New service will allow Phase 5 firms under non-cleared margin requirements to monitor their IM exposure in relation to the permissible $50MM IM threshold and trigger automated agreement onboarding
AcadiaSoft Inc., the leading industry provider of risk and collateral management services for the non-cleared derivatives community, today announced plans to release an Initial Margin (IM) Monitoring Service. The service is designed to provide IM Phase 4 and Phase 5 firms with the ability to monitor their IM exposure and compare it to their estimated IM threshold in order to postpone negotiation and implementation of required legal documents. Once a firm meets their maximum IM threshold, the service will automatically trigger the onboarding process for CSA (Credit Support Annex) and custody agreement negotiation.
The upcoming service is in response to guidance recently issued by the Working Group for Margin Reform (WGMR) within the Basel Committee for Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO), which suggests that global prudential regulators consider providing relief to bi-lateral OTC Derivative market participants in-scope to exchange two-way regulatory initial margin in 2020 from the documentation requirements under the non-cleared margin rules until they approach the 50MM IM threshold. In providing guidance, the regulators emphasized its expectation that covered entities will act diligently when their exposures approach the threshold to ensure that the relevant arrangements needed are in place if the threshold is exceeded.
Chris Walsh, CEO of AcadiaSoft said “By removing the requirement to have legal agreements in place prior to a threshold breach, the regulators have introduced a new need to not only monitor IM thresholds but to have agreements quickly onboarded. By offering IM monitoring in conjunction with our Agreement Manager service, AcadiaSoft can identify when a CSA is required, and have it set up, calculated, margined and settled in a just-in-time manner using an industry-standard, automated process.”
AcadiaSoft will release its Agreement Manager service in the second quarter of 2019. The service will create an industry-wide, authoritative data store of legal and operational collateral agreement information for OTC Derivatives and simplify the integration process to new on-line CSA negotiating tools. The new IM monitoring service will combine existing aspects of AcadiaSoft’s Agreement Manager and its IM Exposure Manager service while leveraging connectivity with on-line document negotiation platforms to form a just-in-time documentation negotiation and margin activation service.
