Brexit Novations

Client-first is at the heart of everything that JDX does.

We shape our consulting capabilities, services, and experiences around our clients, working with them, and our partners, to design and deliver solutions with outcomes that target our clients’ pain points, unmet needs, and real business problems. We use our unique perspective to provide optionality in the client outcome, while unlocking value throughout the journey. Today’s JDX client story showcases one of our Post Trade projects.

In 2018 our client, a Tier 1 Investment Bank, engaged JDX to manage their Brexit Novation process.

Context

In preparation for UK to exit the European Union, initiatives were put into place to ensure that trading between Morgan Stanley and other European entities would not be affected. To prepare for a Hard Brexit scenario, 500+ clients along with their business were required to be migrated to a newly setup European Entity. The project scope included OTC Bilateral and Repos only. The JDX team were engaged to perform:

  • Legal drafting of Novation Agreement
  • Setting up of new accounts
  • Client/sales outreach
  • Portfolio evaluation
  • Co-ordinating individual client novation’s
  • Managing client queries
  • Pre & post migration
  • Co-ordinating internal approvals

Our approach

6 JDX resources were employed to understand and establish the processes of client migration to the European entity. All staff were trained on legal drafting ISDA Novation Agreement, Brexit policies and their implication on trading and OTC bilateral product knowledge and the effect Brexit will have on each product class. Client outreach was split into two stages: Priority and Non-priority.

All priority clients had been migrated before the transitional period of Brexit was set. Non-priority clients were defined by identifying jurisdictional reliefs such as the Temporary Permissions Regime (TRP), this indicated that clients were able to continue operating as normal post Brexit for a transitional period. Main tasks and responsibilities were:

  • Drafting, negotiating and executing novation documentation with clients in preparation for Brexit
  • Coordinating with external clients on best approach to migrate individual portfolios. Options include cutover of new business only or cutover and novation of legacy trades
  • Liaising with internal stakeholders within Operations and the Business Unit in scheduling the individual client novation’s or migration of new business only
  • Reconciling the details of trade population to be novated with the client, including monitoring change in population due to daily trading activity
  • Ensuring that the post account setup processes are complete so that the trading activities would not be disrupted
  • Providing guidance to clients and internal stakeholders on expected individual trade confirmation flows for product types and confirmation methods for trades in scope for each individual novation
  • Managing the negotiation process to the client’s satisfaction whilst ensuring legal and operational risks are appropriately looked after

Outcomes / Measurable impact

  • All priority clients have been migrated before transitional period of Brexit was set
  • 4 Project Extensions: an additional 500+ clients were added to the list of in scope accounts needing to be migrated. Blast email has informed these clients of processes, individual reach out personalised around their portfolios has commenced

Contact us

For more information on our Post Trade services, contact Dominic Amura.

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