Ankeet Dedhia
Ankeet Dedhia

Exploring the operational challenges facing buyside firms coming into scope under Phases 5 and 6 of the UMR

The first four phases of UMR have come into force in stages since 2016 and have affected banks. Many buy-side firms will now come into scope with Phases 5 and 6 of UMR, which are now delayed 12 months to September 2021 and September 2022, respectively. We asked Ankeet Dedhia, Americas Head of Product, ForexClear, LCH to comment about this.

What are the main obligations and requirements associated with these additional phases? According to ISDA, approximately 1,100 buy-side entities, 315 in Phase 5 and 775 in Phase 6, are going to be impacted by the upcoming phases of UMR. This number translates to around 9,000 separate counterparty relationships, 3,600 covered under Phase 5 and an additional 5,400 in Phase 6, for which buy-side firms need to initiate projects whose timelines might range from a couple of months to a couple of quarters.  Once a market participant gets phased in for UMR, they are required to exchange two-way initial margin (IM) for all bilateral in-scope UMR products. For FX, in-scope UMR products includes non-deliverable forwards, non-deliverable options and physically settled FX Options. While physically settled FX forwards, FX swaps and currency swaps are exempted from two-way IM exchange, they still would count towards a firm’s aggregate average notional amount (AANA), which determines UMR compliance...continued

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