Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade p
EY | Assurance | Tax | Transactions | Advisory
Contacts Roy Choudhury Principal Office: +1 212 773 9299
[email protected]
Janina Polo Senior Manager Office: +1 212 773 2486
[email protected]
Prakash Rao Executive Director Office: +1 212 773 2188
[email protected]
John Boyle Senior Manager Office: +1 212 773 5412
[email protected]
Alex Rathod Senior Manager Office: +1 212 773 4210
[email protected]
Setu Pandya Senior Manager Office: +1 212 773 2437
[email protected]
About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About EY's Advisory Services In a world of unprecedented change, EY Advisory believes a better working world means solving big, complex industry issues and capitalizing on opportunities to help deliver outcomes that grow, optimize and protect clients’ businesses. From C-suite and functional leaders of Fortune 100 multinationals to disruptive innovators and emerging market small and medium sized enterprises, EY Advisory teams with clients — from strategy through execution — to help them design better outcomes and deliver long-lasting results. A global mindset, diversity and collaborative culture inspires EY consultants to ask better questions. They work with the client, as well as an ecosystem of internal and external experts, to co-create more innovative answers. Together, EY helps clients’ businesses work better. The better the question. The better the answer. The better the world works. © 2016 Ernst & Young LLP. All Rights Reserved. 1601-1807951 Score no: CK1033 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.
ey.com
Uncleared margin rules Solutions to optimize your technology investment
Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade processing systems and operational workflow. EY’s solution framework consists of technology components, solution design, integration and testing services. The framework will help accelerate progress toward compliance with uncleared margin requirements.
3. Test plan, scenarios, test cases and test data to enable end-to-end compliance with the new rules. UMR test plan
Test results Pre-trade margin calcs and analytics
Trade execution
Margin processing
Settlement and recon
SIMM match
Sell singe trade
SIMM match
Margin calc
Book 10 trades
SIMM match
_23.151.2
Margin calc
Book offsetting trade
SIMM match
1.5
_23.151.2
Margin calc
Day over day
SIMM match
2.1
_23.151.3
Ineligible collateral
Pledge junk bonds
Exception
2.2
_23.151.4
Eligible collateral
Pledge UST’s
Booked
2.3
_23.151.5
Haircut
Pledge UTT’s
Calc value
2.3
_23.150
Dispute
Single Trade
Resolution process
Test reference
Rule rested
1.1
_23.150
Margin calc
Buy single trade
1.2
_23.151.1
Margin calc
1.3
_23.151.2
1.4
1. EY brings an understanding of the uncleared margin rules and a robust tool to document adherence and progress toward compliance.
Technology services
Scenario
Data input
Expected result
Client onboarding
Confirm end-to-end capabilities agnostic of the applications, platforms or vendor solutions that make up the technology infrastructure.
Solution management
• Facilitate solution design • Codevelop solution design principles • Facilitate adoption and design integrity
Capability assessment
• Analyze current state collateral data, systems and processes • Target state architecture
Solution design
4. EY provides solution design, integration and testing services to remediate gaps and help achieve compliance with uncleared margin rules.
12 10 8 6 4 2 CFTC - Gap
0
CFTC - No Gap
Customize compliance requirements, assess adherence, record evidence and generate executive reports.
