Collateral optimisation vendor TriOptima has established connectivity with BNY Mellon, JP Morgan, Clearstream and Euroclear through SWIFT ahead of the upcoming phase of the uncleared margin rules (UMR).
Clients of TriOptima will now gain direct connectivity to the four main tri-party agent firms via SWIFT for sending collateral instructions as well as receiving status messages and end-of-day reports.
The connectivity will help buy-side firms that are set to become impacted by the next phase of UMR for OTC derivatives.
“Extending the margin call process to incorporate instructions to the custodian reduces the manual steps in the process which ultimately reduces the risk of delayed or failed settlements,” said Joakim Strömberg, head of triResolve solutions at TriOptima. “By using our SWIFT automation, clients do not have to build and maintain their own integration to the tri-party agents.”
From September, buy-side firms with OTC derivatives of over $50 billion in average aggregate notional amount (AANA) will be required to establish either third-party or tri-party collateral management arrangements for the first time.
This will mean ensuring they have the right infrastructure in place to exchange initial margin efficiently, including carrying out margin calculations, monitoring counterparty exposure and integrating with tri-party agents.
“With just a few weeks to go until the September go-live, and the bigger challenges to come in phase six, TriOptima’s integration with SWIFT will greatly expedite the onboarding process for mutual clients turning to our firm to connect them to the services they need to meet their UMR obligations,” said Ted Leveroni, head of margin services at BNY Mellon.
Under the tri-party structure, buy-side firms must each maintain a ‘long box’ of segregated collateral held at the custodian bank. Upon agreement of the initial margin call, they must instruct the custodian of the required collateral balance. This contrasts with traditional variation margin settlement where each party will also agree the collateral to be pledged before instructing the custodian bank.
To support buy-side firms in managing these new requirements, service providers have pushed solutions that aim to automate collateral management and tri-party workflows.