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Northern Trust (NTRS) Automates Initial Margin Calculation

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·3 min read
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Northern Trust NTRS has rolled out a function, which automates initial margin calculation, facilitating easy compliance with global regulations related to the trading of over-the-counter (OTC) derivatives for asset manager and asset owner clients. The effort is likely to drive efficiency for OTC derivative transactions.

The company has developed the solution by integrating with Acadia’s margin management solutions. This fully complements Northern Trust’s collateral and OTC processing capabilities.

The solution provides market-approved and automated support for an independent calculation of the initial margin. Another key feature of the solution is that it will be available for clients in advance of a deadline for the implementation of Uncleared Margin Rules (UMR). These will help OTC derivative investors to satisfy complex UMR requirements.

By tapping algorithmic technology, the function identifies optimal assets available to be deployed for meeting margin obligations. This maximizes the investment performances of investors.

Nadia Ivanova, head of C&IS Business Services and North America Asset Servicing chief operating officer at Northern Trust, noted, “by pairing this solution with our other derivatives enhancements, we’ve been able to automate previously manual processes for faster processing and greater accuracy.”

The capability adds to Northern Trust’s existing comprehensive range of collateral, derivatives and liquidity management solutions. The company has been continuously making investments in technology architecture.

In mid-September, Northern Trust launched an artificial intelligence-powered tool to derive unstructured investment information from alternative asset documents in a bid to further digitize its alternative asset servicing business. This underpins the company’s efforts to enhance its asset owner clients’ experience as well as abate operational risk in the alternative asset servicing business. (Read more: Northern Trust Automates Document Extraction Capability)

While digitalization efforts will help to tap efficiencies, the company is seeing an escalation in costs. Notably, non-interest expenses witnessed a CAGR of 5.8% over the last five years (2016-2020), with the trend continuing in the first six months of 2021. We believe that a rising trend in expenses will be a hindrance to bottom-line growth.

The stock has gained 18.5% in the year so far, underperforming 33.4% growth recorded by the industry it belongs to.

Zacks Investment Research
Zacks Investment Research

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Northern Trust currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Steps by Other Companies

A growing number of financial services organizations, including banks, are resorting to convenient, frictionless digital services for their customers and clients.

Recently, Mitsubishi UFJ Financial Group, Inc. MUFG augmented its wealth management capabilities by developing the MUFG Wealth Management Digital Platform. The platform will be deployed in the second half of fiscal 2021 to provide optimal digital solutions to high net-worth clients.

New York Community Bancorp, Inc. NYCB has built a cutting-edge digital payment process via the development of a blockchain-induced digital marker — USD Forward — which is the first to be used by a bank on the Provenance Blockchain.

Earlier this month, Standard Chartered PLC SCBFF, through its wholly-owned subsidiary — Standard Chartered Bank (Singapore) Limited, agreed to form a joint venture to launch a digital-only bank in Singapore with BetaPlus Pte. Ltd. The move will further expand its digital banking facilities.


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