Northern Trust announced that it is expanding its collateral management services for over-the-counter (OTC) derivatives trading, allowing managers and institutional investors to outsource key aspects of regulatory compliance.
Collectively, the enhanced offering 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, officials said.
With this service, the bank said 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, officials said.
The move is in collaboration with AcadiaSoft, which will provide an outsourced collateral optimization tool for clients to calculate initial margin obligations, issue margin demands to clients’ brokers and determine when and if margin is to be transferred.
This is all part of Northern Trust’s Margin Segregation Service that helps to streamline all the processes for meeting uncleared margin rules.
“Our clients’ use of derivatives often falls within the threshold of heightened global derivatives regulation, requiring resource-intensive tasks to support compliance,” said Judson Baker, derivatives product manager at Chicago-based Northern Trust. “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.”
Northern Trust had assets under custody/administration of $11.6 trillion, and assets under management of $1.2 trillion.