UMR Phase 6 readiness

UMR Phase 6 readiness

Are you ready for UMR Phase 6?

The final phase of the BCBS-IOSCO Uncleared Margin Rules (UMR) will go into effect this September. The clock is ticking!

With the average aggregate notional amount (AANA) threshold at $8 billion for UMR Phase 6, this final part of the requirement is expected to bring more than 1,000 buy-side firms into scope, the largest number of market participants to be impacted at once.

Whether or not you have already started the compliance process, it is important to know if you are on track. In order to help you meet the requirements, we’ve designed a quick and easy UMR Phase 6 checklist, to provide clear insight into your progress and what you still need to do to finish in time.

UMR Phase 6 Checklist

  • 1. Identify if you are in scope for UMR Phase 6

    The first step in complying with the regulatory requirements for non-centrally cleared derivatives is determining if your firm is in scope for the rules. The way to do this is to calculate your “Average Aggregate Notional Amount” or AANA.

    To calculate your firm's AANA is to sum the total outstanding amount of non-cleared derivative positions during the prescribed observation period on a gross notional basis. Once a firm determines if they are in scope, they should begin the process of disclosing to their counterparty group(s).

  • 2. Counterparty disclosure

    We recommend early disclosure to your counterparties for them to prepare across the multiple business functions including Business, Legal, Documentation and Operations

  • 3. Choose your methodology for exchanging Regulatory Initial Margin (Reg IM).

    You can choose either the Schedule (also known as GRID) or ISDA Standard Initial Margin Model (SIMM™). If you decide to use ISDA SIMM™, please remember to license this from ISDA.

  • 4. IM Threshold Monitoring

    Many Phase 6 firms will take advantage of the regulatory relief to monitor their initial margin if they remain below the $50M IM threshold.

  • 5. Custodian selection

    Under UMR, initial margin needs to be segregated with an entity independent from the posting party. Firms are required to select a custodian(s) that meets all your service requirements. If you expect to post margin on day one, you will need to factor in your segregation account set up including KYC checks. You will also need to decide whether you intend to use third party custodians or tri-party agents.

  • 6. Collateral eligibility

    There are rules around the types of collateral that can be used under UMR. You will need to set up your collateral eligibility schedules in conjunction with your custodian or tri-party agent to ensure that the collateral posted to your account is within the regulatory requirements.

  • 7. Operational Readiness

    Reg IM is calculated gross and two-way, so you will need to perform calculations of margin calls and reconcile them with your counterparties.

  • 8. Dispute Resolution

    Ensure your firm has a robust process in place to manage Initial Margin disputes. By leveraging Atoti+, you can be assured you are using the market standard for the reconciliation of ISDA SIMM™ which is utilized by nearly every in scope firm today

  • Shortly after submitting this form, you will receive a personalized scorecard on your UMR Phase 6 readiness.