Title (Arial bold 30 point) - EY

EY | Assurance | Tax | Transactions | Advisory

Contacts Roy Choudhury Principal Office: +1 212 773 9299 [email protected]

Janina Polo Senior Manager Office: +1 212 773 2486 [email protected]

Prakash Rao Executive Director Office: +1 212 773 2188 [email protected]

John Boyle Senior Manager Office: +1 212 773 5412 [email protected]

Alex Rathod Senior Manager Office: +1 212 773 4210 [email protected]

Setu Pandya Senior Manager Office: +1 212 773 2437 [email protected]

About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About EY's Advisory Services In a world of unprecedented change, EY Advisory believes a better working world means solving big, complex industry issues and capitalizing on opportunities to help deliver outcomes that grow, optimize and protect clients’ businesses. From C-suite and functional leaders of Fortune 100 multinationals to disruptive innovators and emerging market small and medium sized enterprises, EY Advisory teams with clients — from strategy through execution — to help them design better outcomes and deliver long-lasting results. A global mindset, diversity and collaborative culture inspires EY consultants to ask better questions. They work with the client, as well as an ecosystem of internal and external experts, to co-create more innovative answers. Together, EY helps clients’ businesses work better. The better the question. The better the answer. The better the world works. © 2016 Ernst & Young LLP. All Rights Reserved. 1601-1807951 Score no: CK1033 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

ey.com

Uncleared margin rules Solutions to optimize your technology investment

Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade processing systems and operational workflow. EY’s solution framework consists of technology components, solution design, integration and testing services. The framework will help accelerate progress toward compliance with uncleared margin requirements.

3. Test plan, scenarios, test cases and test data to enable end-to-end compliance with the new rules. UMR test plan

Test results Pre-trade margin calcs and analytics

Trade execution

Margin processing

Settlement and recon

SIMM match









Sell singe trade

SIMM match





Margin calc

Book 10 trades

SIMM match









_23.151.2

Margin calc

Book offsetting trade

SIMM match









1.5

_23.151.2

Margin calc

Day over day

SIMM match







2.1

_23.151.3

Ineligible collateral

Pledge junk bonds

Exception





2.2

_23.151.4

Eligible collateral

Pledge UST’s

Booked





2.3

_23.151.5

Haircut

Pledge UTT’s

Calc value





2.3

_23.150

Dispute

Single Trade

Resolution process



Test reference

Rule rested

1.1

_23.150

Margin calc

Buy single trade

1.2

_23.151.1

Margin calc

1.3

_23.151.2

1.4

1. EY brings an understanding of the uncleared margin rules and a robust tool to document adherence and progress toward compliance.

Technology services

Scenario

Data input

Expected result

Client onboarding

Confirm end-to-end capabilities agnostic of the applications, platforms or vendor solutions that make up the technology infrastructure.

Solution management

• Facilitate solution design • Codevelop solution design principles • Facilitate adoption and design integrity

Capability assessment

• Analyze current state collateral data, systems and processes • Target state architecture

Solution design

4. EY provides solution design, integration and testing services to remediate gaps and help achieve compliance with uncleared margin rules.

12 10 8 6 4 2 CFTC - Gap

0

CFTC - No Gap

Customize compliance requirements, assess adherence, record evidence and generate executive reports.

Client onboarding

2. An end-to-end data framework for specific data sets that are impacted by the new rules.

CSA – Eligibility

Impacted data category*

Reference data

•

Client data

•

Transaction data

Account data

Control data

• • •

• • •

Client onboarding

Pre-trade margin calcs and analytics

Trade execution

Margin processing

Margin Calculations

Settlement Instructions

Credit/Market Risk









Trade positions Collateral balances Margin methodology









Product data





Market data

•

Risk sensitivities







Trade data

•

Not impacted







Collateral data

• • • • • • •

IM and VM requirements MTA Collateral balances Collateral netting Concentration Collateral pledged Collateral valuation



Settlement data

• • •

Collateral delivered Account segregation Re-hypothecation



• • •

Dispute resolution Collateral to settlement Position recs (client/broker)

•

End-to-end integration/system test



impacted data

Intra-day margin

Position maintenance

EOD margin calc per account

EOD netted margin

Margin calculation and exposure management

Global netting agreements as applicable

EOD margin call (Report)



Funding requirements

Treasury functions

Settlement instructions



Margin call agreement 





Settlement proposal by client











Dispute resolution procedures

Collateral eligibility Haircuts

Settlement cash and collateral transfer Segregated accounts Segregated reports Settlement instructions

