EMIR functionality in SLIB CRMS: the added-value of SLIB’s solution
Over the last couple of months, SLIB has implemented substantial extensions in its Clearing Risk Management (SLIB CRMS) solution, inspired by the EMIR regulation.
EMIR covers central clearing of all product types, including securities; one area in which EMIR has substantial impact is risk management. The new regulation introduces segregation of client accounts. Two additional risk components are now included in CCP margining: the Liquidity and Concentration Risk, and the Wrong-Way Risk. Moreover, with EMIR, intraday margin calls have now become systematic in all CCPs.
While the regulatory principles are common for all, each CCP has prepared its own EMIR-compliant adaptations. For clearers active in several European CCPs, following and integrating all these changes has been a major challenge.
SLIB’s Customers, users of the SLIB CRMS solution, can now benefit from the EMIR-compliant version of the system. SLIB has replicated the new regulatory features, as interpreted by each of the CCPs, by extending SLIB’s native implementations of the margin algorithms of all the CCPs covered in its CRMS system.
One particular challenge has been the implementation of the new EMIR elements at the client level, where the general clearing member (GCM) computes and monitors margins on his clients. Applying at this level strictly the same modalities as the CCP applies on the clearing member would not, in general, fully protect the GCM in the case of his client’s default. However, the client procedures as implemented by SLIB can guarantee full protection of the GCM.
The final version of the client procedure has been chosen after extensive consultation with our Customers. Moreover, the SLIB CRMS solution now offers a number of further value-added EMIR-inspired options that can be chosen by our Customers.
As for intraday margins, SLIB CRMS has been supporting them since the product's inception, and for all CCPs. In this respect, SLIB's solution had already been EMIR-compliant.