Northern Trust to Clear Canadian Derivatives Directly
Northern Trust is implementing direct clearing of cash and repurchase agreement (repo) trades for fixed income securities through the Canadian Derivatives Clearing Corporation (CDCC). Northern Trust is the first global custodian to utilize the CDCC, clearing trades on behalf of the Healthcare of Ontario Pension Plan (HOOPP).
HOOPP and three other large buy-side organizations were invited to apply to become Limited Clearing Members (LCMs) by the Bank of Canada in order to participate in an expansion of direct clearing announced in 2017 by the CDCC, Canada’s national central clearing counterparty (CCP) for exchange-traded derivative products, certain over-the-counter products and repos. The expansion of CDCC’s direct-clearing model to include LCMs extends the range of benefits associated with CCP clearing, including capital, margin and collateral efficiencies.
“In partnership with HOOPP, we are pleased to implement this enhanced clearing capability for Canadian securities,” said Arti Sharma, President and CEO of Northern Trust Canada. “As Canada’s capital markets work to make settlement more efficient and resilient, Northern Trust is committed to providing the support and consultation our clients need to benefit from these positive industry developments.”
“Partnering with Northern Trust strengthens our investment ability since many of our investment strategies rely on repo financing to make them work. This new setup will make HOOPP a more attractive counterparty for the banks and should ensure liquidity from this source during severe market downturns, which is good for our members,” says HOOPP President and CEO Jim Keohane.
Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.
Temporary equivalence is set to expire on June 30 2022.
IRS trading volumes have fragmented without an equivalence agreement.
Phase 5 of the uncleared margin rules came into effect on 1 September.
Triparty repos can be executed across U.S. Treasury securities to central clearing.