Uncleared margin rules. Solutions to optimize your technology investment

Transcription

1 Uncleared margin rules Solutions to optimize your technology investment

2 Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade processing systems and operational workflow. EY s solution framework consists of technology components, solution design, integration and testing services. The framework will help accelerate progress toward compliance with uncleared margin requirements. 1. EY brings an understanding of the uncleared margin rules and a robust tool to document adherence and progress toward compliance CFTC - Gap CFTC - No Gap Customize compliance requirements, assess adherence, record evidence and generate executive reports. 2. An end-to-end data framework for specific data sets that are impacted by the new rules. Data type Impacted data category * Client onboarding Pre-trade margin calcs and analytics Trade execution Margin processing and recon Reference data Client data Account data Exemption/Nonexemption Covered entities/affiliates Cross border provisions Legal agreements (e.g., CSA, SA, BA) Schedules (e.g., margin methodology, haircuts) Trade positions Collateral balances Margin methodology Product data Covered instruments Eligibility Market data Risk sensitivities Transaction data Trade data Not impacted Collateral data IM and VM requirements MTA Collateral balances Collateral netting Concentration Collateral pledged Collateral valuation data Collateral delivered Account segregation Re-hypothecation Control data Reconciliation data Test data Dispute resolution Collateral to settlement Position recs (client/broker) End-to-end integration/system test Identify critical data elements required for compliance, close gaps and enable data mapping from source to consumer, and dispute resolution. * Representative impacted data

3 3. Test plan, scenarios, test cases and test data to enable end-to-end compliance with the new rules. UMR test plan Test results Test reference Rule rested Scenario Data input Expected result Client onboarding Pre-trade margin calcs and analytics Trade execution Margin processing and recon 1.1 _ Margin calc Buy single trade 1.2 _ Margin calc Sell singe trade 1.3 _ Margin calc Book 10 trades 1.4 _ Margin calc Book offsetting trade 1.5 _ Margin calc Day over day 2.1 _ Ineligible collateral Pledge junk bonds Exception 2.2 _ Eligible collateral Pledge UST s Booked 2.3 _ Haircut Pledge UTT s Calc value 2.3 _ Dispute Single Trade Resolution process Confirm end-to-end capabilities agnostic of the applications, platforms or vendor solutions that make up the technology infrastructure. 4. EY provides solution design, integration and testing services to remediate gaps and help achieve compliance with uncleared margin rules. T - n T 0 Client onboarding Pre-trade margin calcs and analytics Trade execution Trade affirmation Trade confirmation CSA Eligibility CSA Haircuts Instructions Margin Method Margin Calculations Credit/Market Risk Client Eligibility Product and Client Scope Trade Capture Product and Client Scope Product and Client Scope Confirm Reporting T 0 (EOD) Risk & controls Intra-day margin Position maintenance Periodic margin calculation EOD margin calc per account Margin calculation and exposure management EOD netted margin Global netting agreements as applicable EOD margin call (Report) Unless < MTA Disclosures instructions Funding requirements Treasury functions T+1 Margin call agreement proposal by client cash and collateral transfer Reconciliations Collateral management Dispute resolution procedures Collateral eligibility Haircuts Segregated accounts Segregated reports instructions Position and valuation recs (T0 EOD) Margin and settlement recs (T+1) Treasury functions Design principles to include considerations for foundational components that would be required for a strategic global collateral management solution.

4 Technology services Solution management Facilitate solution design Codevelop solution design principles Facilitate adoption and design integrity Capability assessment Analyze current state collateral data, systems and processes Target state architecture Solution design Reference data management Margin methodology and analytics Margin processing workflow and reconciliation Dispute resolution workflow Application integration End-to-end data mapping Collateral data repository Internal IM, VM calculations Integration with capital, liquidity, pricing, funding, risk and stress testing functions End-to-end system integration: bespoke systems, vendor systems, collateral hub Testing Regression testing Traceability testing Integration testing

5 Contacts Roy Choudhury Principal Office: Prakash Rao Executive Director Office: Alex Rathod Office: Janina Polo Office: John Boyle Office: Setu Pandya Office:

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