CloudMargin and SmartDX set out their stall with joint VM rules solution
27 February 2017 London
Image: Shutterstock
CloudMargin, a digital collateral and margin management solutions provider, and SmartDX, a Smart Communications subsidiary offing trade automation and relationship document generation, have partnered to address the challenges posed by the imminent daily variation margin (VM) rules.
CloudMargin estimated that, on average, the new VM rules, which come into force across the EU on 1 March, will increase a firm鈥檚 collateral activity by 500 percent.
The joint offering promises to enable buy-side investors and other over-the-counter (OTC) derivatives market participants to quickly and comprehensively sign new ISDA documentation or 鈥榬epaper鈥� their OTC agreements with existing or new counterparties through SmartDX. Operational data will then pass to CloudMargin鈥檚 collateral management workflow tool to handle the vastly increased volume of collateral transactions.
SmartDX generates and hosts an extensive library of templates which can be configured to the specific needs of firms.
Participants can use the firm鈥檚 cloud-based offering to collaborate on negotiated points and feed the agreements directly into industry utilities, such as IHS Markit鈥檚 CounterParty Manager.
Lee McCormack, CloudMargin head of strategy and product development, said: 鈥淒espite the VM rule taking effect on Wednesday, only a small percentage of market participants have put in place a plan or the tools needed to post daily variation margin. But their operations workload and processes are about to change forever.鈥�
鈥淭he connectivity between CloudMargin and SmartDX provides buy-side firms and other swap market participants the ability to seamlessly and cost-effectively negotiate their agreements to become regulatory compliant, then on an ongoing basis, automate the process and easily manage the increased operational challenges.鈥�
The EU supervisory authorities recently chastised the union鈥檚 financial services industry for failing to meet the already delayed deadline for exchanging variation margin and confirmed that no new deadline pushback will be forthcoming.
In a joint statement, the regulators acknowledged that the latest requirements posed significant operational challenges for smaller counterparties but reiterated that the initial six-month delay was allowed in order to address these issues.
An audience poll taken at the Deutsche B枚rse Global Funding and Financing Summit in January found that only 17.3 percent of those in attendance were ready for the deadline.
A further 35 percent said they are still putting their agreements into place, but had already completed their operational changes. A bank representative panellist agreed stated that the 17.3 percent result was a surprisingly positive figure.
Robin Moody, global head of SmartDX, commented: 鈥淲hile the industry has made a lot of investment into the legal teams processing the updated documentation, that only solves part of the problem, namely, the legal side.鈥�
鈥淭he operational challenge of implementing these changes is very difficult at this scale unless you can use technology to better manage processes, documents and ultimately the data in those documents.鈥�
CloudMargin estimated that, on average, the new VM rules, which come into force across the EU on 1 March, will increase a firm鈥檚 collateral activity by 500 percent.
The joint offering promises to enable buy-side investors and other over-the-counter (OTC) derivatives market participants to quickly and comprehensively sign new ISDA documentation or 鈥榬epaper鈥� their OTC agreements with existing or new counterparties through SmartDX. Operational data will then pass to CloudMargin鈥檚 collateral management workflow tool to handle the vastly increased volume of collateral transactions.
SmartDX generates and hosts an extensive library of templates which can be configured to the specific needs of firms.
Participants can use the firm鈥檚 cloud-based offering to collaborate on negotiated points and feed the agreements directly into industry utilities, such as IHS Markit鈥檚 CounterParty Manager.
Lee McCormack, CloudMargin head of strategy and product development, said: 鈥淒espite the VM rule taking effect on Wednesday, only a small percentage of market participants have put in place a plan or the tools needed to post daily variation margin. But their operations workload and processes are about to change forever.鈥�
鈥淭he connectivity between CloudMargin and SmartDX provides buy-side firms and other swap market participants the ability to seamlessly and cost-effectively negotiate their agreements to become regulatory compliant, then on an ongoing basis, automate the process and easily manage the increased operational challenges.鈥�
The EU supervisory authorities recently chastised the union鈥檚 financial services industry for failing to meet the already delayed deadline for exchanging variation margin and confirmed that no new deadline pushback will be forthcoming.
In a joint statement, the regulators acknowledged that the latest requirements posed significant operational challenges for smaller counterparties but reiterated that the initial six-month delay was allowed in order to address these issues.
An audience poll taken at the Deutsche B枚rse Global Funding and Financing Summit in January found that only 17.3 percent of those in attendance were ready for the deadline.
A further 35 percent said they are still putting their agreements into place, but had already completed their operational changes. A bank representative panellist agreed stated that the 17.3 percent result was a surprisingly positive figure.
Robin Moody, global head of SmartDX, commented: 鈥淲hile the industry has made a lot of investment into the legal teams processing the updated documentation, that only solves part of the problem, namely, the legal side.鈥�
鈥淭he operational challenge of implementing these changes is very difficult at this scale unless you can use technology to better manage processes, documents and ultimately the data in those documents.鈥�
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