UMR Phase 5 is expected to have a widespread impact on the asset management industry. Although phases 1 through 4 (which began in September of 2016) impacted the largest dealers first and then the largest hedge funds, phases 5 and 6 have often been seen as the most significant due to the sheer number of funds and institutional investors potentially caught by the AANA calculation, with the threshold falling to €/$8 billion in September 2022.
For FX traders using OTC options, UMR can have a significant impact on how much capital is directed toward initial margin and variation margin. Listed FX options can offer a cost-effective, scalable, and accessible way to trade cleared FX options.
In this article, we discuss the challenges along with the potential impacts and responses of the uncleared margin rules (UMR) on real money accounts.
In this paper, we explore some of the headwinds facing FX option traders and how expanding their repertoire to include both OTC and listed products can help overcome those challenges.
Key features of CME FX options:
*FX options contract specifications can be found here.
**View the block trading market regulation advisory notice here.