Citi has launched a new tool to help buy side firms cope with the Uncleared Margin Rules (UMR) that are due to come into effect over the next two years. Financial institutions such as asset managers, pension funds and insurance companies are scheduled to come into scope of the regulations based on volume thresholds that […]
The Commodity Futures Trading Commission (CFTC) has issued an advisory noting that under its uncleared swap margin rules, the documentation of initial margin will not be required until the initial margin threshold amount exceeds $50 million. The CFTC says that this advisory was issued in furtherance of the March 2019 statement by the Basel Committee […]
The Futures Industry Association (FIA) has welcomed news that the Basel Committee on Banking Supervision has agreed on a limited revision of the leverage ratio to allow margin received from a client to offset the exposure amount of client-cleared derivatives. The Committee met last week to discuss a range of policy issues, including the leverage […]
BNY Mellon has incorporated AcadiaSoft’s initial margin (IM) risk suite of tools for margin calculation, reconciliation and messaging into its collateral service offering. In conjunction with BNY Mellon’s existing bilateral margin capabilities from post-trade and settlement through to collateral segregation and ongoing position monitoring, the aim of this is to enable buy side clients trading […]
New regulations will increase the cost of FX prime brokerage (FXPBs) services and all market participants – including executing brokers (EBs) – will have to share these costs, says a new report from Citi.The report, Collateral Damage? How Uncleared Margin Rules Will Revolutionise the FXPB Business Model, argues that FXPB is entering a “new market paradigm” driven by upcoming regulatory requirements that will increase both the value proposition and the cost of the services that they provide.The Uncleared Margin Rules (UMR) alluded to in the title of the report require market participants to post and segregate initial margin (IM) for derivatives transactions, including FX forwards, swaps and options, that are traded bilaterally.
DTCC-Euroclear Global Collateral, the joint venture of Euroclear and The Depository Trust & Clearing Corporation (DTCC), has announced that the Margin Transit Utility (MTU) collateral settlement infrastructure community has added six more dealers to its roster as it moves beyond its pilot production phase.
Goldman Sachs, JP Morgan, Morgan Stanley, Societe Generale, UBS and Wells Fargo have adopted MTU, Global Collateral says, joining over 30 investment management, administrator and custodian firms, including Brandywine Global Investment Management, Fidelity International, Franklin Templeton, Vanguard and Brown Brothers Harriman (BBH) who have adopted the service.
CME Group is set to change the strike price listing for certain FX options contracts in a bid to offer more granularity.Essentially, the exchange is reducing the number of steps above and below the at-the-money strike, while also reducing the strike increments. So, for AUD/USD, instead of 21 steps at $0.50 increments above and below the at-the-money strike, there will be eight steps above and below at $0.25 increments and then 10 steps at $0.50 increments for all weeklies and front monthly contracts. For non-front serials and quarterly contracts there will be 10 steps above and below the at-the-money strike at $0.50 increments and then 10 steps after that at $1 increments.
Kate Lowe, global head of trade services at State Street, talks to Profit & Loss about how new margin requirements could shape buy side behaviour in the FX market, and why 2019 is likely to be a “staging” year for many of these firms.Profit & Loss: As you’ve been talking to clients at the start of 2019, what’s been the major areas of focus for them?Kate Lowe: Well one of the big talking points at the moment is the impact that the uncleared margin rules (UMR) are going to have on the industry. In September this year, the threshold for firms that have to post initial margin for u
TriOptima has launched triCalculate IM Analytics, a new tool to provide insight into the options for initial margin (IM) calculation, helps with the identification and prioritisation of in-scope counterparties and aids trading decisions to reduce future IM costs, the group says.The service supports organisations that are in-scope for Phases 4 and 5 of the IM requirements, which come into effect in 2019/20. These two phases are anticipated to pull in thousands of regional banks and buy side participants with portfolios above €750bn, and €8bn in notional value, respectively. Those coming into scope are faced with a variety of operational challenges around the calculation and exchange of IM.“With less than a year to go until the next IM tranche, regulators will expect to see tried and tested IM calculation models supported by data well in advance of the September deadline.
The Futures Industry Association (FIA) has filed a response to the Basel Committee on Banking Supervision urging the adoption of FIA’s suggested modification to the leverage ratio and to recognise the exposure-reducing nature of client collateral in order to align regulatory incentives.
Central clearing of derivatives was a key pillar of the G20 countries response to the post-2008 financial crisis reforms to reduce systemic risk in the financial system, however FIA argues that to date, the leverage ratio’s failure to recognise collateral has had a direct negative impact on the ability of banks to provide clearing services to customers.