DTCC outlines the way forward to implement central clearing in US Treasury transactions


The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today released a new white paper titled “Making the US Treasury Market Safer for All Participants: How FICC’s Open Access Model Promotes Central Clearing ”, which explores how to advance central clearing around US Treasury transactions.

The latest paper from DTCC’s subsidiary, Fixed Income Clearing Corporation (FICC), describes how FICC’s long-standing “open access” approach provides the flexibility to allow a wide variety of market participants to ” access central clearing, while ensuring impartiality and fairness. . It also compares and contrasts the main differences between the cleared US Treasury market and the cleared swap market, as well as important considerations for the implementation of a possible clearing mandate.

The paper suggests that it is important to consider the significant differences between markets when developing market regulations. For example, several market participants who do not engage in the swap market are essential liquidity providers to the US Treasury market. The systemic risk mitigation objectives of a clearing mandate will not be met if these market participants cannot effectively access the clearing. FICC currently offers a variety of client clearing models for US Treasury cash and repo transactions, including matching clearing, prime broker clearing, and sponsored clearing through FICC’s sponsored service, to enable market participants to select the model that best meets their needs.

“DTCC applauds the industry’s efforts to introduce higher levels of central clearing into US Treasury markets,” said Murray Pozmanter, head of clearing agency services and global business operations at DTCC. “The benefits of such a move are significant, including reduced settlement and counterparty risk, reduced risk of market disorder and fire sales, and improved market access and liquidity. . However, for such an effort to be implemented effectively and to achieve risk management objectives, current market practices and approaches must be taken into account as mandates are developed. We look forward to working with regulators and the industry on this important effort. “

To advance this crucial initiative, DTCC will continue to work with industry to ensure that all companies seeking to access compensation, whether on a voluntary or potentially mandatory basis, can do so in an impartial and fair manner. .

“The FICC believes it is well positioned to support increased central clearing in the US Treasury market,” said Laura Klimpel, Managing Director of Fixed Income Clearing Corporation (FICC) and Head of Business Development for SIFMU at DTCC. “The FICC has developed an open and flexible approach over the past four decades to provide various players in the US Treasury market with access to central clearing on their preferred terms and in a manner that meets their needs. “

Industry participants are welcome and encouraged to actively participate in this conversation as the next steps are identified.


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