Reconciliations

Position and valuation recs (T0 EOD) Margin and settlement recs (T+1)

• • • •

End-to-end data mapping Collateral data repository Internal IM, VM calculations Integration with capital, liquidity, pricing, funding, risk and stress testing functions • End-to-end system integration: bespoke systems, vendor systems, collateral hub

Confirm Reporting

Unless < MTA Disclosures

Reference data management Margin methodology and analytics Margin processing workflow Settlement and reconciliation Dispute resolution workflow

Product and Client Scope

T+1

Identify critical data elements required for compliance, close gaps and enable data mapping from source to consumer, and dispute resolution. *Representative

Trade Capture

Product and Client Scope

Trade confirmation

Testing

Periodic margin calculation

Covered instruments Eligibility

Test data

Product and Client Scope

Trade affirmation

T 0 (EOD)

Exemption/Nonexemption Covered entities/affiliates Cross border provisions Legal agreements (e.g., CSA, SA, BA) Schedules (e.g., margin methodology, haircuts)

• •

Reconciliation data

Client Eligibility

Trade execution

Settlement and recon

Risk & controls

Data type

Pre-trade margin calcs and analytics

CSA – Haircuts

Margin Method

Application integration

T0

T-n

• • • • •

Collateral management

Treasury functions

Design principles to include considerations for foundational components that would be required for a strategic global collateral management solution.

• Regression testing • Traceability testing • Integration testing

Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade processing systems and operational workflow. EY’s solution framework consists of technology components, solution design, integration and testing services. The framework will help accelerate progress toward compliance with uncleared margin requirements.

3. Test plan, scenarios, test cases and test data to enable end-to-end compliance with the new rules. UMR test plan

Test results Pre-trade margin calcs and analytics

Trade execution

Margin processing

Settlement and recon

SIMM match









Sell singe trade

SIMM match





Margin calc

Book 10 trades

SIMM match









_23.151.2

Margin calc

Book offsetting trade

SIMM match









1.5

_23.151.2

Margin calc

Day over day

SIMM match







2.1

_23.151.3

Ineligible collateral

Pledge junk bonds

Exception





2.2

_23.151.4

Eligible collateral

Pledge UST’s

Booked





2.3

_23.151.5

Haircut

Pledge UTT’s

Calc value





2.3

_23.150

Dispute

Single Trade

Resolution process



Test reference

Rule rested

1.1

_23.150

Margin calc

Buy single trade

1.2

_23.151.1

Margin calc

1.3

_23.151.2

1.4

1. EY brings an understanding of the uncleared margin rules and a robust tool to document adherence and progress toward compliance.

Technology services

Scenario

Data input

Expected result

Client onboarding

Confirm end-to-end capabilities agnostic of the applications, platforms or vendor solutions that make up the technology infrastructure.

Solution management

• Facilitate solution design • Codevelop solution design principles • Facilitate adoption and design integrity

Capability assessment

• Analyze current state collateral data, systems and processes • Target state architecture

Solution design

4. EY provides solution design, integration and testing services to remediate gaps and help achieve compliance with uncleared margin rules.

12 10 8 6 4 2 CFTC - Gap

0

CFTC - No Gap

Customize compliance requirements, assess adherence, record evidence and generate executive reports.

Client onboarding

2. An end-to-end data framework for specific data sets that are impacted by the new rules.

CSA – Eligibility

Impacted data category*

Reference data

•

Client data

•

Transaction data

Account data

Control data

• • •

• • •

Client onboarding

Pre-trade margin calcs and analytics

Trade execution

Margin processing

Margin Calculations

Settlement Instructions

Credit/Market Risk









Trade positions Collateral balances Margin methodology









Product data





Market data

•

Risk sensitivities







Trade data

•

Not impacted







Collateral data

• • • • • • •

IM and VM requirements MTA Collateral balances Collateral netting Concentration Collateral pledged Collateral valuation



Settlement data

• • •

Collateral delivered Account segregation Re-hypothecation



• • •

Dispute resolution Collateral to settlement Position recs (client/broker)

•

End-to-end integration/system test



impacted data

Intra-day margin

Position maintenance

EOD margin calc per account

EOD netted margin

Margin calculation and exposure management

Global netting agreements as applicable

EOD margin call (Report)



