AcadiaSoft, an industry provider of risk and collateral management services for the non-cleared derivatives community, is set to carry out an industry-wide soft launch to help phase 5 firms stay on track for Uncleared Margin Rules (UMR) compliance ahead of the extended 2021 deadline.
The UMR initial margin (IM) requirements seek to establish international standards for non-centrally cleared derivatives. Asset managers, pension funds and insurance companies are scheduled to come in-scope of UMR based on their volume thresholds either with phase 5 on 1 September 2021 or phase 6 on 1 September 2022.
AcadiaSoft’s programme is designed to enable phase 5 firms to continue on their current development timelines for IM exposure calculation and testing.
Phase 5 firms with the ability to calculate IM exposure can participate in a “mock” go-live on the original phase 5 deadline. The duration of the soft launch period will last from 1 September 2020 to 31 August 2021.
According to AcadiaSoft, this will allow phase 5 firms who can calculate regulatory IM to compare IM exposure and reconcile it versus participating phase 1 to 4 dealers.
Additionally, the soft launch will enable firms to get a clear picture of where they should negotiate regulatory IM credit support annexes and establish custody accounts and where they don’t need to - if below the 50MM Reg IM Threshold.
AcadiaSoft’s CEO Chris Walsh said: “We are working closely with many phase 5 firms that have already made significant strides towards compliance and do not want to lose any momentum.”
Walsh added: “The soft launch will ensure that these firms stay on track for the new deadline while allowing firms that may be approaching the threshold to monitor initial margin exposure. We are grateful to the firms already in-scope for the rules that have agreed to support this testing program as the industry prepares for the largest phase of the uncleared margin rules.”
Mark Demo, head of community development, AcadiaSoft, commented: “This is really a story of market participants coming together to support a responsible way for self-selecting firms who don’t want to delay their compliance projects. These firms have budget and project resources allocated today which may not be there a year from now. If every phase 5 in-scope firm dropped their pens and picked them back up a year from now – we’d have the same rush towards compliance this time next year.”
AcaidaSoft also noted that participating firms will not need to have negotiated a regulatory IM CSA between them but instead can create a regulatory IM monitoring relationship between parties in AcadiaSoft’s Agreement Manager.
