By Ed Corral, global head of collateral strategy, and Katie Emerson, EMEA head of securities lending and collateral management - platform sales at J.P. Morgan

In September 2020, the fifth phase for Uncleared Margin Rules (UMR) for Segregated Initial Margin (IM) will come into effect for many of the remaining market participants, where the portfolio aggregate average notional amount (AANA) is at or above 50bn USD equivalent. Phase 6 (September 2021) will capture firms with AANA at or above 8bn USD equivalent. Firms trading uncleared OTC derivatives will need to comply with the mandatory exchange of IM with their respective trade counterparties.

During the three year phase-in of UMR to date, the need to post IM has driven custodian and collateral agents to evolve their business models to meet clients’ needs and adapt to new regulations. In the later phases, the need to manage collateral across a variety of activities – securities lending, financing, and cleared and bilateral OTC trading – has become increasingly critical.

This has created demand for a more holistic approach to collateral management to efficiently meet their obligations. Given their focus on optimisation and liquidity, buy-side clients are looking to their custodians and third-party securities financing agents for integrated collateral management and transformation solutions.   

To support these needs, J.P. Morgan is creating an end-to-end platform which is being designed to help clients cover their financing and segregated initial margin obligations via a flexible securities lending program that operates in concert with collateral agency solutions. The enhanced platform aims to support collateral placements which minimise impact to portfolio management activities and provide uninterrupted asset servicing. 

This will allow institutions impacted by UMR, and our other clients, to efficiently optimise the use of their assets – using the most valuable to generate revenue through securities lending while simultaneously fulfilling their collateral obligations.

This thought leader features in the Collateral in 2020 Guide. Download the full guide here.