Important Deadline

Prepare for the SEC Derivatives Rule 18f-4 with Compliant Stress Tests, VaR and Backtests


On October 28, 2020, the Securities and Exchange Commission (SEC) adopted the 18f-4 Rule in regard to a regulatory framework for derivative use.

Who needs to comply?

SEC-registered investment companies including*:

40 Act funds (mutual funds)

Exchange-traded funds (leveraged and inverse)

Business development companies (BDC)

*Exception for funds that have derivatives exposure to less than 10% of its net assets. In addition, derivatives used to hedge currency and interest rate risks are excluded from the derivatives exposure calculation.

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How to comply?

What are the market risk obligations within the rule?

In addition to a written derivatives risk management program, the appointment of a derivatives manager and internal reporting and escalation, asset managers servicing these funds must implement risk guidelines that take into account:

  • Limits on fund leverage risk based on absolute and relative value at risk (VaR)
  • Stress testing
  • VaR backtesting

 

How can we help?

Whether you need a turnkey reporting package, access to clean data to produce accurate filing submissions, or a cloud-native risk system connected to your internal reporting process, we’re here to help. Using our cloud-native Axioma RiskTM platform, you can produce pre-packaged reports addressing these market risk obligations.

Why Axioma Risk?

Turnkey reporting

Access our turnkey reporting package coupled with expert reporting solutions team at your service.

 

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Cloud-native computing for scalability and performance

Access to tens of thousands of cores on Microsoft Azure that enables clients to run VaR calculations and backtests accurately and efficiently. Separating the aggregation and calculation engines allows users to make changes to their portfolio on the fly and obtain updated results at speed.

Accurate Results

Be confident in the accuracy of results for derivatives and non-linear assets with full repricing.

See an example of AAPL Call Option showing non-linear behavior in stress conditions due to the full-repricing approach.

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Schedule a no-commitment demo to learn more about our 18f-4 Rule offering.

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Integrated market data and broad asset coverage

  • Native pricing models for cash securities and derivatives are available across all markets and all asset classes.
  • Benchmark data is also available in both constituent and time series forms.
  • Best-of-breed pricing data, market data, historical time series, as-of-date Terms & Conditions data, and proprietary curves can be accessed natively.

Axioma Risk

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class risk management, offering analytics and data
in a unified platform.

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