Northern Trust has partnered with technology provider CloudMargin to launch an enhanced active collateral management platform, so that the majority of clients will have zero-touch processing in 12 months time.

Barney Binder, head of collateral management at Northern Trust Asset Servicing, told Markets Media that collateral management for over-the-counter derivatives and repo continues to become more automated but there is still room to move forward.

Binder, who is based in London, joined Northern Trust in November 2023 to lead the firm’s continued strategic evolution of its global collateral capabilities across operations, product development and client service. He was previously at HSBC where his roles included global head of collateral and global head fixed income derivatives and collateral.

In November this year Northern Trust said it was launching an enhanced active collateral capability with CloudMargin to provide increased transparency on a real-time basis and platform resiliency. CloudMargin is used by 225 buy-side and sell-side institutions across the globe and said it is the first cloud-native collateral management workflow solution,

Nadia Ivanova, head of business services at Northern Trust Asset Servicing, said in a statement: “Our clients must be strategic and nimble in managing their investment portfolios, including collateral management, to optimize asset deployment and minimize performance drag.”

Binder continued that Northern Trust liked CloudMargin as the firm has a “very good” capability centered on automation, which is key to drive zero-touch straight-through-processing (STP).

“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 added. “That was part of our selection logic for CloudMargin and ensuring they could apply those types of rules during a trial period.”

Stuart Connolly, chief executive of CloudMargin, said in a statement that Northern Trust clients will benefit from full automation in their collateral workflow, and unprecedented levels of transparency.  “The collaboration is another important milestone in our continued growth trajectory in our 10th anniversary year,” he added.

Northern Trust has onboarded its first clients to the platform and is working through a migration plan to complete the rest. In 12 months the majority of clients will have zero-touch processing according to Binder.

For example, electronic messaging is used to communicate margin calls. Northern Trust is now trying to ensure that processes are fully automated from those messages, so that a good proportion of margin call processes are zero-touch. Binder said only a minority of counterparts to their clients are not using electronic messaging and it is invariably for their repo business.

“If you look at the trend of where we want to take our clients, it is very much around increasing visibility and increasing automation,” Binder added.

For example,Northern Trust wants to be able to offer seamless placement of collateral in securities lending programs, together with the reporting and transparency. Northern Trust is also thinking about how to give clients the benefits of using data in more ways to understand their portfolios and risk.

“We are also trying to drive quicker completion of our processes to give clients certainty earlier in the day,” said Binder. “Regulations have driven accelerated, same day movement of collateral. T+1 has clearly added pressure around where inventory is coming from, or where it needs to be returned to fund transactions.”