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Article: Q4 ’18 Key Themes – SIMM and other hot buttons…

26 October 2018 | Bill Hodgson

In a guest post from Liam Huxley CEO at Cassini Systems, he provides thoughts on SIMM, UMR, Systems, Politics, Brexit and 2019. The OTC Space welcomes well written and insightful articles which are of practical benefit to our readers. If you have something you think might be suitable, please contact us. No charges apply, quality and relevance is what matters.


At Cassini, we have recently been traveling across Europe and the US to events ranging from global client conferences hosted by our partners Charles River and Simcorp, to exhibiting or attending at the FIA expo in Chicago, the ISDA North America Conference in New York, and the Fleming Collateral Management event in Amsterdam. The Autumn merry go round is not done yet, with the DerivSource London event on Nov 14 and Fixed Income Leaders Summit in Amsterdam to come, but it’s a good time to catch breath and reflect on what we’ve heard across these events.

We have heard seen several key themes across all these events

  • SIMM – regulatory and operational
  • Consolidation and integration of front to back systems
  • Geopolitical concerns, especially Brexit

None of these will be particularly shocking to anyone in the industry, although we have been surprised by the upturn in interest in SIMM by the buy side community. On that note we also joined CloudMargin, IHS Markit and MarginReform to present a webinar on SIMM initial margin this week which covered model, implementation, and application. You can access a recording of that webinar here.

SIMM and Uncleared Margin Rules

Thinking about SIMM, as I said, the buy side has been rapidly waking up to the oncoming impact of SIMM and starting to understand its impact and figure out the best way to implement a SIMM process.

The deadlines are September 2019 or 2020 depending on where each firm falls in terms of scope but there is a lot of preparation to do first, and decisions to be made (agreement, technology, capital optimisation) before the actual implementation date. Therefore, it is imperative that all Fund managers assign an owner to the Uncleared Margin Rules and SIMM impact assessment and start engaging with ISDA and service providers.

One interesting result we saw from the webinar, previously mentioned, was that in a poll question only 25% of the attendees said they thought their firm was in a position to calculate the SIMM sensitivities in house*. We are also seeing similar feedback in our conversations with firms around the street. The requirements to marshal trades, define and agree curves and sensitivity models, and source the required market data makes this piece alone a complex problem for many firms.

*This data is owned by Cassini Systems, CloudMargin, IHS Markit and MarginReform. Not to be reused by any other institution unless permission is sought from above companies. Answers are provided from a variety of institutions and companies within the financial services space. 

We will be exploring this area in more depth in November in a series of blogs about SIMM and ways to address its various needs.

System Consolidation

We also exhibited at both the CRD Global Client Conference and the Simcorp European Client Event and although these are very different platforms we did see similar topics being discussed, and one theme that was consistent was around the trend to system consolidation.

As everyone will have seen this year by the spate of M&A in our industry (CRD by State Street, NEX by CME, Lombard by Vermeg, Advent by SS&C, to name but a few), platform consolidation is continuing at a pace. At the same time larger firms are looking to their existing system providers to increase their footprints and enable greater front to back perspectives and analytics.

This theme resonates strongly with us, as our mission has always been to integrate front office and back office perspectives to provide consistent analytics, calculations and optimisation, so we are happy to see this trend reflected more broadly.

Geopolitics & Brexit

Inevitably Brexit was a topic for panel discussions at all events. Wisely most people avoided claims to predict the future, but with no consensus as to how it will pan out, concern of a no deal Brexit ranged from moderate to high.

I was interested to see how prominent a topic this was at the US based events as well as in Europe. One very senior panellist from a tier 1 bank stated that Brexit was going to be a bigger disruption and effort than MiFiD

Generally, firms advised that they were planning for a ‘no-deal’, and ensuring they can continue to provide services to clients in the event of worst case outcomes. That said, there was some optimism that there will be substituted compliance in place to avoid breaks in acceptance for euro clearing, for example.

And onward to 2019

All in all, its been a busy year for the industry with plenty more challenges to come, but we are glad to see more focus on integration across firms and looking more holistically at capital optimisation.

This is a fast-developing world and plenty to stay on top of as we head toward year end and 2019.

We look forward to seeing you at future events and hearing your thoughts too!

Cassini Systems is an ISDA SIMM Licensed vendor for the ISDA SIMM Methodology. For more information, click here.

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