Considerations For Firms Who Are Approaching the UMR Threshold: Lessons Learned And Key Takeaways From Previous Phases

In September 2022, regulators introduced Phase 6 of Uncleared Margin Rules (UMR), ushering in new legal requirements for a wider group of funds. Funds with an average aggregate notional amount (AANA) of over $8 billion are now considered in scope and many new firms have come into scope during the 2023 AANA observation period (March 2023 – May 2023).

What does this mean for portfolios who are closing in on UMR requirements? 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.

No Need to Reinvent The Wheel

Perhaps the biggest takeaway from our discussion is that firms coming into scope can look to others already in scope on Phase 6 for best practices. There is an established playbook for setting up a successful UMR program, along with a host of resources that a firm can reference to ensure they are deploying efficient processes while remaining compliant. For more information on available resources, here are some helpful links:

Additional Resources:

How Will Your Firm Keep Track of Portfolios That Are About To Breach Threshold Amounts?

When working with our clients, the Hazeltree team stresses the importance of leaving plenty of time to set up a UMR program. While the process is certainly manageable, funds that fell in scope for Phase 6 were subject to rules that added significant complexity to a fund’s document architecture.

Additionally, the grace period for compliance may be shorter than you think. Once subject to UMR, firms do not have to post collateral while their IM requirement is under the $50mm threshold. However, once a fund breaches the IM threshold, the firm is expected to post the requisite collateral immediately. It is, therefore, critical that firms who are not yet in scope actively monitor AANA and continue tracking it over time as well as begin to document any items that are needed once in scope.

What Role Can Technology Play?

Technology can be a key advantage for companies seeking to establish an efficient and compliant UMR program. The Hazeltree platform can be used in a number of ways to monitor and manage UMR requirements including:
• Calculating each margin call according to any of the 3 industry IA/IM approaches (Distinct, Greater of, Allocated)
• Designating separate initial margin MTA, rounding, threshold, eligible collateral, and haircuts per agreement for both parties to the agreement
• Utilizing SIMM and/or Schedule values for both parties to the agreement
• Providing visibility to show internal/external UMR data side-by-side on the screen
• Calculating the RQV for any triparty account for use in movement booking
• Calculating AANA on a daily basis for monitoring UMR status

Firms that make the investment now will be better positioned for any additional future regulations.

If you are 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, a Director of Product Management at Hazeltree.