Hedge Fund Y, based in Europe, is subject to EMIR. Article 19 of Commission Delegated Regulation (EU) 2016/2251 stipulates that “Counterparties” (a definition which includes Hedge Fund Y) which exchange initial margin must perform an “independent legal review” verifying the robustness of collateral segregation arrangements.
The legal review itself may be conducted by an independent internal unit, or by an independent third party. However, either way, Hedge Fund Y MUST “provide evidence” to its competent authority of compliance with these requirements with respect to each jurisdiction in which it does business. Moreover, “upon request” by its competent authority, Hedge Fund Y must “establish policies ensuring the continuous assessment of compliance”.
Reviewing netting and collateral opinions is a complex and time-consuming undertaking. In reality, Hedge Fund Y lacks the resources and the skill set to perform the task properly.
Fortunately, Hedge Fund Y is a subscriber to Ark 51.
Through Ark 51’s opinions module, Hedge Fund Y has access to detailed summaries of industry standard collateral opinions. Moreover, using its AI capabilities to extract data from executed collateral documentation, Ark 51’s collateral engine combines opinion analysis with contract data in order to automate the process of assessing compliance with EMIR’s collateral segregation requirements.
Real-time, automated dynamic collateralisation assessments replace Hedge Fund Y’s previous manual, time-consuming and error-prone processes – reducing cost, enhancing compliance and releasing valuable resource to focus on higher-value risk issues.