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Northern Trust Peter Cherecwich

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Northern Trust launches enhanced collateral optimisation solution

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Northern Trust has developed an enhanced collateral optimisation solution designed to help institutional investors manage their collateral more efficiently whilst meeting the demands of continuing global regulatory reform.

“Our clients want to be strategic and nimble in managing their investment portfolios, especially with regard to collateral management – deploying the right assets at the correct time to meet regulatory requirements whilst minimising any impact on investment performance,” says Pete Cherecwich (pictured), president of Corporate & Institutional Services at Northern Trust. “Historically the collateral management process took time, resource and frankly a lot of spreadsheets. Today our advanced algorithmic optimisation solutions can achieve this objective – minimising the value of assets that need to be tied up as collateral and reducing counterparty exposure.”

Northern Trust’s collateral optimisation capability applies flexible algorithms to manage asset selection when meeting margin requirements. The use of these algorithms could reduce the market value of assets being delivered or prevent assets from being tied up as collateral if they can be deployed better elsewhere. There are a number of different drivers that can be customised to the priorities of each client from a liquidity management perspective.

“The ability to optimise the deployment of collateral is key to reducing our clients’ counterparty risk by utilising the most efficient assets,” says Gavin Platman, head of operations strategy at Insight Investment. “Insight Investment and Northern Trust have worked together and have devised a solution that we believe addresses our clients’ needs today and provides flexibility for the future as liquidity and collateral management needs evolve.”

In addition to its new collateral optimisation capability, Northern Trust recently became the first global custodian to offer access to buy-side, sponsored repo clearing via LCH RepoClear. This capability helps clients minimise risk whilst improving profitability, enabling them to access a diverse range of lenders in a more efficient manner.

Northern Trust can now also support clients trading triparty repo via Euroclear’s triparty service. This provides diversification of repo counterparties as the industry moves away from traditional banking counterparties.

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