Since its inception in 2016, the first four phases of UMR impacted just a small number of firms. However, phases 5 and 6 are likely to impact more than 1,000 firms on initial margin requirements. These UMR phases can impact many market participants such as asset managers, hedge funds, corporates and pension funds.
By looking at the Average Aggregate Notional Amount (AANA) holistically, market participants can decide which products and services are the best fit to optimize UMR-based margin requirements:
The first step to complying with UMR is determining if your firm is in scope by calculating your AANA. For EU firms, this is done by summing the total amount of outstanding non-cleared derivative notional over the observation period and dividing this by the number of months in the observation period (3).
Any centrally cleared and exchange-traded products are exempt from the calculation.
Which derivatives count towards my AANA?