Client onboarding
2. An end-to-end data framework for specific data sets that are impacted by the new rules.
CSA – Eligibility
Impacted data category*
Reference data
•
Client data
•
Transaction data
Account data
Control data
• • •
• • •
Client onboarding
Pre-trade margin calcs and analytics
Trade execution
Margin processing
Margin Calculations
Settlement Instructions
Credit/Market Risk
Trade positions Collateral balances Margin methodology
Product data
Market data
•
Risk sensitivities
Trade data
•
Not impacted
Collateral data
• • • • • • •
IM and VM requirements MTA Collateral balances Collateral netting Concentration Collateral pledged Collateral valuation
Settlement data
• • •
Collateral delivered Account segregation Re-hypothecation
• • •
Dispute resolution Collateral to settlement Position recs (client/broker)
•
End-to-end integration/system test
impacted data
Intra-day margin
Position maintenance
EOD margin calc per account
EOD netted margin
Margin calculation and exposure management
Global netting agreements as applicable
EOD margin call (Report)
Funding requirements
Treasury functions
Settlement instructions
Margin call agreement
Settlement proposal by client
Dispute resolution procedures
Collateral eligibility Haircuts
Settlement cash and collateral transfer Segregated accounts Segregated reports Settlement instructions
Reconciliations
Position and valuation recs (T0 EOD) Margin and settlement recs (T+1)
• • • •
End-to-end data mapping Collateral data repository Internal IM, VM calculations Integration with capital, liquidity, pricing, funding, risk and stress testing functions • End-to-end system integration: bespoke systems, vendor systems, collateral hub
Confirm Reporting
Unless < MTA Disclosures
Reference data management Margin methodology and analytics Margin processing workflow Settlement and reconciliation Dispute resolution workflow
Product and Client Scope
T+1
Identify critical data elements required for compliance, close gaps and enable data mapping from source to consumer, and dispute resolution. *Representative
Trade Capture
Product and Client Scope
Trade confirmation
Testing
Periodic margin calculation
Covered instruments Eligibility
Test data
Product and Client Scope
Trade affirmation
T 0 (EOD)
Exemption/Nonexemption Covered entities/affiliates Cross border provisions Legal agreements (e.g., CSA, SA, BA) Schedules (e.g., margin methodology, haircuts)
• •
Reconciliation data
Client Eligibility
Trade execution
Settlement and recon
Risk & controls
Data type
Pre-trade margin calcs and analytics
CSA – Haircuts
Margin Method
Application integration
T0
T-n
• • • • •
Collateral management
Treasury functions
Design principles to include considerations for foundational components that would be required for a strategic global collateral management solution.
• Regression testing • Traceability testing • Integration testing
Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade processing systems and operational workflow. EY’s solution framework consists of technology components, solution design, integration and testing services. The framework will help accelerate progress toward compliance with uncleared margin requirements.
3. Test plan, scenarios, test cases and test data to enable end-to-end compliance with the new rules. UMR test plan
Test results Pre-trade margin calcs and analytics
Trade execution
Margin processing
Settlement and recon
SIMM match
Sell singe trade
SIMM match
Margin calc
Book 10 trades
SIMM match
_23.151.2
Margin calc
Book offsetting trade
SIMM match
1.5
_23.151.2
Margin calc
Day over day
SIMM match
2.1
_23.151.3
Ineligible collateral
Pledge junk bonds
Exception
2.2
_23.151.4
Eligible collateral
Pledge UST’s
Booked
2.3
_23.151.5
Haircut
Pledge UTT’s
Calc value
2.3
_23.150
Dispute
Single Trade
Resolution process
Test reference
Rule rested
1.1
_23.150
Margin calc
Buy single trade
1.2
_23.151.1
Margin calc
1.3
_23.151.2
1.4
1. EY brings an understanding of the uncleared margin rules and a robust tool to document adherence and progress toward compliance.
Technology services
Scenario
Data input
Expected result
Client onboarding
Confirm end-to-end capabilities agnostic of the applications, platforms or vendor solutions that make up the technology infrastructure.
Solution management
• Facilitate solution design • Codevelop solution design principles • Facilitate adoption and design integrity
Capability assessment
• Analyze current state collateral data, systems and processes • Target state architecture
Solution design
4. EY provides solution design, integration and testing services to remediate gaps and help achieve compliance with uncleared margin rules.
12 10 8 6 4 2 CFTC - Gap
0
CFTC - No Gap
Customize compliance requirements, assess adherence, record evidence and generate executive reports.
