What happens when a financial institution is slow to complete the OTC documentation required for Dodd-Frank derivatives compliance? Worst-case scenario, a non-compliant firm will have a significant share of its non-cleared OTC derivatives trading book shut down. Best case scenario is that legal document work is delayed and increased; trading accounts with counterparties are forced to cease and desist; resources are diverted away from operations, credit and legal staff; and as that same staff falls behind the firm is pushed closer and closer to the worst-case scenario.
We recently partnered with preeminent law firm Clifford Chance to find a technology solution to this complex and burdensome problem. Drawing from deep industry expertise and trusted technology, together we created an automated process for OTC contracts that allows banks to prioritize and complete smarter legal documentation in a fraction of the time. We sat down with Lucinda Case, managing director of Thomson Reuters Legal in the United Kingdom & Ireland, and Bas Boris Visser, global head of innovation and business change at Clifford Chance, to walk through what makes co-innovation successful.
View the 2016 Annual Report: The Partnership Equation to see highlights from other strategic partnerships over the last year.
Putting our clients first
Bas Boris Visser: I think Thomson Reuters and Clifford Chance are both organizations who are incredibly client focused. And I think we can pride ourselves by being able to say that we can count most of the top financial institutions as our clients. And so what better motive can there be when you discover that these clients may actually be best served if you find a way to collaborate rather than go on your own.
Lucinda Case: We have entered into a partnership with Clifford Chance to help global financial institutions solve a very complex issue they have with re-documenting a lot of derivative transactions.
Visser: I think both organizations looked at what are the issues that our clients are going to be confronted with and how are they going to be able to say that they are in compliance with these new regulations.
Case: So the way that in-house counsel are looking to buy legal services is very different these days. They’re getting much smarter about where they source their legal advice, their legal support.
OTC contract automation, abstraction and analytics
Visser: I think we discovered that there was a very complex part within these regulations where we as Clifford Chance could come up with a structure and a playbook which would explain how to unravel the complexities and how they can ensure that they would be in compliance. But at the same time, we saw that there was a huge amount of work which also had to be done once the position was clear about how then to renegotiate and re-paper all these documents and all these contracts our clients had entered into. And we thought that Thomson Reuters would be an ideal partner to also take part of that part of that transaction.
Case: Clifford Chance were also going after work like this on their own. But I think by adding the Thomson Reuters legal process part into it they are showing their customers, their clients that they have a much more scalable solution and a much more cost-efficient solution.
Moving the RegTech revolution forward
Visser: We are looking at a whole range of projects where we think we can complement each other and where we can help our mutual clients.
Case: Partnerships between really trusted providers like ourselves and Clifford Chance are so important. We know our customers are facing more and more challenges. And the fact that they’ve got two such strong institutions prepared to come together to solve those challenges I think is the best attribute of the partnership.
Studies show that compliance professionals continue to face tight resources in the face of regulatory updates every ten minutes. As major initiatives like BEPS, Brexit and even President Trump’s deregulation initiatives become more real, regulatory change will continue to be the norm. Among all of the questions swirling around these issues, one answer is surfacing with clarity: streamlined and automated processes provide a competitive advantage and free up time for specialization.
Check out the 2016 Annual Report for more on the legal and financial expertise behind automated OTC contracts.
Get our white paper for practical advice on how to overcome OTC margin requirement challenges.
Join the conversation
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