CloudMargin, creator of a collateral and margin management solution native to the cloud, and Margin Tonic, a service provider specializing in the collateral and post-trade domains, have announced that the two firms have partnered to launch a global Average Aggregated Notional Amount (AANA) calculation service for the latter phases of the Uncleared Margin Rules (UMR), combining CloudMargin’s technology with Margin Tonic’s regulatory consultancy services.
The joint subscription service automates the AANA calculation for clients on the CloudMargin platform, leveraging Margin Tonic’s expertise in the multi-jurisdictional Uncleared Margin Rules and helping clients to fine-tune fit-for-purpose trading and compliance strategies.
Firms brought into scope for Phase 5 of UMR – based on their AANA calculations for March, April and May of 2021 – were required to begin exchanging Initial Margin (IM) from 1st September 2021, for trading of non-cleared over-the-counter (OTC) derivatives. A much larger group of mainly buy-side firms, estimated at almost 800 firms by the International Swaps and Derivatives Association (ISDA), is expected to fall into scope for Phase 6, which takes effect on 1 September 2022. This follows AANA calculations conducted in March through May of the same year for most jurisdictions.
Importantly, even for those firms under the threshold ($8 billion in the U.S. or €8 billion in the European Union) and not in scope for Phase 6, there is a regulatory need to perform ongoing year-on-year AANA calculations to assess if firms will come into scope any year after September 2022.
AANA calculation rules can be complex, with product scope and calculation methods varying by jurisdiction. Firms also often encounter AANA challenges such as consolidation of data from multiple trade sources, lack of AANA regulatory guidance and unclear treatment of funds, including multi-manager funds.
In addition, trading volumes and products will also change over time, meaning that AANA calculations should be performed regularly and on an ongoing basis. A proactive monitoring approach ensures firms will have full readiness in place, with no late surprises on their AANA results and rushed compliance solutions.
Over recent years, both CloudMargin and Margin Tonic have been central to helping a wide range of firms navigate UMR successfully, including a large number of Phase 5 firms. The joint AANA service further strengthens the two companies’ ongoing collaboration on multiple fronts, including an Initial Margin ‘Health Check’ service and other initiatives.
Simon Millington, of CloudMargin said: “Calculating AANA is the first step toward determining if an institution is in scope for UMR. Many firms don’t realize that they’ll need to maintain these AANA calculations on an ongoing basis, whether or not they fall into scope for Phase 6. This service offers clients a heightened level of confidence and comfort that they have industry-leading expertise analyzing the various nuances of regulatory jurisdictions and complex factors, combined with a robust technology solution providing accurate AANA calculations they can track over time with automated reporting. They can also choose to work with us to automate and optimize their entire collateral workflow as desired, if and when they exceed the threshold. We’re delighted to extend our partnership with Margin Tonic with this important initiative.”
Chris Watts, Co-Founder of Margin Tonic, said: “We have performed and advised on AANA calculations across multiple UMR phases, for a variety of different firms and set-ups. Having early and ongoing clarity on AANA status ensures that firms can prepare for compliance with confidence, for the heavy front-to-back changes. Too often, we have seen firms perform AANA calculations too late, or not regularly enough, causing a rush to compliance with unfit solutions and high compliance risk, with the potential to impact their ability to trade. By introducing the joint AANA service with our partners at CloudMargin, we provide an AANA
one-stop-shop, combining our industry-leading advice with their best-in-class technology. In turn, we will remove AANA burden for our clients, allowing them to focus on key decisions, either for compliance readiness or for trading adjustments to remain out of scope entirely.”
CloudMargin recently announced that in order to facilitate clients’ preparedness for UMR in Phases 5 and 6, it is now connected to nearly 60 custodians globally for cash, securities and third-party SWIFT settlement, in addition to its long-established SWIFT connectivity to the four major triparty agents.