Margining solution of the year: S&P Global Market Intelligence

Asia Risk Awards 2023

The final implementation phase of the uncleared margin rules (UMR) kicked off in September 2022. S&P Global Market Intelligence, with its comprehensive and adaptive end-to-end workflow solution, was there to support the large number of players now coming in scope.

UMR was first introduced in 2016. Initially these rules only applied to the world’s largest derivatives dealers, but over the years the threshold above which institutions must start posting margin has come down.

The sixth and final phase of UMR captures entities that trade an aggregate average notional amount of more than US$8 billion non-centrally cleared derivatives each year. This has brought an estimated 1,100 entities into scope, including many buy-side firms.

Many of these smaller firms have found adoption of the new rules challenging, not least because they tend to have fewer resources at their disposal compared with the bigger players. Thus, being able to access a comprehensive margining system with high levels of support and a user-friendly interface has proven particularly important in this latest wave.

S&P Global offers a comprehensive and interactive margin ecosystem that covers the entire collateral management cycle, from accurately calculating initial margin and settling margin calls to managing disputes.

The easy-to-use margining tool allows clients to automate margin calls processing, manage exceptions and maintain a high level of transparency and consistency for audit purposes. The solution supports the collateralisation of all instruments across all asset classes.

The platform is offered under a software-as-a-service model and comes equipped with dashboards that are intuitive and support real-time reporting.

A wide number of firms across Asia rely on S&P Global’s solution for their margining needs, ranging from investment banks, asset managers and securities firms to custodians and insurance companies.

The platform performs more than 11 million independent valuations monthly across a broad range of OTC derivatives and cash instruments, both vanilla and more exotic structures. These valuations rely on various models and multi-contributor data, with full integration with MarkitServ, Collateral Manager, Enterprise Data Management and thinkFolio.

The solution features on-demand pre-trade optimisation to calculate incremental initial margin impacts across each bilateral counterparty, eligible CCPs and clearing brokers to ensure clients remain within their target threshold.

Data capabilities

One of the big competitive advantages S&P Global has in the market is its sophisticated data and analytical capabilities, allowing clients to perform precise calculations that preserve their balance sheet while satisfying regulators’ demands.

S&P Global uses best-in-class over-the-counter derivatives data, which it collects from a range of sources including the world’s top inter-dealer brokers, more than 60 market-makers and more than 30 exchanges.

This up-to-date pricing data covers more than 110,000 bonds, more than a million municipal securities and around 1.2 million securitised products. It comes with full assumption sets, liquidity metrics and transparency into pricing models to mirror market pricing.

These capabilities were further boosted last year when the company completed its merger of IHS Markit, a data service provider. S&P Global says this allowed the margining solution to generate more expansive views, encompassing new risks and operational workflows.

The merger has also enabled S&P Global to include data valuations and analytics for equities, drawing on corporate information to decipher cashflow, workflow and financial statements. This is in addition to existing cash and derivatives valuations.

Having good data capabilities is especially important in a region such as Asia, where markets are notoriously fragmented and high-quality data is not always so easy to come by.

While much of the development of the margining solution has been conducted on a global basis, S&P Global says a substantial portion of the enhancements have been driven by the needs of the firm’s large and growing client base in Asia-Pacific. This has included refining solutions for complex structured products that are popularly traded in the region.

Adaptive and versatile

S&P Global’s margining solution adapts well to the evolution of business needs, which has proved very important as phase six firms start out on their UMR journey.

Hosted in the cloud, the platform does not require a large initial investment or onerous set-up cost. As it is volume-based, the cost of the service grows in sync with the client’s growth, making the solution suitable for the long term.

S&P Global continues to enhance its Simm backtesting capabilities, which the company says will grow in importance now phase six firms are in scope. Phase five firms started paying more attention to backtesting once the initial margin process had stabilised. S&P Global expects to see a similar trajectory with phase six.

S&P Global’s client support is also important, with a diverse global network of 200 analysts, covering multiple regions and sectors round-the-clock, able to deliver instant assistance from onboarding through to go-live.

Sage Patel, managing director, head of market data and valuations, Asia-Pacific, S&P Global Market Intelligence, says: “Being awarded Margining solution of the year by Asia Risk is a testament to our comprehensive and innovative initial margining solution, combining high-quality data and advanced technology across the workflow while providing transparency and expert localised support.

“S&P Global Market Intelligence has expanded capabilities that provide access to deep valuations across all asset classes, leveraging industry-arranged premium information. Our solution is being utilised by the industry across borders, which allows impactful, regulatory-reviewed margin solutions for effective and efficient margin reporting, making us a ‘one-stop’ workflow for our customers in Asia-Pacific.”