Singapore Exchange and Cassini Systems have partnered to provide a free service for SGX market participants, to help them prepare to meet the Uncleared Margin Rules (UMR) requirements. Under the agreement, SGX will leverage Cassini’s domain expertise to provide market users with complimentary analyses to determine their average aggregated notional amount (AANA), representing the gross value of open, non-centrally cleared derivatives positions. International regulators use the AANA to determine whether a firm falls in scope for each phase of UMR, with Phase 5 scheduled to take effect in September 2021. In-scope entities are subject to a mandatory exchange of Initial Margin (IM) with their counterparties for their bilateral over-the-counter (OTC) agreements over the $50 million IM threshold per counterpart. While the consecutive three-month period for officially determining in-scope status for Phase 5 will be in 2021, SGX and Cassini are offering the service in advance so firms potentially meeting the $50 billion AANA threshold can take steps now to assess their status, adjust their positions and look for alternatives to certain non-cleared products. Firms affected by Phase 5 include banks, asset managers, hedge funds and pension funds. Phase 6, scheduled to take effect in September 2022, has a threshold of $8 billion AANA.
KC Lam, SGX Head of FX and Rates, said: “By September 2022, more than a thousand firms will be impacted by UMR, thus it is important to start planning for it now. Cassini is a natural partner for us in this effort to help our market participants with a best-of-breed solution.”
Liam Huxley, CEO and founder of Cassini, said: “Those firms that conceivably could fall in scope for Phase 5 should immediately begin efforts to understand their AANA and strategize on how they might identify opportunities to re-allocate their portfolio, reduce their margin obligations to potentially achieve substantial cost savings and delay falling in scope while still meeting their trading goals. If they wait until it’s time to report the information to the regulator, it’s often too late to make these adjustments.”