Hazeltree Adds AANA Estimator for UMR Compliance

As buy-side firms approach the significant costs and operational burdens of UMR compliance, Hazeltree, a provider of integrated treasury management and portfolio finance solutions for investment managers, has launched Hazeltree AANA Estimator.

By September 2022 an estimated 1,000 buy-side firms may meet the threshold for regulatory UMR (Uncleared Margin Rule) Phases 5 or 6 compliance.

AANA (Average Aggregate Notional Amount) is the metric, which determines whether a firm falls within the scope of the mandate. 

Hazeltree’s AANA Estimator can utilize a firm’s internal data, or data from their counterparties, to perform this critical calculation.  

Joseph Spiro, Director of Product Management at Hazeltree, said: “I’m not aware of any product that has the ability to do the AANA calculation on an ongoing basis and in a highly configurable manner.”

Joseph Spiro, Hazeltree

The Estimator is a dynamic widget within Hazeltree’s collateral management solution.

The company is working with clients to improve operational efficiencies in managing collateral with the added requirement of UMR compliance. 

According to Spiro, the industry has come up with three standard approaches called the distinct approach, the allocated approach and the greater of. Each one of them is a completely different calculation methodology for figuring out the daily margin call. 

“So not only do you have to have a workflow, but you have to have a workflow that’s capable of accommodating any of those three approaches, and and giving you the accurate margin call calculation at the end,” he said.

“Once the margin calls have been issued or received and agreed, or disputed, as the case may be by both parties, you have to instruct collateral movements. And whereas previously, collateral movements were often cash that was just moved bilaterally, between the two parties, now it’s going to be non cash assets, for the most part, and they’re going to be posted to third party or tri party custody accounts. So that’s a pretty big change that clients have to adapt to,” he added.

Hazeltree is encouraging clients to prepare now for UMR compliance.

Spiro believes that the overwhelming majority of clients who will fall into scope of Phase 5 for this September are aware and making last minute arrangements. 

“For Phase 6, I think the spread is maybe a little bit wider. We’ve seen certain clients who are very well aware and are already several steps down the road. And we have others who are just getting started,” he said. 

“We would definitely urge any Phase 6 clients who have not begun that journey yet to do so quickly to avoid getting caught up in the last-minute bottleneck,” he added.