Uncleared Margin Rules (UMR) Implementation: Phase 6

Uncleared Margin Rules (UMR) Implementation: Phase 6

Coremont in this article shares some of the insights that they have gathered over the course of multiple implementations, focusing on the less obvious aspects of UMR.

Author: Coremont– www.coremont.com


Phase 5 of the Uncleared Margin Rules (UMR) came into effect on 1 September 2021.

There is now less than a year for those in scope for Phase 6 to implement their own UMR plans, including new operational processes, technologies, and counterparty negotiations.

Amending your current agreements to be UMR-compliant is neither efficient nor acceptable to most counterparties. As such, if new agreements are to be created, why not revisit old margin methodologies at the same time?

Over the years, many funds accepted margin methodologies that were dictated by the big banks. Those methodologies include VaR or stress-based margin, which are often unique to each counterparty, updated periodically at the counterparty’s discretion, and difficult to monitor or replicate. Agreeing to a new SIMM-based houseIA margin methodology would be helpful for all parties.

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