SGX and Cassini Systems team up to help market participants manage and comply with UMR

Singapore Exchange (SGX) and pre- and post-trade margin and collateral analytics provider for derivatives markets Cassini Systems announced their partnership aiming to provide free service for SGX market participants and assist them with the preparation for meeting the Uncleared Margin Rules (UMR) requirements.

As part of the partnership agreement, SGX will utilize Cassini’s domain expertise to provide market users with complimentary analyses to determine their average aggregated notional amount (AANA), representing the gross value of open, non-centrally cleared derivatives positions.

The AANA is used by international regulators to determine whether a firm falls in scope for each phase of UMR. Phase 5 of the UMr is planned to take effect in September 2021. Entities which are in scope, are subject to a mandatory exchange of Initial Margin (IM) with their counterparties for their bilateral OTC agreements over the $50 million IM threshold per counterpart.

SGX and Cassini are offering the service in advance of Phase 5 so firms which potentially meet the $50 billion AANA threshold can assess their status, adjust their positions and look for alternatives to certain non-cleared products now.

Affected by the Phase 5 are banks, asset managers, hedge funds and pension funds. Phase 6 will take effect in September 2022 and has a threshold of $8 billion AANA.

SGX and Cassini will also collaborate in educating and raising 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, commented:


KC Lam
Source: LinkedIn

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, stated:

Liam Huxley, Cassini

Liam Huxley
Source: LinkedIn

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.

Cassini announced in April its new office in Sydney and first physical presence in the APAC region with plans to grow its client base there.

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