In other news, Northern Trust embraces A.I., Euronext has a new partner, and regulators reach out to municipal securities advisors.
Clearing Service to Launch Next Week
CME Group is claiming a first for derivatives trading with the September 27 launch of the Sustainable Clearing service intended to help firms “track and report on how their hedging activities are advancing their sustainability goals,” officials announce.
“This service will allow clients to demonstrate commitment to ESG-positive business support and green hedging activities as they trade in and out of ESG positions,” according to CME officials. “Sustainable derivatives encompass both the trading of products such as carbon offsets, battery metals and bioenergy as well as interest rate and foreign exchange futures hedging activity that is carried out to support a sustainable business.”
The CME offering “ensures that all sustainable trades continue to benefit from our established risk management approach, including full margin offsets where applicable, which creates efficiencies for clients and end users,” says Sunil Cutinho, president, CME Clearing, in a prepared statement.
CME officials will be providing participating futures commission merchants (FCMs) with Sustainable Clearing “eligibility criteria to identify and tag their sustainable trades. The eligibility criteria will be aligned to external standards, such as the International Capital Markets Association (ICMA) Social & Green Bond Principles. CME Group will be ‘criteria neutral’ to ensure that only independent third-party standards are applied,” officials say.
CME Benchmark Administration, a legal entity of CME Group, will oversee the criteria and governance of Sustainable Clearing, officials say.
Northern Trust Pries Data from Alternatives via A.I.
Using artificial intelligence (A.I.), Northern Trust has launched a way to extract unstructured investment data from alternative asset documents and make that information “accessible and actionable for asset owner clients,” officials say.
“The solution leverages Microsoft Azure Applied A.I. Services to extract unstructured data from investment documents,” according to Northern Trust officials. The proprietary solution “transforms crucial information such as capital call notices, cash and stock distribution notices, and capital account statements from a variety of unstructured formats into digital, actionable insights for investment teams.”
The data extraction capabilities “will read stored documents and fund manager reports on holdings and performance of hedge funds, private equity and other alternative assets and pull out data points including asset names, currencies and market value,” officials say. “The two functions — document capture and data extraction — create an end-to-end, scalable, cloud-based process capable of moving from document receipt notification to digitized, accounting-ready data in just minutes.”
Digitized alternative asset servicing offers firms a “better ramp-up experience when investing in new assets, empowering asset owners to be more agile about making strategy changes when needed,” officials say.
The new solution could also yield “faster delivery of accounting book of record services, including during the peak monthly and quarterly statement cycles that are typical for alternative investments,” officials add. The move to automation should lead to accuracy rates that are better than manual processes.
The solution grew out of an initiative to digitize alternative asset servicing, and involved business and consulting firm Neudesic, officials say.
“Automating investment data is a focus for Northern Trust, particularly for alternative assets due to their complexity and growing investor demand. Our investments in cloud technology, artificial intelligence, blockchain and machine learning will help asset owners achieve a true understanding of their assets and portfolios as a whole,” says Pete Cherecwich, president of corporate and institutional services at Northern Trust.
Euronext & Qomply Partner to Offer Integrated Reporting
Trading exchanges company Euronext has partnered with vendor Qomply to deliver a transaction reporting service for market participants that sidesteps the cost and complications of separately integrated solutions, officials say.
The Qomply streamlined process “accepts trade data, performs a matrix of over 1,000 rules for accuracy and validity and sends the transaction data directly to Euronext ARM [Approved Reporting Mechanism],” officials say. “Users can tease out any issues with their trade reporting before sending it to the Euronext ARM. This service is unique in that users control when and if trades are sent to the ARM.”
Qomply is a regulatory technology firm that offers technology and automated services for transaction reporting covering MiFIR, SFTR and EMIR, officials say. The vendor’s flagship product is the Report Assure Suite, a subscription-based service that includes checks for accuracy and completeness, trade reconciliation, over-reporting, and detailed reference data checks.
SEC, MSRB & FINRA Reach Out to Municipal Securities Advisors
The SEC’s Division of Examinations and Office of Municipal Securities (OMS), the Municipal Securities Rulemaking Board (MSRB), and the Financial Industry Regulatory Authority (FINRA) have opened registration for the 2021 Compliance Outreach Program for Municipal Advisors, officials say.
“The virtual program will be held Thursday, Oct. 7, 2021, from 10 a.m. to 5 p.m. ET. Additional information and program materials, including the agenda are available on the SEC website,” officials add.
The program is being pitched as an opportunity for municipal advisors and other municipal market participants “to hear from SEC, MSRB, and FINRA staff on timely regulatory and compliance matters,” according to officials.
The subjects up for discussion are managing conflicts of interest disclosures; operational considerations for registered municipal advisors; municipal advisors’ participation in new issue pricing; preparing for examinations; SEC and FINRA examination processes and common observations; and SEC and FINRA enforcement actions. The event will also feature a tutorial on the EDGAR system.
“The municipal securities market plays an important role in U.S. capital markets, providing opportunities for new and experienced retail investors as governments leverage bonds, complex structured products and financial derivatives to address their infrastructure and capital needs,” says Bari Havlik, FINRA’s executive vice president of member supervision, in a prepared statement. “This program enables municipal advisor firms across the country to hear from regulators about areas of oversight, compliance and obligations that promote a fair and efficient market.”
FINRA is handling registration for this free program. Information on how to attend the program can be found https://bit.ly/3EATBnD . There will be a recording of the event, archived via the SEC’s Compliance Outreach Program for Municipal Advisors webpage for later viewing, officials say. Questions before the event can be send to: 2021MAOutreach@sec.gov .
