30 June, 2016
Axiom’s New Offering Combines Deep Derivatives Expertise, Proprietary Technology and a Novel Law Firm Partnership Model
Axiom, a leading provider of technology-enabled legal and contracting services, has secured instruction from six global banks, including two bulge bracket houses, to repaper their derivatives trading portfolio in line with new requirements. Axiom’s offering allows banks to remediate their trading documentation – either bilaterally or via industry protocols — to comply with new variation margin rules in the US, EU and Asia, scheduled to take effect in early 2017.
Wide in scope, “the new margining requirements are probably the most far reaching the market has seen for large-scale repapering of complex client trading agreements,” said Chris DeConti, Executive Vice President and Global Head of Axiom’s Banking Practice.
“To help banks meet this massive challenge, we combined the legal, domain, operational and technology capabilities developed in our Capital Markets Banking Practice into a solution specifically designed to tackle this urgent and critical compliance mandate.”
In recent years, that practice has conducted more than 50 projects supporting banks’ derivatives documentation functions, leveraging a unique ‘industrialized’ approach. Banks have traditionally relied on an artisanal approach to compliance in which more regulations has meant more lawyers. While the artisanal model is well-suited to providing one-off advice to novel problems, it is ill-suited to the high-volume and complex challenges of large-scale regulatory remediation. As a result, bank processes are straining under the stress of changing regulation.
Continued DeConti, “Margin mandates don’t call for an artisanal approach, they call for an industrialized model – a combination of technology and process with the right balance of domain expertise, experienced negotiators, and legal advisory. Our uncleared margining offering is designed to provide just that balance.”
Axiom’s model combines its proprietary technology, workflow methodology, and a team of over 300 legal, negotiation and regulatory specialists in derivatives documentation. This specialized team has undertaken comprehensive training over the past several months for enhanced familiarity with the specific challenges related to uncleared margining reform.
The Axiom team will be powered by IRIS by AXIOM, a technology platform that enables banks to automate the drafting of compliant agreements. The technology mitigates risk and ensures consistency by ‘hard-wiring’ adherence to clients’ negotiating policies and saves tens of thousands of man hours. Critically, a comprehensive audit trail is created at each step along the remediation process.
In addition, Axiom today announced that its offering now includes carefully curated law firm partnerships. While the repapering and renegotiation phase may account for most of the man-hours associated with the remediation effort, banks also require world-class legal advice to interpret the regulations and provide guidance to clients’ overall compliance efforts.
This partnership model, implemented first with London-based Ashurst, not only marries domain-specific legal advisory services with Axiom’s industrialized framework, but removes the client burden of assembling and managing multiple providers.
"We are strong believers in offering clients a flexible menu of service structures and technologies,” said James Coiley, Partner, Derivatives Group, Ashurst. “We're delighted to partner with Axiom to help financial institutions face the challenges of margin rules implementation."
