Uncleared Margin Rules (UMR) Phase 5 – Euroclear triparty solutions Business & Operational Update 12 May 2020 1
UMR Phase 5 – Market Update • BCBS-IOSCO: Deferral of final implementation 2021 / 2022 • Euroclear service levels continued as originally planned for Sept 2021 ► Full support ► Keeping Commitment • Some 1.200 – 1.400 “pairs” indicated for UMR Phase V implementation • More than 25 “new” clients (banks and sellside ) in “Admission” • Please update your Euroclear Relationship Manager about your - and your counterparts’ – intentions • Admission / Triparty Setup / UMR Onboarding ► https://my.euroclear.com/eb/en/reference/services/collateral- management/otc-derivatives-margin-service/non- cleared_otc_derivative_margining_service-e-elearning.html • OTCD Documentation ► https://my.euroclear.com/eb/en/reference/services/collateral- management/otc-derivatives-margin-service/non- cleared_otc_derivative_margining_service.html 2
Connecting to Euroclear Bank Define your operating model. If Triparty, as Pledgee: 1. Set up with your Pledgee Representative OR 2. Start your admission process in Euroclear Bank Build your knowledge of Euroclear Bank and Triparty Digital stand-alone training modules Bilateral negotiation & documentation ISDA & Euroclear Bank joint documentation UMR Set-up Triparty documentation, accounts opening and activation of triparty relations 3
Your UMR Operational set-up in Euroclear Bank How does it look like? 2. Legal entity signoff on the 3. Triparty accounts activation 1. Bilateral negotiation of the Triparty documentation (Pledgor and pledgee) margin terms between the (to subscribe to the parties EB Triparty services) Opening of a Bilateral negotiation & Triparty documentation multiseg documentation Activation of pledged + Triparty relation Euroclear Bank single account & ISDA & Euroclear Bank form of agreement reporting joint documentation subscription • Collateral Profile 4
Buy Side collect Reg IM in Euroclear Bank triparty Sell Side will most probably want to keep existing Triparty set-up to post collateral Buy Side as direct A Custodian acts as Pledgee Client of Euroclear Bank Representative for its Buy Side Client Triparty Collateral Management Triparty Collateral Management Buy-side as Pledgee Pledgee Representative Pledgor 1 Sub div Pledgor 1 Pledgor 1 Sub div Pledgor 1 Sub div Pledgor 2 Pledgor 2 Pledgor 2 Buy Side Sub div Pledgor 2 Sub Div Pledgor n Pledgor n Sub Div Pledgor n Pledgor n EB Third party pledge holder a/c EB Third party pledge holder a/c (1 MultiSeg a/c) (1 MultiSeg a/c per Pledgee) Euroclear Bank Euroclear Bank 5
Buy Side provide Reg IM using triparty Buy-side can use triparty set up to provide collateral Buy Side as direct Buy Side with their preferred custodian Client of Euroclear Bank using the Collateral Portfolio Service Collateral Triparty Collateral Management Triparty Collateral Management Portfolio Buy Side as Sell Side as Sell Side as Buy Side as Pledgor Pledgee Pledgee Pledgor Sell Side 1 Buy Side Sell Side Sell Side 2 Buy Side 1 Sell Side X Custodian Euroclear Bank 6
UMR Phase 5 Set-Up of UMR agreements and pairing 7
Your UMR Operational set-up in Euroclear Bank Timeline Final deadline 31 July March - April August • By end-May , provide: • Processing of legal doc and • FINALISATION IN EB signed documentation reporting subscription as of 01 (single form of March agreement and • By end-July, provide : reporting subscription) Account activation List of counterparty details pairs Activation of “tailor “tailor made” made” profiles collateral profiles Activation of a “standard” profile or a May “high - grade” profile, or replicate a collateral profile July 8
Detailed timeline 9
OTCD Set-up – Overview of documentation Once per legal entity Once per legal entity Per batch Per batch Legal Fast Track Activation Collateral Counterparty list Documentation Profile (pairs) RG1003 RG812 @ @ PLEDGOR • • • Provides two signed Provides one signed copy Provides list of • Provides Excel RG1011 and of each profile copies per legal entity counterparties send it via e-mail (accounts and activation details) Once per legal entity Once per legal entity Per batch Legal Account Opening Fast Track Activation Documentation RG148 & Reporting info RG812 @ PLEDGEE • • Provides two signed • Provides Excel RG1011 and Provides one signed copy copies per legal entity send it via e-mail (accounts per legal entity (RG148) and activation details) 10
Clients on-boarding process @ @ @ @ Legal Collateral + Pack Profile Pledgor (RG812) Pairs Confirmation + FastTrack Activation FYI Subdivision id details a/c nbr & reporting 1 2 3 4 5 Service Activation Account Opening & Contract Activation 6 Reporting subscription 1 2 5 4 @ @ @ Legal RG148 Pack Pledgee (RG812) FastTrack Activation Confirmation + FYI – confirmation details Subdivision id of a/c opening & reporting & pairs 11
Building your tailor-made collateral profiles (1) • You can 1. build your own collateral profile (“tailor made”) using the building blocks of the different templates shared with you or profiles activated in previous waves 2. Independently customize your collateral profile directly in EasyWay (without the intervention of Euroclear) 3. copy an existing profile as many time as you may require 4. agree to have your counterparty's collateral profile applied to your triparty contract 12
Building your tailor-made collateral profiles (2) • You can create 1 “tailor - made” collateral profile per counterparty and reuse it as a standard profile across your counterparties In order to easily create and negotiate a profile with your counterparty, we suggest you start by using the wider profile possible (in the framework of your acceptable risks) Then, take out the items / criteria that are not accepted between you and your counterparty It is easier, especially when using EasyWay, for you and your counterparty to take out items / criteria rather than starting with a restrictive one and add criteria 13
EasyWay Contract Management • With our EasyWay solution for Collateral Contracts Management, all triparty collateral profiles available in electronic format and human readable • Benefits ► Faster set up and easier amendment: Clients can negotiate, amend and create their profiles online, with electronic or wet signature ► Easy monitoring: Consult and query all profiles, able to see a Dashboard with contract status ► More efficient and faster replication: easy to copy sets from existing ones • Bilateral ISDA contracts available in electronic format on ISDA Create We strongly recommend the usage of EasyWay to speed up the set up and implementation of eligibility sets 14 14
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