The next decade of UMR: from optimisation to automation

• The next phase of UMR is likely to focus on optimisation, automation and operational resilience.
• Better collateral visibility and mobility could help firms respond more efficiently to changing margin requirements.
• Automation will depend on reliable data, effective controls and appropriate human oversight.
• Greater regulatory alignment could support scalable post-trade processes, although regional differences will remain.
• Shared standards and trusted infrastructure will be critical to managing the risks associated with greater automation.

The first decade of UMR demonstrated that the industry could collaborate at scale, establish common standards and infrastructure, and enable firms to meet a major new compliance requirement together.

Those same foundations have since supported greater optimisation and more sophisticated approaches to collateral management.

Over the next decade, the task at hand is to continue to streamline and reduce operational effort and costs, while moving towards solutions that can actively implement outcomes for firms as new products and requirements emerge.

If the first decade of UMR was about establishing the infrastructure and standards needed to comply, the next will be about building on those foundations, moving from compliance to optimisation and, ultimately, towards a much more automated and innovative post-trade market.

As we look ahead to the next decade, here are five additional lessons from UMR that will help shape what comes next.

UMR resulted in significantly more collateral circulating through the market. Over the past decade, firms have therefore become increasingly focused on what collateral they post and how efficiently they use it.

Looking ahead, innovation will be directed towards making collateral processes faster and more automated. That includes making collateral substitutions quicker and more streamlined, alongside addressing costs around raising cash, capital and repo.

Over the longer term, emerging technologies such as blockchain and tokenised assets can play an important role in increasing the speed and mobility of collateral, making collateral processes more continuously automated and optimised with less manual intervention.

Despite the progress of the past decade, significant operational inefficiencies remain.

Initial margin reconciliation alone still consumes substantial amounts of manual time. Reconciliation is inherently labour-intensive, requiring firms to parse through imperfect data and engage with counterparties to understand and resolve discrepancies.

That makes it a natural use case for AI. As technology advances, the shift will be towards a more automated and scalable post-trade environment, one in which data, reconciliation and downstream processes require progressively less manual intervention.

UMR fundamentally reshaped what clients need and expect from post-trade technology and infrastructure providers.

Increasingly, clients seek solutions that go beyond identifying the problem and providing information but help to resolve it. That points towards an important evolution from software that gives clients the tools to manage operational issues themselves towards services that can actively resolve those issues through automated workflows.

Looking ahead, the opportunity is to go beyond improved analytics or dashboards, towards technology that can act on the information it produces.

UMR demonstrated the benefits of globally consistent standards and regulations. Unified approaches to implementation made it easier to build infrastructure that can operate across jurisdictions, rather than creating bespoke solutions market by market.

As markets evolve, jurisdictions are increasingly tailoring their approaches to address regional requirements while pursuing shared regulatory objectives.

UMR demonstrated that a globally coordinated approach can work, but as the environment becomes more fragmented, the challenge ahead will be to navigate those differences while preserving the benefits that greater consistency can bring.