Customers | Use cases | UMR

As wave six of uncleared margin rules (UMR) impacts more firms across the globe, the pressure on operations teams will only increase. Resolving margin disputes doesn’t need to be a long, arduous process. Use Taskize to resolve them more efficiently.

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The industry still heavily relies on traditional methods

Traditional methods, like email and phone, for resolving margin disputes, reconciling portfolios, and resolving payment fails are:

  • time-consuming
  • unreliable
  • slow
  • inefficient
  • difficult to track the progress of
  • lack actionable data and insights

Despite years of investment in straight through processing (STP), global financial service operations still rely heavily on manual processes and workarounds, especially to manage new regulations. The final wave of UMR regulation will bring into scope hundreds of smaller firms and put all operations teams under increased pressure to comply with new margin rules.

The expected increase in margin disputes will see a significant increase in inter-company emails, an area where most firms are already struggling to cope. The industry has already seen a huge rise in the amount of variable and initial margin posted between 2019 and 2021.  

[Chart graphics from ISDA report: Total Variable Margin 42.5% increase between 2019 and 2020 and Total Initial Margin by 50.7% increase between 2020 and 2021. Source: ISDA]

Transform the way you resolve issues

The Taskize platform has been purpose-built to free up capacity in your teams and eliminate the issues they face when using traditional communication methods.

  • Resolve disputes faster – by resolving disputes in a secure Taskize Bubble, your inboxes won’t be full of long and complicated email threads with irrelevant people or group emails in.
  • Quickly find what you need – you can keep all relevant messages and documents in a Bubble, so nothing gets lost, and you can keep a clear auditable trail.
  • Quickly find the right people to collaborate with – the Smart Directory’s unique dynamic matching technology automatically adds the person needed to resolve your issue to a Bubble.
  • Maximise your capacity – it will also allocate the most appropriate person based on their role in the business and considers their current workload and availability, to make sure that your issue is resolved as quickly as possible.
  • Avoid future disputes – by tagging the root cause of a dispute as it occurs, you can eliminate the need to manually keep track of the main causes of disputes. Our MI reporting dashboards provide you with data in real-time so you can improve your processes and reduce the risk of future issues.

Resolving portfolio reconciliations

  • Generate Bubbles directly from your reconciliation platform through the Taskize API
  • Resolve issues faster by populating key Bubble attributes
  • Highlight position break for easy identification

Resolving margin disputes

  • Pass all relevant dispute data into a Bubble without the need to re-key
  • Automatically invite you counterparty to a Bubble to begin resolution
  • Update margin platform with dispute resolution details

Resolving payment fails

  • Use failed payment details to create Bubble
  • Bubble can be linked back to margin dispute for improved audit
  • Use root cause analysis to prevent future fails

The regulations explained

The regulation for UMR was set in motion at the 2009 G20 meeting following the global financial crisis. It requires firms using over-the-counter derivatives to post margin on those transactions. Phases 1 to 4 have covered firms with $750 billion+ in notional value.

According to International Swaps and Derivatives Association (ISDA) during waves 1-3 of UMR, only some 34 global asset managers come under the scope of UMR. But waves 4 and 5 saw that expand to 1,200 firms, who between them will have some 9,500 counterparty relationships, each of which required new sets of documentation.

For Wave 5&6, the legal aspect of UMR will be several times more complex and generate several times more administrative workload – and not just for back-office staff.

Firms need to:

  • set up segregated accounts both for collecting margin and for posting margin.
  • new Credit Support Annexes (CSAs) agreeing how they will calculate IM, the eligible collateral, the haircuts, how Non-Transferrable Assets (NTAs) will be broken down, how thresholds will be split, and how they are going to separate regulatory and non-regulatory IM.

Furthermore, not all transactions will be subject to the rules e.g. equity options are out of scope in the US and Singapore, but in scope in Japan, Canada, Australia and Brazil, while there are temporary exclusions on them in the EU, Hong Kong and Korea.

Posting margin is not too complicated but the Standard Initial Margin Model (SIMM) requirements asked for a lot more than just a standard variation margin exchange.

Adhering to, reporting and managing the process requires firms to exchange more margin more often so many more disputes have arisen, which had to be monitored and managed through operations.

The industry is already posting over USD 100 billion of uncleared margin, which is a huge cost to the industry in terms of loss of liquidity. And much of this is posted in the form of segregated assets that cannot be rehypothecated, which in turn is a huge drag for the whole business.

Wave 4 Sept 1 2020 Aggregate Average Notional Amount of non-centrally cleared derivatives (AANA) >750bn

Wave 5 Sept 1st 2021 – AANA > €50bn

Wave 6 Sept 1st 2022 – AANA > €8bn


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