Northern Trust launches outsourced collateral management service

Northern Trust will use technology provided by AcadiaSoft for an outsourced collateral optimisation solution.

By Joe Parsons

Northern Trust has expanded its collateral management capabilities for OTC derivatives with a new outsourced service for buy-side firms to manage their margin requirements.

The new functionality will enable asset managers and institutional investors to outsource key aspects of their regulatory compliance to Northern Trust and optimise collateral selection.

The new Margin Segregation Service will include new functionalities that streamline complex processes for meeting the incoming uncleared margin rules, such as undertaking industry-standard electronic settlement messaging and advanced collateral reporting.

Northern Trust will also use technology provided by AcadiaSoft for an outsourced collateral optimisation solution, which calculates clients’ initial margin obligation, issues margin demands to brokers, and determines if and when margin needs to be transferred.

“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,” said Judson Baker, derivatives product manager at Northern Trust.

A number of custodians have partnered with technology specialists to enhance their buy-side collateral management services.

In May, BNY Mellon also partnered with AcadiaSoft to develop an end-to-end collateral management solution allowing buy-side firms to fully outsource their entire non-cleared margin workflow.

Meanwhile, JP Morgan developed a distributed ledger technology (DLT)-powered platform with Baton System to deploy cash and collateral balances to global clearing houses, and most recently, RBC Investor and Treasury Services (RBC I&TS) launched a new collateral management service by leveraging technology from CloudMargin to centralise and intpret collateral management data.

BNP Paribas Securities Services also selected a cleared derivatives margin calculary offered by tech vendor FIS.