Understanding and Adhering to Un-cleared Margin Rules (UMR)

Monday, December 7, 2020 | By Paul Caiazza, Director SS&C GlobeOp | Fund Administration

Understanding and Adhering to Un-cleared Margin Rules (UMR)

Is your firm in scope for UMR? SS&C’s whitepaper, OTC Derivatives Workflow for Un-cleared Margin Rules in the EU and US, provides a simple flow chart to help you determine whether your firm is in scope, and for which phase.

In response to the financial crisis of 2008, the G-20 launched a four-element reform program in 2009, with a fifth element added in 2011. The program’s Un-cleared Margin Rules (UMR) mandate exchange of two-way initial margin. UMR reduces the risk of over the counter (OTC) derivatives by ensuring collateral is available to protect against counterparty default. The ISDA introduced a market standard initial margin calculator known as SIMM or Standard Initial Margin Method.

The core elements of the program are:

  • Reporting OTC derivative contracts to trade repositories.
  • Bringing standard OTC derivative contracts on exchange.
  • Clearing OTC derivative contracts through central counterparties.
  • Introducing higher capital requirements for non-centrally cleared contracts.
  • Regularly assessing whether the measures are sufficient to improve market transparency, mitigate systemic risk and protect against abuse.

Phase-in of the regulations began in 2016 for the largest firms. Phase 4 began rolling out in September of 2019. The final two phases will roll out in September of 2021 and 2022, respectively. The phases are determined by AANA (average aggregate notional amount) calculation over three months at Group Entity Level.

Download the "OTC Derivatives Workflow for Un-cleared Margin Rules in the EU and US" whitepaper to learn more about the ways SS&C can help your firm stay compliant. We provide AANA calculations, motoring service of Initial Margin Thresholds, Trade Matching utilizing Industry-Leading Technology and more. Through full outsourcing, component outsourcing and hosting services, SS&C’s Middle Office Service helps firms prepare for the regulations of OTC operations, offering a solution to handle your full collateral needs.  

Alternative Investments, Asset Management, Fund Administration, Regulation, Wealth Management

Theme picker