Navigating Uncleared Margin Rules

Are you ready for initial margin?

Find Capital-Efficient Solutions to UMR Challenges

Since Uncleared Margin Rules (UMR) went live in 2016, only a small number of firms have been impacted by Phases 1-4. But by September 2021, an estimated 1,000+ additional firms will be subject to UMR for initial margin. These firms must get ready to comply with new regulatory initial margin and reporting requirements on non-centrally cleared OTC derivatives.
Initial margin (IM) is collateral posted to help reduce risk exposure to a given counterparty. Posting IM is a new step for many firms trading non-cleared OTC derivatives, and will increase a firm’s costs.

The resources here can help you understand if, when and how your firm will be impacted by UMR for IM in Phases 5 & 6. If your firm is in scope, CME Group offers the broadest set of global solutions to help you overcome UMR challenges. How? By minimizing UMR exposure, easing the burden of daily requirements, and reducing your notional outstanding and IM amounts.

WEBINAR: Preparing for UMR and Initial Margin

CME Group’s Jack Callahan discusses UMR and initial margin challenges: Who is impacted, what
you need to know, and how CME Group can help.

Watch Now

50 Billion: The New Magic Number for Initial Margin Rules

A change to the margin mandate for uncleared derivatives reduces the number of affected firms from 1,100 to 200, according to triOptima.

Read Now

UMR Timeline

Getting ready for UMR can be a significant, time-intensive undertaking for firms not familiar with posting initial margin. Knowing if your firm is impacted is critical to plan accordingly.

Watch: “Uncleared Margin Rules – how well are you prepared?”

What's In Scope for UMR

Average Aggregate Notional Amount (AANA)

AANA is what regulators use to determine whether a firm is in scope for IM in Phases 5 & 6. Asset managers, banks, hedge funds, corporates, pensions and more may be subject to the requirements.

Which derivatives are in-scope

AANA is based on the open gross notional value of all non-centrally cleared derivatives during the designated calculation observation period for the phase.

Included:
Uncleared OTC Derivatives

Not Included:
Cleared Instruments

  • FX options 
  • Non-deliverable forwards (NDFs)
  • Physical FX forwards
  • Swaptions
  • Hedging trades
  • Centrally cleared OTC swaps
  • Exchange-traded derivatives

This is not an exclusive list. For a detailed list, visit ISDA.

How and when AANA is calculated

Where you are located (US or EU) will help determine how your firm’s AANA is calculated, when/if you will be captured under UMR Phases 5 & 6, and when you must start posting IM.

Observation Phases 5 & 6 in the US & EU

Phase 5 - Sept. 1, 2020 Compliance date Phase 6 - Sept. 1, 2021 Compliance date
Observation Period: 
US: June, July and August 2019
EU: March, April and May 2020
US & EU Observation Period: March, April and May 2021
Calculated daily in US, monthly in EU Calculated daily in US, monthly in EU
AANA threshold: > 50 billion (USD, EUR) AANA threshold: > 8 billion (USD, EUR)

Do You Use triResolve?

We can help with your AANA calculation using the info you’re already sending.  It’s free and fast.

Contact Us

Our Solutions

CME Group offers the broadest set of global solutions to help you overcome challenges throughout the entire UMR process.  These solutions enable you to meet IM requirements, gain capital efficiencies, as well as minimize costs and core business disruptions.

1. Reduce your total notional outstanding

If your firm is close to a UMR threshold, explore multiple ways to lower your AANA.

Use compression services

Use triReduce to compress notional outstanding and line items in your OTC derivatives portfolio, via multilateral compression cycles.

Scalable for use in multiple asset classes for cleared and non-cleared relationships:

  • Rates
  • FX
  • Credit
  • Commodities


Part of the market-leading TriOptima suite of solutions
Read more >

Voluntarily clear OTC products

Use our multi-asset OTC cleared offering to add the margin efficiencies of clearing to your OTC portfolio.

Rates
Cleared IRS in 24 currencies USD swaptions
Read more >

FX
11 NDFs, 26 CSFs, 7 FX options
Read more >

Additional tools
Portfolio margining, coupon blending, compression services
Read more >

Move vanilla bilateral exposures to futures

Use our diverse futures and options lineup to replicate vanilla bilateral OTC exposures and reduce in-scope notional outstanding, as follows.

Rate swaps
Eurodollar and Treasury futures and options, MAC swap futures
Read more >

FX forwards
FX monthlies, FX options, FX Link 
Read more >

Equity total return swaps
S&P 500 Total Return futures, Dividend futures, Select Sector futures
Read more >

2. Get help meeting daily compliance needs

Explore solutions to integrate daily IM calculation, communication and reconciliation tasks into the collateral management process for your derivatives portfolio.

Calculate daily margin requirements

Bilateral
Use triCalculate, which has licensed the ISDA SIMM margin model, to calculate IM exposure.
Read more >

Cleared
Use CME CORE to calculate and compare IM for listed and cleared OTC CME Group products.
Read more >

Agree to margin calls with your counterparties

Bilateral
Use triResolve Margin to calculate and automatically agree to your Initial Margin calls and collateral movements with your counterparties.
Read more >

Resolve margin disputes with ease

Bilateral
Use AcadiaSoft’s IM Exposure Manager to help identify exposure differences and resolve disputes.
Read more >

3. Minimize margin requirements

Minimizing exposure against each counterparty and optimizing net funding amounts can help lower bilateral margin requirements.

Optimize counterparty risk exposures

Use triBalance to rebalance bilateral and cleared counterparty risk for greater margin efficiencies and to keep your portfolio market-risk neutral.

triBalance takes the next step in portfolio optimization by innovating a trusted, simple, uniform process for managing your portfolio risk and counterparty exposure.
Read more >

Use voluntary clearing

Use CME Group cleared OTC products where possible to lower requirements from 10-day margin on uncleared bilateral exposures to the 5-day margin on cleared OTC.

You also can add counterparty netting benefits by clearing all trades in a single account instead of bilaterally across multiple counterparties (UMR margins are calculated at the counterparty level).
Read more >

Shift to futures

Use CME Group futures and options where possible in place of vanilla swaps to further reduce requirements to the 1-2 day margin of standardized listed products.

As with voluntary clearing, CME Group futures and options offer counterparty netting benefits.
Read more >

FX Case Study: Add Up to 89% Capital Efficiencies

See the difference UMR solutions can make to your IM costs. The example below shows a real portfolio of FX options. By applying one of our solutions to address IM costs, the client can add significant potential savings. Clearing delta hedges would add to the IM efficiencies of using OTC clearing or exchange-traded derivatives.

Read Full Study

UMR Resources

FCA Fact Checker

Find out more about the margin requirements for uncleared derivatives that started to be phased in 2017.

ISDA Checklist

View ISDA’s 8-Step Guide to getting ready for Initial Margin regulatory requirements.

UMR FAQ

Get answers to common questions on UMR and compliance.

Greenwich TCA Study

Buyside firms may save up to 70% in execution costs on some trades by using listed FX options.

Learn More About Our Initial Margin Solutions