Funding requirements

Treasury functions

Settlement instructions



Margin call agreement 





Settlement proposal by client











Dispute resolution procedures

Collateral eligibility Haircuts

Settlement cash and collateral transfer Segregated accounts Segregated reports Settlement instructions

Reconciliations

Position and valuation recs (T0 EOD) Margin and settlement recs (T+1)

• • • •

End-to-end data mapping Collateral data repository Internal IM, VM calculations Integration with capital, liquidity, pricing, funding, risk and stress testing functions • End-to-end system integration: bespoke systems, vendor systems, collateral hub

Confirm Reporting

Unless < MTA Disclosures

Reference data management Margin methodology and analytics Margin processing workflow Settlement and reconciliation Dispute resolution workflow

Product and Client Scope

T+1

Identify critical data elements required for compliance, close gaps and enable data mapping from source to consumer, and dispute resolution. *Representative

Trade Capture

Product and Client Scope

Trade confirmation

Testing

Periodic margin calculation

Covered instruments Eligibility

Test data

Product and Client Scope

Trade affirmation

T 0 (EOD)

Exemption/Nonexemption Covered entities/affiliates Cross border provisions Legal agreements (e.g., CSA, SA, BA) Schedules (e.g., margin methodology, haircuts)

• •

Reconciliation data

Client Eligibility

Trade execution

Settlement and recon

Risk & controls

Data type

Pre-trade margin calcs and analytics

CSA – Haircuts

Margin Method

Application integration

T0

T-n

• • • • •

Collateral management

Treasury functions

Design principles to include considerations for foundational components that would be required for a strategic global collateral management solution.

• Regression testing • Traceability testing • Integration testing

Compliance with uncleared margin rules will require significant operations and technology re-design of bilateral trade processing systems and operational workflow. EY’s solution framework consists of technology components, solution design, integration and testing services. The framework will help accelerate progress toward compliance with uncleared margin requirements.

3. Test plan, scenarios, test cases and test data to enable end-to-end compliance with the new rules. UMR test plan

Test results Pre-trade margin calcs and analytics

Trade execution

Margin processing

Settlement and recon

SIMM match









Sell singe trade

SIMM match





Margin calc

Book 10 trades

SIMM match









_23.151.2

Margin calc

Book offsetting trade

SIMM match









1.5

_23.151.2

Margin calc

Day over day

SIMM match







2.1

_23.151.3

Ineligible collateral

Pledge junk bonds

Exception





2.2

_23.151.4

Eligible collateral

Pledge UST’s

Booked





2.3

_23.151.5

Haircut

Pledge UTT’s

Calc value





2.3

_23.150

Dispute

Single Trade

Resolution process



Test reference

Rule rested

1.1

_23.150

Margin calc

Buy single trade

1.2

_23.151.1

Margin calc

1.3

_23.151.2

1.4

1. EY brings an understanding of the uncleared margin rules and a robust tool to document adherence and progress toward compliance.

Technology services

Scenario

Data input

Expected result

Client onboarding

Confirm end-to-end capabilities agnostic of the applications, platforms or vendor solutions that make up the technology infrastructure.

Solution management

• Facilitate solution design • Codevelop solution design principles • Facilitate adoption and design integrity

Capability assessment

• Analyze current state collateral data, systems and processes • Target state architecture

Solution design

4. EY provides solution design, integration and testing services to remediate gaps and help achieve compliance with uncleared margin rules.

12 10 8 6 4 2 CFTC - Gap

0

CFTC - No Gap

Customize compliance requirements, assess adherence, record evidence and generate executive reports.

Client onboarding

2. An end-to-end data framework for specific data sets that are impacted by the new rules.

CSA – Eligibility

Impacted data category*

Reference data

•

Client data

•

Transaction data

Account data

Control data

• • •

• • •

Client onboarding

Pre-trade margin calcs and analytics

Trade execution

Margin processing

Margin Calculations

Settlement Instructions

Credit/Market Risk









Trade positions Collateral balances Margin methodology









Product data





Market data

•

Risk sensitivities







Trade data

•

Not impacted







Collateral data

• • • • • • •

IM and VM requirements MTA Collateral balances Collateral netting Concentration Collateral pledged Collateral valuation



Settlement data

• • •

Collateral delivered Account segregation Re-hypothecation



• • •

Dispute resolution Collateral to settlement Position recs (client/broker)

•

End-to-end integration/system test



impacted data

Intra-day margin

Position maintenance

EOD margin calc per account

EOD netted margin

Margin calculation and exposure management

Global netting agreements as applicable

EOD margin call (Report)



