January 30th, 2019 by Nick Railton-Edwards
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DRS recently hosted a well-attended IM Breakfast Roundtable at the Gherkin. A distinguished list of panellists included Mayer Brown’s Ed Parker, Margin Reform‘s Chetan Joshi and Bank of New York Mellon’s Mark Higgins. Focused primarily on the imminent challenges of IM Phase 4, participants were drawn from the sellside; the event’s success effectively mandates a buyside-focused sequel in the next few months. Free-flowing conversation covered a wide range of topics including:

Phases 4 & 5 – what is the size of the challenge?

• Who will be in scope? Will self-disclosure come to the rescue or will a more pro-active approach be required?
• Market advocacy to limit the scope of Phase 5 – what are the chances of the market dodging a Phase 5 bullet (or at least reducing it in size)?

SIMM implementation

• Gaining approval – making the calculation is one thing, getting regulatory sign-off quite another…
• Buy or build? With “off the shelf” solutions available, what is the optimal strategy?

Custodians

• Tri-party vs third party – are these materially different models properly understood?
• New entrants in Phase 5 – will the emergence of fresh faces in the custody space complicate matters in 2020?

Legal documentation

• “Phase 1” vs “Next Gen” ISDA docs – which will prevail?
• Emerging doc management technologies – how much of the burden can they really alleviate?

The pre-event survey was of particular interest, highlighting some slightly surprising results:

  • 43% of attendees regard SIMM authorisation/implementation as their greatest IM challenge
  • Of the various industry-advocated mitigants to the phase 5 explosion, 50% of attendees believe that raising the AANA threshold from $8bn. to $100bn. has the greatest chance of success
  • 63% of attendees don’t know (yet) if they have a preference for Phase 1 documentation rather than the newly-minted Next Generation suite
  • In the unsurprising but welcome category- 50% of attendees intend to outsource their IM negotiation to a legal services provider

The survey is still live and we would very much welcome your participation.

 

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