Northern Trust, one of the world’s largest fund administrators, is to implement the Settlement Messaging Service of GlobalCollateral, a joint venture of Euroclear and The Depository Trust & Clearing Corporation (DTCC).
The adoption of the service will streamline Northern Trust’s margin call process, increase transparency through automated collateral settlement tracking, enhance client service and improve custodian communications.
GlobalCollateral’s Settlement Messaging and Tracking Service, powered by Margin Transit Utility technology, is currently ready for client on-boarding and is anticipated to go live with client collateral movements during the first half of 2017.
It will provide straight-through processing to the settlement of margin obligations, as the industry prepares for pending global derivatives regulations projected to create an increase in margin calls and operational complexity.
“Global derivatives regulation and the resulting increase in collateral calls will require market participants to improve their collateral management processes,” says Mark Jennis, executive chairman at GlobalCollateral Ltd. “It is great to see Northern Trust and other leading global fund administrators recognise the benefits of an automated margin call process, including lower operational risk, increased transparency and improved client and counterparty satisfaction.”
“Northern Trust looks forward to taking advantage of GlobalCollateral’s Settlement Messaging capabilities,” says Pete Cherecwich (pictured), Americas head of corporate and institutional services at Northern Trust. “We believe that one of the keys to excellent client service is to take advantage of new and innovative technologies, especially those that not only create operational efficiencies and improved risk management, but can also enable us to provide increased transparency to our clients.”
Fund administrators often use manual processes in the margin call process, creating risk, limiting collateral settlement transparency and requiring frequent one-on-one communications with their custodian banks. Margin Transit Utility provides administrators with a better way to service their clients globally while increasing operational efficiency, settlement certainty and transparency as margin call volumes increase.
Northern Trust plans to offer the Margin Transit Utility service to its clients, based upon demand. Development and deployment timelines will be determined based upon client feedback.
When fully implemented, Northern Trust will confirm the underlying clients’ collateral movements with MTU handling the margin call process.
MTU will deliver settlement instructions to the appropriate custodian for movement of the collateral, and deliver confirmed settlement details back to Northern Trust and its counterparties. This will provide automated notification that the call has been successfully completed and that the collateral has been received, providing Northern Trust with the information to help to ensure that their clients are fully collateralised.