Funding requirements

Treasury functions

Settlement instructions



Margin call agreement 





Settlement proposal by client











Dispute resolution procedures

Collateral eligibility Haircuts

Settlement cash and collateral transfer Segregated accounts Segregated reports Settlement instructions

Reconciliations

Position and valuation recs (T0 EOD) Margin and settlement recs (T+1)

• • • •

End-to-end data mapping Collateral data repository Internal IM, VM calculations Integration with capital, liquidity, pricing, funding, risk and stress testing functions • End-to-end system integration: bespoke systems, vendor systems, collateral hub

Confirm Reporting

Unless < MTA Disclosures

Reference data management Margin methodology and analytics Margin processing workflow Settlement and reconciliation Dispute resolution workflow

Product and Client Scope

T+1

Identify critical data elements required for compliance, close gaps and enable data mapping from source to consumer, and dispute resolution. *Representative

Trade Capture

Product and Client Scope

Trade confirmation

Testing

Periodic margin calculation

Covered instruments Eligibility

Test data

Product and Client Scope

Trade affirmation

T 0 (EOD)

Exemption/Nonexemption Covered entities/affiliates Cross border provisions Legal agreements (e.g., CSA, SA, BA) Schedules (e.g., margin methodology, haircuts)

• •

Reconciliation data

Client Eligibility

Trade execution

Settlement and recon

Risk & controls

Data type

Pre-trade margin calcs and analytics

CSA – Haircuts

Margin Method

Application integration

T0

T-n

• • • • •

Collateral management

Treasury functions

Design principles to include considerations for foundational components that would be required for a strategic global collateral management solution.

• Regression testing • Traceability testing • Integration testing

EY | Assurance | Tax | Transactions | Advisory

Contacts Roy Choudhury Principal Office: +1 212 773 9299 [email protected]

Janina Polo Senior Manager Office: +1 212 773 2486 [email protected]

Prakash Rao Executive Director Office: +1 212 773 2188 [email protected]

John Boyle Senior Manager Office: +1 212 773 5412 [email protected]

Alex Rathod Senior Manager Office: +1 212 773 4210 [email protected]

Setu Pandya Senior Manager Office: +1 212 773 2437 [email protected]

About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About EY's Advisory Services In a world of unprecedented change, EY Advisory believes a better working world means solving big, complex industry issues and capitalizing on opportunities to help deliver outcomes that grow, optimize and protect clients’ businesses. From C-suite and functional leaders of Fortune 100 multinationals to disruptive innovators and emerging market small and medium sized enterprises, EY Advisory teams with clients — from strategy through execution — to help them design better outcomes and deliver long-lasting results. A global mindset, diversity and collaborative culture inspires EY consultants to ask better questions. They work with the client, as well as an ecosystem of internal and external experts, to co-create more innovative answers. Together, EY helps clients’ businesses work better. The better the question. The better the answer. The better the world works. © 2016 Ernst & Young LLP. All Rights Reserved. 1601-1807951 Score no: CK1033 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

ey.com

Uncleared margin rules Solutions to optimize your technology investment

EY | Assurance | Tax | Transactions | Advisory

Contacts Roy Choudhury Principal Office: +1 212 773 9299 [email protected]

Janina Polo Senior Manager Office: +1 212 773 2486 [email protected]

Prakash Rao Executive Director Office: +1 212 773 2188 [email protected]

John Boyle Senior Manager Office: +1 212 773 5412 [email protected]

Alex Rathod Senior Manager Office: +1 212 773 4210 [email protected]

Setu Pandya Senior Manager Office: +1 212 773 2437 [email protected]

About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About EY's Advisory Services In a world of unprecedented change, EY Advisory believes a better working world means solving big, complex industry issues and capitalizing on opportunities to help deliver outcomes that grow, optimize and protect clients’ businesses. From C-suite and functional leaders of Fortune 100 multinationals to disruptive innovators and emerging market small and medium sized enterprises, EY Advisory teams with clients — from strategy through execution — to help them design better outcomes and deliver long-lasting results. A global mindset, diversity and collaborative culture inspires EY consultants to ask better questions. They work with the client, as well as an ecosystem of internal and external experts, to co-create more innovative answers. Together, EY helps clients’ businesses work better. The better the question. The better the answer. The better the world works. © 2016 Ernst & Young LLP. All Rights Reserved. 1601-1807951 Score no: CK1033 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

ey.com

Uncleared margin rules Solutions to optimize your technology investment