Client onboarding
2. An end-to-end data framework for specific data sets that are impacted by the new rules.
CSA – Eligibility
Impacted data category*
Reference data
•
Client data
•
Transaction data
Account data
Control data
• • •
• • •
Client onboarding
Pre-trade margin calcs and analytics
Trade execution
Margin processing
Margin Calculations
Settlement Instructions
Credit/Market Risk
Trade positions Collateral balances Margin methodology
Product data
Market data
•
Risk sensitivities
Trade data
•
Not impacted
Collateral data
• • • • • • •
IM and VM requirements MTA Collateral balances Collateral netting Concentration Collateral pledged Collateral valuation
Settlement data
• • •
Collateral delivered Account segregation Re-hypothecation
• • •
Dispute resolution Collateral to settlement Position recs (client/broker)
•
End-to-end integration/system test
impacted data
Intra-day margin
Position maintenance
EOD margin calc per account
EOD netted margin
Margin calculation and exposure management
Global netting agreements as applicable
EOD margin call (Report)
Funding requirements
Treasury functions
Settlement instructions
Margin call agreement
Settlement proposal by client
Dispute resolution procedures
Collateral eligibility Haircuts
Settlement cash and collateral transfer Segregated accounts Segregated reports Settlement instructions
Reconciliations
Position and valuation recs (T0 EOD) Margin and settlement recs (T+1)
• • • •
End-to-end data mapping Collateral data repository Internal IM, VM calculations Integration with capital, liquidity, pricing, funding, risk and stress testing functions • End-to-end system integration: bespoke systems, vendor systems, collateral hub
Confirm Reporting
Unless < MTA Disclosures
Reference data management Margin methodology and analytics Margin processing workflow Settlement and reconciliation Dispute resolution workflow
Product and Client Scope
T+1
Identify critical data elements required for compliance, close gaps and enable data mapping from source to consumer, and dispute resolution. *Representative
Trade Capture
Product and Client Scope
Trade confirmation
Testing
Periodic margin calculation
Covered instruments Eligibility
Test data
Product and Client Scope
Trade affirmation
T 0 (EOD)
Exemption/Nonexemption Covered entities/affiliates Cross border provisions Legal agreements (e.g., CSA, SA, BA) Schedules (e.g., margin methodology, haircuts)
• •
Reconciliation data
Client Eligibility
Trade execution
Settlement and recon
Risk & controls
Data type
Pre-trade margin calcs and analytics
CSA – Haircuts
Margin Method
Application integration
T0
T-n
• • • • •
Collateral management
Treasury functions
Design principles to include considerations for foundational components that would be required for a strategic global collateral management solution.
• Regression testing • Traceability testing • Integration testing
Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade processing systems and operational workflow. EY’s solution framework consists of technology components, solution design, integration and testing services. The framework will help accelerate progress toward compliance with uncleared margin requirements.
3. Test plan, scenarios, test cases and test data to enable end-to-end compliance with the new rules. UMR test plan
Test results Pre-trade margin calcs and analytics
Trade execution
Margin processing
Settlement and recon
SIMM match
Sell singe trade
SIMM match
Margin calc
Book 10 trades
SIMM match
_23.151.2
Margin calc
Book offsetting trade
SIMM match
1.5
_23.151.2
Margin calc
Day over day
SIMM match
2.1
_23.151.3
Ineligible collateral
Pledge junk bonds
Exception
2.2
_23.151.4
Eligible collateral
Pledge UST’s
Booked
2.3
_23.151.5
Haircut
Pledge UTT’s
Calc value
2.3
_23.150
Dispute
Single Trade
Resolution process
Test reference
Rule rested
1.1
_23.150
Margin calc
Buy single trade
1.2
_23.151.1
Margin calc
1.3
_23.151.2
1.4
1. EY brings an understanding of the uncleared margin rules and a robust tool to document adherence and progress toward compliance.
Technology services
Scenario
Data input
Expected result
Client onboarding
Confirm end-to-end capabilities agnostic of the applications, platforms or vendor solutions that make up the technology infrastructure.
Solution management
• Facilitate solution design • Codevelop solution design principles • Facilitate adoption and design integrity
Capability assessment
• Analyze current state collateral data, systems and processes • Target state architecture
Solution design
4. EY provides solution design, integration and testing services to remediate gaps and help achieve compliance with uncleared margin rules.
12 10 8 6 4 2 CFTC - Gap
0
CFTC - No Gap
Customize compliance requirements, assess adherence, record evidence and generate executive reports.
