Global financial services firm Northern Trust has reorganised its middle-office support functionality to help clients manage central clearing of some OTC derivatives instruments.
The firm can now capture trade information on swaps and connect to external parties to route trades to electronic matching platforms, clearing houses and exchanges, as the industry continues its preparation for new swaps rules in in the US and Europe.
Buy-side firms will have access to the new capabilities as part of Northern Trust’s custody and collateral management systems to meet OTC derivatives clearing requirements, including routing trades to newly created swap execution facilities (SEFs) on which the instruments will be traded.
“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,” said 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.”
In the US, new clearing and reporting rules embedded in Title VII of the Dodd-Frank Act have already come into force for interest rate swaps and credit default swaps for large market participants. In Europe, the European markets infrastructure regulation will mandate the central clearing of swaps from mid-2014.
“The regulatory environment continues to evolve, bringing greater demand for derivatives services,” added 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.”