March 1 Deadline in EU, UK, US and Elsewhere Challenges Firms to Find Fast, Efficient Ways to Comply with Global Regulatory Changes, Demonstrate Best Efforts
CloudMargin, the multi-award winning creator of the world’s first web-based collateral and margin management solution, and SmartDX from Smart Communications, the industry standard for automating trade and relationship document generation, collaboration and processing in the capital markets, today announced that the firms have partnered to address the Daily Variation Margin (VM) Rule that goes into effect March 1 in the European Union, United Kingdom, United States and elsewhere 1.
The offering, available immediately, enables buy-side investors and other over-the-counter (OTC) derivatives market participants to quickly and comprehensively sign new ISDA Documentation or “repaper” their OTC agreements with existing or new counterparties through SmartDX, and then seamlessly pass the operational data to CloudMargin’s collateral management workflow tool to handle the vastly increased volume of collateral transactions. CloudMargin estimates that, on average, the new VM rules will increase firms’ collateral activity by 500 percent.
Lee McCormack, CloudMargin Head of Strategy and Product Development, said: “Despite the VM rule taking effect on Wednesday, only a small percentage of market participants have put in place a plan or the tools needed to post daily variation margin. But their operations workload and processes are about to change forever. The connectivity between CloudMargin and SmartDX provides buy-side firms and other swap market participants the ability to seamlessly and cost-effectively negotiate their agreements to become regulatory compliant, then on an ongoing basis, automate the process and easily manage the increased operational challenges. We are thrilled to work with SmartDX, which has a similar philosophy to ours in its focus on providing solutions to clients’ problems by offering better processes delivered through a cloud-based SaaS product.”
Robin Moody, Global Head of SmartDX, said: “While the industry has made a lot of investment into the legal teams processing the updated documentation, that only solves part of the problem, namely, the legal side. The operational challenge of implementing these changes is very difficult at this scale unless you can use technology to better manage processes, documents and ultimately the data in those documents. By adopting SmartDX and CloudMargin, market participants can show the regulators they are putting forth best efforts and directly solve the operational challenge of VM rules compliance. The integration with CloudMargin was an obvious next step for us, and we are very pleased that we could move so quickly to meet the industry’s needs now and also for the business-as-usual process after the deadline.”
SmartDX generates and hosts an extensive library of templates which can be configured to the specific needs of firms. OTC market participants can then use these templates to repaper their CSA agreements or enter into new agreements while maintaining a machine-readable version of the document. Participants can use the firm’s cloud-based offering to collaborate on negotiated points and feed the agreements directly into industry utilities such as IHS Markit’s CounterParty Manager.
Through the SmartDX and CloudMargin partnership, the repapered agreements are then seamlessly fed into the CloudMargin platform, giving users a comprehensive solution that expedites repapering all the way to the automation of the variation margin calls that are now expected on a daily basis, with little to no additional work from extra staff, or risk of manual error in re-keying of data.
The CloudMargin platform is built to handle complex collateral requirements with multiple counterparties, and it provides automated connectivity to global custodians, banks, clearing brokers and clearing houses, allowing market participants to manage collateral across all asset types and instruments.
Headquartered in London, CloudMargin created the world’s first cloud-based collateral management workflow tool, which has earned eight different industry awards since 2015 for innovation and best-in-class technology. The firm’s Software-as-a-Service (SaaS) model is helping many of the leading financial institutions globally – including exchanges, brokerage firms, banks, asset management firms and insurance companies – meet time-critical regulatory deadlines and reduce costs associated with collateral requirements that are growing dramatically. CloudMargin bypasses many of the shortfalls of legacy, on-premise software, enabling clients to experience rapid implementation and access to robust and secure collateral management workflow software.
SmartDX from Smart Communications is the industry standard for automating trade and relationship document generation, collaboration and processing in the Capital Markets. Trusted by all of the G15 investment banks and some of the world’s largest energy and commodity companies, SmartDX helps simplify the drafting, negotiation and execution of trade and relationship documentation for all market participants, across all document types, asset classes and product types. SmartDX serves its global customer base from offices located in North America, Europe and Asia Pacific.
1. Certain global regulators have offered designated parties a grace period for enforcement, but in all cases market participants must show that they have made progress toward compliance and are demonstrating best efforts.