Client onboarding
2. An end-to-end data framework for specific data sets that are impacted by the new rules.
CSA – Eligibility
Impacted data category*
Reference data
•
Client data
•
Transaction data
Account data
Control data
• • •
• • •
Client onboarding
Pre-trade margin calcs and analytics
Trade execution
Margin processing
Margin Calculations
Settlement Instructions
Credit/Market Risk
Trade positions Collateral balances Margin methodology
Product data
Market data
•
Risk sensitivities
Trade data
•
Not impacted
Collateral data
• • • • • • •
IM and VM requirements MTA Collateral balances Collateral netting Concentration Collateral pledged Collateral valuation
Settlement data
• • •
Collateral delivered Account segregation Re-hypothecation
• • •
Dispute resolution Collateral to settlement Position recs (client/broker)
•
End-to-end integration/system test
impacted data
Intra-day margin
Position maintenance
EOD margin calc per account
EOD netted margin
Margin calculation and exposure management
Global netting agreements as applicable
EOD margin call (Report)
Funding requirements
Treasury functions
Settlement instructions
Margin call agreement
Settlement proposal by client
Dispute resolution procedures
Collateral eligibility Haircuts
Settlement cash and collateral transfer Segregated accounts Segregated reports Settlement instructions
Reconciliations
Position and valuation recs (T0 EOD) Margin and settlement recs (T+1)
• • • •
End-to-end data mapping Collateral data repository Internal IM, VM calculations Integration with capital, liquidity, pricing, funding, risk and stress testing functions • End-to-end system integration: bespoke systems, vendor systems, collateral hub
Confirm Reporting
Unless < MTA Disclosures
Reference data management Margin methodology and analytics Margin processing workflow Settlement and reconciliation Dispute resolution workflow
Product and Client Scope
T+1
Identify critical data elements required for compliance, close gaps and enable data mapping from source to consumer, and dispute resolution. *Representative
Trade Capture
Product and Client Scope
Trade confirmation
Testing
Periodic margin calculation
Covered instruments Eligibility
Test data
Product and Client Scope
Trade affirmation
T 0 (EOD)
Exemption/Nonexemption Covered entities/affiliates Cross border provisions Legal agreements (e.g., CSA, SA, BA) Schedules (e.g., margin methodology, haircuts)
• •
Reconciliation data
Client Eligibility
Trade execution
Settlement and recon
Risk & controls
Data type
Pre-trade margin calcs and analytics
CSA – Haircuts
Margin Method
Application integration
T0
T-n
• • • • •
Collateral management
Treasury functions
Design principles to include considerations for foundational components that would be required for a strategic global collateral management solution.
• Regression testing • Traceability testing • Integration testing
EY | Assurance | Tax | Transactions | Advisory
Contacts Roy Choudhury Principal Office: +1 212 773 9299
[email protected]
Janina Polo Senior Manager Office: +1 212 773 2486
[email protected]
Prakash Rao Executive Director Office: +1 212 773 2188
[email protected]
John Boyle Senior Manager Office: +1 212 773 5412
[email protected]
Alex Rathod Senior Manager Office: +1 212 773 4210
[email protected]
Setu Pandya Senior Manager Office: +1 212 773 2437
[email protected]
About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About EY's Advisory Services In a world of unprecedented change, EY Advisory believes a better working world means solving big, complex industry issues and capitalizing on opportunities to help deliver outcomes that grow, optimize and protect clients’ businesses. From C-suite and functional leaders of Fortune 100 multinationals to disruptive innovators and emerging market small and medium sized enterprises, EY Advisory teams with clients — from strategy through execution — to help them design better outcomes and deliver long-lasting results. A global mindset, diversity and collaborative culture inspires EY consultants to ask better questions. They work with the client, as well as an ecosystem of internal and external experts, to co-create more innovative answers. Together, EY helps clients’ businesses work better. The better the question. The better the answer. The better the world works. © 2016 Ernst & Young LLP. All Rights Reserved. 1601-1807951 Score no: CK1033 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.
ey.com
Uncleared margin rules Solutions to optimize your technology investment
EY | Assurance | Tax | Transactions | Advisory
Contacts Roy Choudhury Principal Office: +1 212 773 9299
[email protected]
Janina Polo Senior Manager Office: +1 212 773 2486
[email protected]
Prakash Rao Executive Director Office: +1 212 773 2188
[email protected]
John Boyle Senior Manager Office: +1 212 773 5412
[email protected]
Alex Rathod Senior Manager Office: +1 212 773 4210
[email protected]
Setu Pandya Senior Manager Office: +1 212 773 2437
[email protected]
About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About EY's Advisory Services In a world of unprecedented change, EY Advisory believes a better working world means solving big, complex industry issues and capitalizing on opportunities to help deliver outcomes that grow, optimize and protect clients’ businesses. From C-suite and functional leaders of Fortune 100 multinationals to disruptive innovators and emerging market small and medium sized enterprises, EY Advisory teams with clients — from strategy through execution — to help them design better outcomes and deliver long-lasting results. A global mindset, diversity and collaborative culture inspires EY consultants to ask better questions. They work with the client, as well as an ecosystem of internal and external experts, to co-create more innovative answers. Together, EY helps clients’ businesses work better. The better the question. The better the answer. The better the world works. © 2016 Ernst & Young LLP. All Rights Reserved. 1601-1807951 Score no: CK1033 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.
ey.com
Uncleared margin rules Solutions to optimize your technology investment
