Phase 6 of Uncleared Margin Rules is set to take effect within days, and we hosted an"SS&C Middle Office Series - UMR" podcastin which we discussed ways to confirm your readiness for compliance. The fast-approaching deadline doesn’t mean you can soon stop thinking about the changes, and it doesn’t mean you’re too late to take actions that will help your firm make the best decisions.
The sheer number of entities that will be brought into scope with this latest phase will include those whose core competence isnotOTC derivatives, and who will want to ensure they’re complying in the most efficient way possible.
In that same vein, some entities may choose to monitor initial margin requirements closely to ensure they remain below the $50 million threshold that would require their firm to post collateral. There are a few strategies for remaining below the threshold. One option is to move qualifying trades to clearinghouses, compress trades, or add more counterparties.
There are also many nuances to custodians, so choose a custodian within the same region of the governing law of your CSA. For international business, choose a custodian that can handle any region. It’s also important that the custodian can accept the eligible collateral that falls under your CSA. This may require new negotiations with your counterparties to determine what is accepted eligible collateral.