Vermeg, a banking and insurance software solutions provider, is targetting smaller market participants set to face an unprecedented level of regulatory oversight with its new collateral management platform.
Some 1,100 buy and sell-side firms are understood to be in scope for the phase five and six of the Uncleared Margin Rules, which will bring new margining requirements for over-the-counter derivatives in September 2021 and September 2022 respectively.
The 12-month delay in the implementation of the final two phases of UMR was extended because of the COVID-19 pandemic.
Phase five will require all entities with an average aggregated notional amount above €8 billion to post and manage initial margin (IM) for non-centrally cleared derivatives from next September.
A spokesperson for the firm explains that many of the organisations affected by the final phases of UMR have typically managed their collateral management process on spreadsheets and have historically been unaffected by the regulations.
Many in-scope firms will not need to exchange IM but should still be taking this opportunity to review processes, infrastructure and ensure the appropriate controls are in place, says Vermeg.
The delay gives smaller buy and sell-side firms a critical window in which to find strategic solutions to avoid non-compliance with the regulations, says Helen Nicol, global product director of collateral solutions at Vermeg.
The requirement for IM monitoring and the potential need to exchange collateral requires further documentation, triparty or third-party custodian accounts and connectivity plus the ability to calculate the trade sensitivities in order to calculate the numbers depending upon the approach the organisation has taken.
To meet this challenge, Vermeg has launched Colline.Cloud, a modular, cloud-based, end-to-end collateral management service, aimed at smaller buy and sell-side firms that are due to come under the remit of UMR over the next two years.
Vermeg says Colline.Cloud is highly-automated and adaptable and can be implemented rapidly and seamlessly to meet this need.
The firm’s flagship platform, Colline, is currently used by more than 90 financial institutions.
The new software has been developed by the Colline service and has additional capabilities including standard IM model calculations and a new user interface.
Nicol adds: “With a more efficient collateral management solution like Colline.Cloud, they will not only tick the regulatory box, but it could also improve business performance by providing a sustainable and flexible cost structure and removing the need for burdensome IT infrastructure.”
