SGX partners with Cassini Systems to prepare market participants for UMR

By Edil Corneille

Singapore Exchange (SGX) and Cassini Systems, a provider of pre and post-trade margin and collateral analytics for derivatives markets, have partnered to provide a free service for SGX market participants, to help them prepare to meet the Uncleared Margin Rules (UMR) requirements. SGX will leverage Cassini’s domain expertise to provide market users with complementary analysis to determine their average aggregated notional amount (AANA), representing the gross value of open, non-centrally cleared derivatives positions.

International regulators use the AANA to determine whether a firm falls in scope for each phase of UMR, with Phase 5 scheduled to take effect in September 2021. In-scope entities are subject to a mandatory exchange of Initial Margin (IM) with their counterparties for their bilateral over-the-counter (OTC) agreements over the $50 million IM threshold per counterpart. While the consecutive three-month period for officially determining in-scope status for Phase 5 will be in 2021, SGX and Cassini are offering the service in advance so firms potentially meeting the $50 billion AANA threshold can take steps now to assess their status, adjust their positions and look for alternatives to certain non-cleared products.

Firms affected by Phase 5 include banks, asset managers, hedge funds, and pension funds. Phase 6, scheduled to take effect in September 2022, has a threshold of $8 billion AANA.

SGX and Cassini will also team up to educate and raise awareness among market participants on the process for complying with UMR, through webinars that will take place in the coming months.

KC Lam, SGX Head of FX and Rates expounded, “By September 2022, more than a thousand firms will be impacted by UMR, thus it is important to start planning for it now. Cassini is a natural partner for us in this effort to help our market participants with a best-of-breed solution. Once a SGX market participant provides us with information on its OTC positions, we will work with Cassini to turn around a timely and comprehensive analysis. UMR will inevitably increase the cost burden for many of our clients. SGX’s FX Futures (including FlexC FX Futures) that are traded and cleared on exchange was our first solution offered to clients to help them manage UMR. We are now taking a step further by assisting them to take steps to lower their AANA, simply by understanding how they can alter the balance of exchange-traded and non-centrally cleared products within their portfolios.”

Liam Huxley, CEO and founder of Cassini explicated, “Those firms that conceivably could fall in scope for Phase 5 should immediately begin efforts to understand their AANA and strategize on how they might identify opportunities to re-allocate their portfolio, reduce their margin obligations to potentially achieve substantial cost savings and delay falling in scope while still meeting their trading goals. If they wait until it’s time to report the information to the regulator, it’s often too late to make these adjustments. We commend SGX for taking this initiative and are delighted to provide our expertise to the exchange and the world’s major institutions across the globe that rely on its markets every day.”

In April, Cassini announced the establishment of its first physical Asia Pacific presence with the opening of a Sydney office and plans to grow its client base in the region.