As the Dust Settles on UMR, Many Firms Look to Increase Efficiency and Take Advantage of Opportunities Ahead

We’re now more than eight months removed from the sixth and final cohort of firms subject to UMR regulation, and more than 20 months removed from those who fell under Phase 5.

Firms that scrambled to cobble something together to comply by the deadline now have some time to look back at how they’ve managed so far, and several we’re speaking to are looking for ways to gain greater efficiency and create new growth opportunities.

I had the opportunity to discuss this on an FTF News webinar with Amy Caruso, Head of Collateral Initiatives at ISDA, Mark Higgins from BNY Mellon and Jaimie Madell from Paul Hastings LLP. Here are some key points from our conversation.

‘Biting The Bullet’ When It Comes to Revamping Collateral Documentation

One of the most frequent issues we’ve observed is that firms are starting to take a closer look at their collateral documentation processes to make sure they aren’t falling behind. This is becoming a hard reality for firms who had to patch together a combination of spreadsheets and personnel to meet the deadline.

As one of my fellow panelists noted, solving for this means “biting the bullet” and investing in digital tools that can ensure your firm is maintaining current collateral documentation as well as streamlining highly repetitive input tasks (such as common agreement terms).

Improving Communication with Custodians as More Firms Use Triparty Accounts

We’ve seen that more buy-side firms are electing to enter in to a triparty structure with their custodians, as opposed to a more traditional third-party structure.

For a quick primer on the major differences between the two, ISDA created a brief overview..

While the triparty structure is generally considered to be more efficient, many firms run into challenges when it comes to nailing the processes related to creating and sending the proper communications on items such as required value (RQV) instructions to the custodian.

There are two basic components to this. The first is being able to calculate the RQV, which needs to be sent to the custodian daily. The second is executing the communication, and one of the simplest ways to do this is via a SWIFT MT527 message. Technology partners like Hazeltree can help automate the calculations and the communications to help smooth this process out and reap the full benefits of the triparty model.

Moving From Efficiency to Opportunity

Firms that are looking to revamp their technology and operations in a holistic manner can capitalize on opportunities to bolster performance. Specifically, the efficiency that comes with reducing counterparty and liquidity risks associated with collateral management offers more opportunities to put capital to work, turning operations teams into more of a profit center than a cost center.

UMR compliance may have been a painful and expensive exercise for some, but now that the industry has had some time to stop and catch its breath, we can take a step back and evaluate where the inefficiencies are and what technology and/or operational changes are required to address them.

It’s clear that many firms have a big opportunity in front of them when it comes to investing in their back-office technology stack to not only save time and resources, but also to capitalize on the next wave of opportunity when it comes to collateral optimization.

If you’re interested in learning more about how your firm can increase the efficiency of fulfilling UMR obligations, please reach out to us at

Contributed by: Joe Spiro, Hazeltree Director of Product Management

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