Citi launches UMR tool for buy side
13 November 2019 New York
Image: Shutterstock
Citi has unveiled its new initial margin service – the Regulatory Initial Margin Calculation Service – aimed at helping buy-side firms in-scope for the Uncleared Margin Rules (UMR) to calculate and post initial margin (IM).
The UMR IM requirements for non-centrally cleared derivatives seek to establish international standards for non-centrally cleared derivatives.
Asset managers, pension funds and insurance companies are scheduled to come in-scope of the UMR based on their volume thresholds either with phase five on 1 September 2020 or 1 September 2021 for phase 6.
In order to comply with the regulation, many firms will have to establish collateral management capabilities for the first time and this includes the ability to calculate IM.
According to Citi, its new service helps firms as they progress from needing to estimate their future IM levels before the deadline, as well as once the thresholds take effect.
Citi’s service offers ad-hoc estimation, for which no set-up is required, or periodic IM calculation based on a regularly supplied trade file.
The IM calculation can be applied to existing portfolios or to hypothetical portfolios for the purposes of simulating initial margin under different scenarios.
Citi’s North America head of collateral management services, Diana Shapiro, said that an early and accurate view of the likely IM levels will enable clients to plan the scope and scale of work needed to comply with the regulation.
The service will leverage the International Swaps and Derivatives Association’s (ISDA) standard initial margin model (SIMM) model which has been made possible through a partnership with AcadiaSoft, an industry collaborative focused on margin automation and collateral management.
The service builds on Citi’s investment in its collateral management platform over the past 18 months, which includes the migration to a fully cloud-based architecture to enable greater scalability and faster time to market for new capabilities.
Fergus Pery, global head of collateral management services at Citi, explained that the final two phases of UMR could strain the operational platforms of in-scope firms, drain liquidity from their portfolios and increase collateral drag.
“The role of collateral management here goes beyond just another regulatory readiness exercise,” Pery added. “We see this as an opportunity to help our clients understand the growing impact of collateral management on investment performance and to create value by implementing sound practices today.”
The UMR IM requirements for non-centrally cleared derivatives seek to establish international standards for non-centrally cleared derivatives.
Asset managers, pension funds and insurance companies are scheduled to come in-scope of the UMR based on their volume thresholds either with phase five on 1 September 2020 or 1 September 2021 for phase 6.
In order to comply with the regulation, many firms will have to establish collateral management capabilities for the first time and this includes the ability to calculate IM.
According to Citi, its new service helps firms as they progress from needing to estimate their future IM levels before the deadline, as well as once the thresholds take effect.
Citi’s service offers ad-hoc estimation, for which no set-up is required, or periodic IM calculation based on a regularly supplied trade file.
The IM calculation can be applied to existing portfolios or to hypothetical portfolios for the purposes of simulating initial margin under different scenarios.
Citi’s North America head of collateral management services, Diana Shapiro, said that an early and accurate view of the likely IM levels will enable clients to plan the scope and scale of work needed to comply with the regulation.
The service will leverage the International Swaps and Derivatives Association’s (ISDA) standard initial margin model (SIMM) model which has been made possible through a partnership with AcadiaSoft, an industry collaborative focused on margin automation and collateral management.
The service builds on Citi’s investment in its collateral management platform over the past 18 months, which includes the migration to a fully cloud-based architecture to enable greater scalability and faster time to market for new capabilities.
Fergus Pery, global head of collateral management services at Citi, explained that the final two phases of UMR could strain the operational platforms of in-scope firms, drain liquidity from their portfolios and increase collateral drag.
“The role of collateral management here goes beyond just another regulatory readiness exercise,” Pery added. “We see this as an opportunity to help our clients understand the growing impact of collateral management on investment performance and to create value by implementing sound practices today.”
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