Northern Trust has announced a partnership with the technology provider CloudMargin to enhance its active collateral management platform, aiming for a goal of zero-touch processing for the majority of clients within the next 12 months. This initiative reflects a growing trend in the financial services industry where automation is increasingly becoming integral to business operations, particularly in the realm of collateral management for over-the-counter derivatives and repurchase agreements (repo).
Barney Binder, who recently joined Northern Trust as the head of collateral management for Asset Servicing in London, spoke to Markets Media about the evolving landscape of collateral management. He noted that while significant strides have been made towards automation, there remains substantial potential for further advancements. "Collateral management for over-the-counter derivatives and repo continues to become more automated, but there is still room to move forward," Binder remarked.
The collaboration with CloudMargin, celebrated for being the first cloud-native collateral management workflow solution, is intended to enhance transparency and platform resilience on a real-time basis. CloudMargin has established a strong presence in the collateral management sector, with 225 buy-side and sell-side institutions currently utilising its services. The leadership at Northern Trust has recognised the firm's capabilities, specifically its focus on automation, as being critical to achieving their operational goals.
In a statement, Nadia Ivanova, the head of business services at Northern Trust Asset Servicing, emphasised the need for clients to be both strategic and agile in managing their investment portfolios, underscoring the importance of optimising asset deployment and minimising performance drag.
Binder elaborated on Northern Trust's selection of CloudMargin, highlighting the platform's proficiency in automating processes which aim to achieve zero-touch straight-through processing. "The most important point is that we have the ability to codify what a client sees as being optimal for their collateral into the system," he said, explaining that this capability was central to their decision to partner with CloudMargin.
Stuart Connolly, the chief executive of CloudMargin, also shared insights, indicating that Northern Trust clients would enjoy full automation of their collateral workflows and unprecedented transparency. "The collaboration is another important milestone in our continued growth trajectory in our 10th anniversary year," Connolly stated.
To date, Northern Trust has successfully onboarded its first clients to the enhanced platform and is implementing a detailed migration plan for the remainder. Within a year, the firm anticipates that the majority of its clients will experience zero-touch processing.
In practical terms, this strategy includes using electronic messaging for margin calls, with Northern Trust keen to automate processes associated with these communications. Binder noted that a significant majority of counterparts to their clients have adopted electronic messaging, with exceptions primarily seen in the repo sector.
"We want to offer seamless placement of collateral in securities lending programmes, alongside comprehensive reporting and transparency," Binder explained. The firm is also exploring ways to leverage data to provide clients with deeper insights into their portfolios and associated risks.
Additionally, Binder indicated that Northern Trust aims to expedite the completion of its processes to provide clients with certainty earlier in the day, particularly in light of regulatory pressures that necessitate same-day collateral movements. The introduction of T+1 settlement has intensified the need for a more efficient deployment of collateral, prompting Northern Trust to reassess inventory management strategies to effectively support its clients' transactional requirements.
Source: Noah Wire Services