To help clients comply with new regulations intended to manage risk in the financial derivatives markets, Northern Trust has enhanced its systems to provide operational support for central clearing of certain over-the-counter (OTC) derivatives.
New capabilities allow Northern Trust to electronically capture trade information on swaps, a widely used type of OTC derivative, and connect with external parties to route trades to electronic matching platforms, clearing firms and exchanges.
The enhancements to Northern Trust’s custody and middle-office platform will support compliance with the Dodd-Frank Act in the US and the European Markets Infrastructure Regulation (EMIR), which require investors to clear OTC derivatives through centralised exchanges, rather than on a bilateral basis.
"As the infrastructure for derivatives transactions moves toward central counterparty (CCP) clearing, we have developed processing efficiencies that allow us to electronically capture and confirm CCP trades, interface with the exchanges and clearing firms, and offer margin management,” says Judson Baker, product manager for derivatives and collateral management at Northern Trust. "Our ability to provide these services saves our clients from having to make costly investments in systems and operational support needed to meet regulatory requirements."
Available on a global basis to investment managers, institutional investors and other asset servicing clients, the new capabilities are integrated with Northern Trust's Investment Operations Outsourcing, global custody and collateral management systems to support all aspects of post-trade processing.
“The regulatory environment continues to evolve, bringing greater demand for derivatives services," says Peter Cherecwich, head of global fund services at Northern Trust. “We are committed to investing in automation and increased product coverage to fully support derivatives processing, including margin management, in support of our back and middle office outsourcing clients.”
Northern Trust offers an active collateral management service for clients that trade futures and listed options, OTC and cleared swaps. Northern Trust provides this service for an array of derivative participants including asset managers, corporations, pension funds and family offices located around the globe. In addition, Northern Trust will continue to invest in operational capabilities in support of margin management to help clients optimise their pledged assets.