Ahead of the upcoming implementation of Phase 5 UMR on 1 September, Bob Stewart, Executive Director of Institutional Trade Processing (ITP) at DTCC commented.

“In less than one month, Phase Five of the BCBS-IOSCO’s uncleared margin requirements (UMR) for uncleared OTC derivatives will be implemented. Phase Five requirements will capture the largest number of firms that trade derivatives, and therefore it is critical that in-scope firms have significantly advanced their preparations for compliance with the new rules.  

“UMR is likely to require many firms to make significant changes to their existing collateral management processes – a large number of which are manual today, and can often lead to processing errors and trade settlement failures. Another area of concern is segregated margin accounts, as they are a mechanism that many buy-side entities will not have used before and are likely to be a challenge due to the existence of multiple manual processes and associated errors. 

“The operational weaknesses exposed by the Covid-19 pandemic led a large number of market participants to overhaul their collateral management systems, and many have made good use of the extra time to prepare for the UMR rules. However, the deadline for implementation is looming and many firms remain behind on preparations. These firms should act now.”