Research and Insights

2020 Uncleared Margin Rules Readiness Survey

Our findings reveal that a significant proportion of institutions are behind in their preparations.

September 2020

The Uncleared Margin Rules (UMR) were set out by the G20 countries in 2009 to reform the over-the-counter (OTC) derivatives market in response to the global financial crisis (GFC).

One of the major reforms recommended was the implementation of exchanging initial margin (IM) and variation margin (VM) between counterparties trading OTC non-centrally cleared derivatives. UMR has been rolling out in phases since September 2016, with an estimated 1,200 counterparties coming under the purview of Phase 5 and 6. 

Despite a year’s reprieve on the UMR deadline, institutions slated for compliance in the next two years have much to do and little time to waste. 

In June 2020, we engaged Oxford Economics to field a global survey of 300 industry executives from 16 countries to gauge institutions’ plans and perspectives regarding compliance with UMR. While half of institutions believe UMR compliance will have a positive impact on their operating models, just 19 percent reported that they are fully prepared.

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Given the amount of education and work required to get up to speed, the majority of firms say they will use external partners to lessen the burden of new workflows. While many approaches for mitigating the impact of compliance have gained traction, such as trading only in cleared products, a holistic review is essential to understanding the long-term impact on costs and risks.

In the first podcast of our “Collateral+” series, Gino Timperio, global head of Collateral Management and Financing, puts some context around the survey results and explains how institutions should approach compliance.