THRESHOLD BREACH ASSESSMENT SERVICE
Margin Tonic are NOW pleased to OFFER our INITIAL MARGIN Threshold Breach Assessment TO Phase 5 & 6 firms.
THE THRESHOLD BREACH ASSESSMENT IS A KEY UPFRONT COMPLIANCE PLANNING SERVICE WHICH further EXTENDS our end-to-end Initial Margin PROPOSALS.
BCBS/IOSCO announced in March 2019 that relationships do not need to be operationally-ready to exchange collateral until their exposure breaches the exchange threshold ($50mill at group-level). Global regulators are now following suit and translating this guidance into law.
With that in mind, the immediate priority for in-scope firms should be on answering two key questions:
Do we have relationships whose exposure will breach the exchange threshold?
If so, when will threshold breaches for those relationships occur?
Only after answering these questions will firms be able to confidently plan out their IM delivery.
Especially important for in-scope firms is to confirm whether they have relationships which will breach the exchange threshold soon after 1st Sept. We call these ‘quick-breach’ relationships.
For firms with quick-breach relationships there is effectively no change to the compliance date, which still stands as 1st Sept or soon after.
With that in mind we’d strongly advise Phase 5 and 6 firms to identify as soon as possible if and when their relationships will breach.
A couple of not always-known fundamentals on the exchange threshold….
It’s important that the $50mill threshold is available at group-to-group level, not per CSA. This means that if your firm has 3 x Reg IM CSAs vs Dealer ABC (for different entities, or the same fund managed by different fund managers), then the $50mill may be allocated out to threshold amounts of $15mill per CSA, with a $5mill excess left over. Clearly exposure will hit $15mill far quicker than $50mill, making a threshold breach more likely.
It’s also important to remember that any exchange threshold is optional, so $50mill is the maximum negotiable threshold amount. For example, dealers may not give the full $50mill group-level threshold to their higher-risk counterparties. Another scenario that would trigger quicker threshold breaches.
THRESHOLD BREACH Assessment
Margin Tonic can now help in-scope firms understand the impact of BCBS/IOSCO’s guidance via our Threshold Breach Assessment service, which provides….
a single, upfront view across all trading relationships of which will breach threshold and by when, USING detailed upfront analysis, forecast SIMM & SCHEDULE calculations, what-if scenario planning AND THRESHOLD OPTIMISATION.
Management view across all relationships of which will breach the threshold and by when
Ability to plan for compliance with confidence
Protection against unnecessary delivery and associated costs
No need for your firm to resource heavy analysis and data normalisation tasks for forecast calculations
For more information please get in touch with us on firstname.lastname@example.org or fill out the form below.
MARGIN TONIC - END-TO-END INITIAL MARGIN SERVICES
Margin Tonic supports a flexible set of end-to-end Initial Margin services, covering Calculations, Operations, Custodial and Legal changes
Margin Tonic’s specialists have defined and delivered the Initial Margin changes to multiple firms across different phases, including Tier 1 banks, smaller banks and the buy-side
We consider ourselves the industry leaders in accelerating the Initial Margin compliant changes
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Regardless of the stage of your Initial Margin delivery, Margin Tonic is able to help
Feel free to contact us via the form below if you want to learn more, either about our Threshold Breach Assessment or how we could potentially help your firm.