Video: Top analytical challenges risk managers face when implementing an SEC Derivatives Rule 18f-4

The SEC has adopted the 18-f Rule which will affect specific investment companies using derivatives. Reporting on stress tests, VaR measurements and backtests, are just some of the mandatory requirements – all of which can be accessed through the cloud-native Axioma RiskTM risk management platform.

Rule 18f-4 is likely the most significant change ever to the way the SEC regulates funds’ use of derivatives, and will have a large impact on how registered companies will need to manage their derivatives risk. We hosted a Risk.net webinar with Dechert LLP and Wellington Management to discuss what this important legislation entails, how firms are preparing for it and what risk measurements are required. The main message? Companies need to focus on this now to make the Aug. 19, 2022 deadline.

The countdown has begun. The Securities and Exchange Commission (SEC) adopted the 18f-4 Derivatives Rule in October last year, which means most SEC-registered companies will now have to make sure they don’t fall foul of the rule by August 19, 2022. While it seems a long time away, it’ll be here before you know it. To that end, we’ve put together a few questions you should ask your existing – or potential – risk solutions provider.

As a result of the derivatives rule SEC 18f-4 passed on October 28, 2020, all SEC-registered mutual funds, ETFs and Business Development Companies (BDCs) with derivative notional exceeding certain threshold are required to appoint a derivatives risk manager in charge of implementing a regulatory framework for its fund’s derivatives use. The necessary risk guidelines focus on reporting limits of fund leverage risk based on Value-at-Risk (VaR).