Northern Trust Enhances Collateral Management12.18.2019
Northern Trust is expanding its collateral management services for over-the-counter derivatives trading. The new functionality will enable asset managers and institutional investors to outsource key aspects of regulatory compliance to Northern Trust and optimize collateral selection – driving efficiencies in how they meet margin obligations.
Northern Trust’s Margin Segregation Service will include new capabilities that streamline complex processes for meeting uncleared margin rules, such as undertaking industry-standard electronic settlement messaging and providing advanced collateral reporting. Clients can take advantage of the service to pledge assets from their trading account and place them into segregated accounts for each broker, thereby retaining their investments with a single asset servicing provider for optimal efficiency, consolidated record-keeping and oversight.
Additionally, Northern Trust has partnered with risk and collateral management services expert AcadiaSoft to provide an outsourced solution for collateral optimization calculating clients’ initial margin obligations, issuing margin demands to clients’ brokers, and determining if and when margin is to be transferred.
With this service, clients will have the ability to seamlessly optimize collateral selection, using algorithmic technology to identify their best assets available to meet regulatory eligibility requirements. It will allow only optimal assets to be deployed to meet margin obligations – helping optimize investment performance.
Judson Baker, derivatives product manager at Northern Trust, said: “Our clients’ use of derivatives often falls within the threshold of heightened global derivatives regulation, requiring resource-intensive tasks to support compliance. By outsourcing these complex and onerous functions, they can draw on our expertise and advanced technology – negating the need for costly investment in their systems. They can also minimize the value of their assets locked up as collateral by using our optimization solution.”
Collectively, these capabilities may enable Northern Trust’s clients to meet their obligations under the European Market Infrastructure Regulation (EMIR), the United States’ Dodd-Frank Wall Street Reform and Consumer Protection Act, and equivalent global regulations.
These advanced capabilities will be part of Northern Trust’s comprehensive range of collateral, derivatives and liquidity management solutions. Clients can access these services globally, either on a component basis – to complement their current in-house practices – or as part of a broader suite of collateral management solutions.
Source: Northern Trust
Initial margin for centrally cleared markets increased by $300bn over March 2020.
More buy-side firms will be caught by the new rules.
Exposures and margin calls can be monitored in real-time.
Reducing costs associated with funding and liquidity is becoming increasingly important.
Clients can agree collateral on a real-time basis and increase efficiencies.