Pirum launches IM automation tool for OTC derivatives
05 February 2020 London
Image: Shutterstock
Pirum Systems has begun its first foray into the over-the-counter (OTC) derivatives market with the unveiling of a new initial margin (IM) tool aimed at automating clients’ collateral obligations under the Uncleared Margin Rules (UMR).
The first phase of UMR went live in 2016 and the close has increased annually, with phase five due to come into effect in September. By 2021, it is believed that more than 1,000 more firms will be required to post IM for OTC derivative trades.
The IM Instruct tool, which is now live, aims to assist users of over-the-counter derivatives in delivering IM to the various triparty and third-party custodian collateral venues and will replace the multitude of instruction operating models with a single, automated, exception-based solution, says Pirum.
Due to the limited scope of the first four phases of UMR, many of those in-scope have survived so far by manually processing the handful of IM transactions required per day. But, the next phases will radically increase the scope of the regulation and demands a more sophisticated long-term solution – and the IM Instruct is Pirum’s answer to this challenge.
Robert Frost, head of product development at Pirum Systems, explains that the different operating models between triparty and third-party custodians mean that firms have to cope with a multitude of messaging formats ranging from fax to SWIFT.
“This is simply impractical to do at volume so I’m excited that we have launched IM Instruct to automate this essential process for our OTC derivatives clients,” he adds.
According to Pirum, IM Instruct meets the industry’s need to standardise the various instruction flows across all collateral venues into a single instruction platform. The firm says that users will integrate once with the tool to gain real-time, two-way connectivity to all their triparty and third-party custodian collateral venues.
Pirum then allows users to instruct, monitor and manage the full instruction and affirmation process to maximise straight-through processing and increase capacity and efficiency for our clients.
"Instructing margin movements at triparty agents has been part of Pirum’s securities finance product offering for the past eight years,” says Todd Crowther, head of client innovation at Pirum Systems.“Within the repo and stock loan space, we currently enable our clients, some of the biggest financial companies in the world, to achieve a 99 percent STP rate by instructing across 41,000 triparty accounts, managing circa $1.4 trillion in collateral and facilitating over 6,000 margin movements per day.”
The first phase of UMR went live in 2016 and the close has increased annually, with phase five due to come into effect in September. By 2021, it is believed that more than 1,000 more firms will be required to post IM for OTC derivative trades.
The IM Instruct tool, which is now live, aims to assist users of over-the-counter derivatives in delivering IM to the various triparty and third-party custodian collateral venues and will replace the multitude of instruction operating models with a single, automated, exception-based solution, says Pirum.
Due to the limited scope of the first four phases of UMR, many of those in-scope have survived so far by manually processing the handful of IM transactions required per day. But, the next phases will radically increase the scope of the regulation and demands a more sophisticated long-term solution – and the IM Instruct is Pirum’s answer to this challenge.
Robert Frost, head of product development at Pirum Systems, explains that the different operating models between triparty and third-party custodians mean that firms have to cope with a multitude of messaging formats ranging from fax to SWIFT.
“This is simply impractical to do at volume so I’m excited that we have launched IM Instruct to automate this essential process for our OTC derivatives clients,” he adds.
According to Pirum, IM Instruct meets the industry’s need to standardise the various instruction flows across all collateral venues into a single instruction platform. The firm says that users will integrate once with the tool to gain real-time, two-way connectivity to all their triparty and third-party custodian collateral venues.
Pirum then allows users to instruct, monitor and manage the full instruction and affirmation process to maximise straight-through processing and increase capacity and efficiency for our clients.
"Instructing margin movements at triparty agents has been part of Pirum’s securities finance product offering for the past eight years,” says Todd Crowther, head of client innovation at Pirum Systems.“Within the repo and stock loan space, we currently enable our clients, some of the biggest financial companies in the world, to achieve a 99 percent STP rate by instructing across 41,000 triparty accounts, managing circa $1.4 trillion in collateral and facilitating over 6,000 margin movements per day.”
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