Axiom and Ashurst follow with similar service to meet regulations
In the first marquee joint venture between a Magic Circle firm and a Big Four accountant, Allen & Overy (A&O) and Deloitte have teamed up to create a tech-driven service to help banks handle post-Lehman regulation.
The June announcement from A&O and Deloitte that they would deploy automation to help banks address incoming regulation of the $500trn over-the-counter (OTC) derivatives market was quickly followed by Axiom and Ashurst revealing a similar offering later that month.
A&O and Deloitte’s service – dubbed MarginMatrix – is designed to deal with global reforms to the OTC derivatives market that are expected to come into force in Europe in 2017.
The reforms – which A&O estimates will require a large banking group to provide around $10bn initially in additional margin alongside thousands of new contracts – are a major compliance challenge for the securities industry and potentially a lucrative product line for advisers.
MarginMatrix codifies legal regimes in multiple jurisdictions and automates the drafting of documents based on computer-assisted analysis. A&O claims the system can create a document that would conventionally take a lawyer three hours in just three minutes. On its estimate, the 10,000 OTC contracts that a major bank would typically hold can be processed in 12 weeks with one person deploying the system, against 15 years of lawyer hours.
A&O derivatives partner David Wakeling (pictured) said the programme ‘will allow [major banks] to carry on trading derivatives without worrying that they may be, for example, complying with the US rules but not with the Singapore rules’.
Around 20 A&O partners are dedicating ‘significant time’ to implement the system and Deloitte partner Hugo Morris predicted ‘some hundreds’ of its staff will deliver MarginMatrix when the regulations kick in.
Morris also suggested the joint venture would not be the only one of its kind: ‘It’s going very well with A&O; we’ve worked very well together on this project. From our perspective, we’re always looking to collaborate.’
While MarginMatrix is signed up with six banks, including one of the ‘bulge bracket’ houses, Axiom, which unveiled a similar service has also signed up six banks, including two major international investment houses.
Axiom banking head Chris DeConti said: ‘Axiom is working with Ashurst as our first partner in a new model for collaboration with law firms. Margin mandates don’t call for an artisanal approach; they call for an industrialised model – a combination of technology and process with the right balance of domain expertise, experienced negotiators and legal advisory. [This] is designed to provide just that balance.’
madeleine.farman@legalease.co.uk