Margin Agreement Platforms Have Become Like London Buses...

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...there's never one when you need one, then suddenly three come along at once.

The legal profession seem to have remained stuck with Word and Email to handle negotiations whilst other parts of the OTC market have invested heavily in automation. Both ISDA and market participants recognise the mountain of work to reach September 2020 and the final phase of UMR, nobody disagrees that there ought to be better ways to put margin agreements in place. Yet, much like trading platforms, liquidity may be split across (at least) three platforms aimed to solve similar problems.

MarginXchange is a consortium between SmartDX, Allen & Overy and IHS Markit. The SmartDX platform already provided a high level of automation from term sheets through to electronic execution and data delivery. With the input of IHS Markit and A&O the platform will connect with the Counterparty Manager service, and use knowledge from A&O to guide the creation of pre-made templates for UMR & IM. Next is ISDA Create, which as far as I can tell aims at the same problems as MarginXchange and solves them in a similar way. (Let me know if there are fundamental differences I am unaware of).

Now comes along AcadiaSoft and their Agreement Manager (Agreement Negotiation: Changing the Dynamics). The PDF asserts that their platform:

  • Goes beyond on-line agreement negotiation
  • Enables end-to-end processing across the enterprise
  • Determines the relationships in scope for each IM phase and the types of agreements needed
  • Delivers true system/market infrastructure integration through a standard API and adaptors
  • Provides source agnostic consolidation of legal agreement data

The differentiating strategy in the diagram above is to offer connectivity to "Negotiation Providers" e.g. MarginXchange and ISDA Create, Digitisation Services (such as Perceptiv) and other downstream service providers. They also acknowledge the customers choice of platform by saying:

AgreementManager enables a firm to select its preferred negotiation solution provider; while at the same time communicating with their peers who choose to use another negotiation provider, vendor or proprietary doc portal.

In the webinar yesterday and from the recording available here, there is a timeline of the AcadiaSoft development shown below:

This indicates that the complete platform will take about another year to complete. In a CloudMargin webinar on the Operational Aspects of IM, the experts stated their belief that firms in Phase 5 need 18 months to prepare for compliance, meaning they need to start repapering their margin agreements right now, at least one year sooner that the AcadiaSoft platform completion date above.

The landscape will be made up of a complex set of offerings for buy-side firms, to choose either ISDA Create or MarginXChange (or both) or hedge by using Agreement Manager (which has a year to run) or use other vendor services to complete their re-papering. 

  • Have ISDA Create and MarginXChange agreed to integrate their platforms with AcadiaSoft?
  • When will either of those platforms be production ready?
  • How should a buy-side firm decide between them all?
  • What about other not so visible vendor platforms?

Answers in the comments or by email.


Nov 15th: Update: It has been pointed out to me that the AcadiaSoft platform is not intended to be a negotiation platform, but more of a communication platform and agreement repository.

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