Margin Xchange™ Addresses Regulatory Challenge Faced by Derivatives Market

Initial Margin (IM) regulations are already affecting about 40 bank groups globally, and that number will explode over the next two years as hundreds of new counterparties – including asset managers and hedge funds – are brought in scope and thousands of relationships need to be repapered. A single derivatives relationship is usually subject to at least two IM legal regimes and requires numerous documents. Negotiating complex arrangements within those legal frameworks is expensive and time-consuming – it presents both an opportunity and a need to rethink the way the market agrees, records and uses documents.

To address these regulatory challenges faced by the derivatives market, SmartDX™ has joined forces with international legal practice Allen & Overy and information and analysis provider IHS Markit to launch a new product for the derivatives market, Margin Xchange™.

Margin Xchange™ is an online platform that covers all stages of the repapering of derivatives contracts required to comply with IM regulations. It provides information reconciliation, document generation, negotiation and execution, case management and a full data export. It not only increases efficiency (impacting both time and cost) in the agreement process, but also achieves the long-held goal of treating derivative documents as data, by using a document format that is human and machine readable.

Margin Xchange™ puts the entire process on to a single online platform, and also allows counterparties to achieve the following:

  • Bulk import and reconcile counterparty data
  • Mass upload and agree on term sheets
  • Generate and customize all IM documents
  • Run all negotiations and drafting
  • Execute by electronic signatures
  • Capture the full audit trail of every negotiation point, internal escalation and sign-off

Crucially, users will be able to record every variable as a data point, rather than text, enabling them to maintain a clear view of progress at every stage during the repapering task, provide higher quality progress reports to regulators and represent the documents as data that can be stored and interrogated in the future with ease.

Margin Xchange™ will allow users to achieve the highest standards of risk management and governance in IM, reduce the time and cost of the repapering exercise and maximise the efficiency of negotiations. Even more importantly, it creates a new model for how legal documentation could be drafted, negotiated and recorded in the future.

Contact us for a demo today.