Allen & Overy (A&O) and Deloitte have launched a new system to help banks deal with new regulatory requirements in the first major collaboration between a magic circle firm and one of the Big Four accountants.
The system, called MarginMatrix, is expected to support banks as they come to terms with new rules that come into force in September for the $500tr over-the-counter derivatives (OTC) market.
The rules mean uncleared OTC derivatives are now subject to European Market Infrastructure Regulation, meaning all counterparties have to provide additional margin for their net exposures.
The move will result in an increase in documentation, with MarginMatrix set to speed up the process by codifying laws in multiple jurisdictions and auto-drafting contracts. A&O calculates that one document would normally take three lawyer hours to complete manually, but MarginMatrix would be able to deliver this in three minutes.
The system also removes many logistical challenges, meaning clients would not need to appoint and project manage separate legal, technology and resourcing providers across the EU, US and Asia Pacific.
This is the first major collaboration between a magic circle firm and one of the “Big Four” professional services firms. A&O will provide legal input on the programme, with a team led by derivatives partner David Wakeling, while Deloitte will manage the counterparty negotiation process.
The product is the latest in a stream of new initiatives developed by A&O in the past few years. The firm hired Deloitte’s former managing partner of growth and markets Richard Punt in 2014 to lead its contracts lawyer business Peerpoint, which is poised to grow further in Asia and the US. Last year the firm also relaunched its derivatives services business as aosphere, covering new product areas such as cross-border data transfer and shareholding disclosure.