best practices as they bring operations up to speed for the UMR phases, Bolisay says.
“It is extra work. In fact, it’s slightly specialized extra work in that it is not necessarily related to portfolio exposures or valuations — more related to the analytics that produce the initial margin,” Bolisay says. “So, for firms that are in scope and will be required to comply, they should be looking to insure they’re staffing up appropriately, staffing with the right folks who have the right skill sets to be able to meet the new regulatory requirements.”
Overall, firms need to keep in mind that UMR compliance is connected to many levels within a firm.
“What’s important to note is that UMR compliance does not occur in a vacuum,” Bolisay says. Inefficient existing collateral operations will need to be streamlined so that firms are better prepared and have the capacity to address UMR initial margin demands, he says. “Really, the name of the game is efficiency so that you have additional capacity to address initial margin.”
At CMD, Bolisay took part in two panels: “More Margin Calls & Other Burdens” and “When SMAs Are In Scope.”
Click on the image above to see the full interview.
CREDITS:
Videographer and video Editor: Janene Knox
Interview conducted by Eugene Grygo, chief content officer, FTF News
Co-Producers: Sarah Hathaway, vice president, Financial Technologies Forum (FTF) and Eugene Grygo
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