5 ways to control initial margin
UMR will bring new indirect costs to uncleared OTC portfolios. These costs for protecting the world against systemic risk will be paid by the firms in waves 1 to 5 of UMR.
UMR will bring new indirect costs to uncleared OTC portfolios. These costs for protecting the world against systemic risk will be paid by the firms in waves 1 to 5 of UMR. If your firm has never paid out IM before here are five ways to keep margin under control:
1. Make managing IM someone's job
Delivering assets to cover IM will be a big deal compared to VM. Who in your firm owns the responsibility to measure and reduce IM? Start with one individual and put in place a strategy. Their goal is to manage IM across your entities and portfolios.
2. Equip yourself for the journey
Do you have the necessary tools to measure and manage IM? Take a look at your daily trade lifecycle and the people involved. Think about the 'use cases' where individuals interact with IM. Build a requirements map and start equipping yourself with the right analytics.
3. Connect the costs of IM with the risk takers
The costs of IM belong in the front office – does your firm make this connection? A trickier question is how to split net portfolio IM across multiple originators. Is it done by person, by portfolio, by strategy or by desk? Making this connection is essential to align front office behaviour with IM.
4. Optimise, Optimise, Optimise
There are many ways to optimise or reduce IM. Acting on your portfolio as a whole will give the biggest results. Use compression services. Back-load trades into clearing. Transform portfolios into alternative products. Apply optimisation to collateral postings.
5. Go real-time and on-demand
Margin isn't an end-of-day matter now. Give your teams the ability to know IM at any point in their daily workflows. Know the impact of IM pre-trade. Estimate collateral funding before the close of business. Keep a portfolio under the UMR 50mm IM threshold. Achieve true best-execution.
Join Our IM Webinars
July 9th: SIMM: More than just end of day
A perception that calculating SIMM (& IM) is an end-of-day activity for a collateral team couldn't be more wrong. The need to know IM starts from before a trade is executed, right through the front office, middle office and back office. Find out why this matters in 'SIMM: More than just end of day'. (Register using the form below)
July 10th: New approaches to Collateral Management within the UMR
UMR & IM will bring a new and complex workload to collateral teams. Handling IM will mean your team becoming familiar with trade sensitivities and how to reconcile disputes on IM. Your team will also have two extra events per relationship to handle (a call and a receipt). Find out how to remain an efficient and high performance team with the webinar 'New approaches to Collateral Management within the UMR'. CLICK HERE TO REGISTER
July 16th: IM Cliff Edge: Avoid the 50mm Threshold
The regulations contain two thresholds, one for the average notional (AANA) and the other on the amount of IM. The latter is commonly referred to as the '50mm threshold' and is a possible way to reduce the effort required to be ready for the wave 4 or 5 UMR deadlines. Enhance your approach to UMR by attending 'IM Cliff Edge: Avoid the 50mm Threshold'. (Register using the form below)
REGISTER BELOW FOR WEBINARS "SIMM: Not just end of day" AND "IM Cliff Edge: Avoid the 50mm Threshold". REGISTER HERE FOR "New approaches to Collateral Management within the UMR"