Depository Trust & Clearing Corporation
| Depository Trust & Clearing Corporation | |
| |
| Founded | 1999 |
|---|---|
| Headquarters | New York |
| Key People | Michael Bodson, President and CEO; Robert Druskin, Non-Executive Chairman |
| @The_DTCC | |
| Profile | |
| Page | |
| Website | www.dtcc.com/ |
Depository Trust & Clearing Corporation (DTCC) is a U.S. holding company formed in 1999 to combine the Depository Trust Company (DTC), the National Securities Clearing Corp. (NSCC) and three other units providing post-trade services to exchange-traded and over-the-counter (OTC) securities. All units include:
- National Securities Clearing Corporation (NSCC) - a central counterparty providing clearing and settlement for virtually all U.S. securities transactions.
- Depository Trust Company (DTC) - provider of securities movement services for NSCC.
- Fixed Income Clearing Corporation (FICC) - facilitates fixed income transaction processing.
- DTCC Deriv/SERV LLC - services post-trade processing of derivatives to enable firms to meet regulatory requirements.
- DTCC Solutions LLC - two main products, the Global Corporation Action Validation Service and the Managed Accounts Service.
- EuroCCP Ltd - clears equities, exchange-traded funds and depositary receipts from 18 markets
- Omgeo - post-trade operations such as trade allocation, confirmation, settlement and collateral management for buy-side firms.
- Avox - matches, enriches and maintains legal entity reference data
DTCC, through its subsidiaries, provides clearing, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC processes mutual funds and insurance transactions, linking funds and carriers with their distribution networks.
DTCC's depository provides custody and asset servicing for 2.8 million securities issues from the U.S. and 107 other countries and territories, valued at $36 trillion.
On July 18, 2018 the DTCC announced its intention to open a new office in Dublin, Ireland to continue providing an authorized regulatory reporting service for clients in the EU27 and the UK as the UK prepared to depart from the European Union.[1]
In late January and in early February 2021 the role of the DTCC came into sharper focus after its subsidiary, the National Securities Clearing Corporation, raised margin requirements during a spike in volatility in certain suddenly popular stocks. [2] [3]
History[edit]
Wall Street's "Paperwork Crisis"[edit]
The depository, DTC, and the oldest of the DTCC's clearing subsidiaries, NSCC, were both created in response to the paperwork crisis that developed in the securities industry in the late 1960s and early 1970s. At that time, brokers still exchanged paper certificates and checks for each trade, sending hundreds of messengers scurrying throughout Wall Street clutching bags of checks and securities.[4]
With the New York Stock Exchange (NYSE) handling 10 to 12 million shares daily, brokers were drowning in paperwork, and concern about risk was growing in Congress, the SEC, and elsewhere.
The crisis became so severe that, to help reduce the backlog, the exchanges closed every Wednesday, shortened trading hours on the other days, and extended settlement to T+5 from T+4. Eventually the industry developed two separate and distinct approaches to solve the paperwork problem.
The first solution was to immobilize physical stock certificates by maintaining them in a central location or depository, and to record changes of ownership using "book-entry" accounting methods where no certificates actually change hands. Initially, this was done by the NYSE and its Central Certificate Service. That led to the creation of DTCC's depository subsidiary in 1973.
The second approach to solving the paperwork crisis involved a concept called multilateral netting. If one broker does 100 trades in IBM, both buying and selling at different prices with a variety of different brokers, there are few opportunities for netting. By interposing a central organization as the counterparty to all trades, all of those broker's trades in IBM could settle to one net position, and all money for trades in all securities could settle to a single dollar figure owed to or from the central counterparty.
Today, with net money settlement, only a single money transfer is required, reducing the dollar amount of financial obligations by as much as 98 percent.
Recent Initiatives[edit]
Global Trade Repository
In September 2009, amid the fallout from the global financial crisis, the leaders of the G-20 met in Pittsburgh to hammer out a coordinated approach to regulatory reform. Chief among their concerns was the lack of transparency in OTC derivatives. The Pittsburgh statement set out four priorities – execution transparency, mandatory clearing, data storage and accessibility, and heightened capital buffers. The idea was to have a central repository of OTC derivatives trades, standardized and searchable, so that relevant authorities could monitor data and identify systemic imbalances.
The GTR operates as a trade repository for all OTC derivative contracts, providing regulators with access to information used on a variety of basis. GTR service supports the mandatory reporting as regulations are finalized in each country, such as the Dodd Frank Act and the European Market Infrastructure Regulation (EMIR). [5]
| WATCH - Five Year Plan: DTCC’s Marisol Collazo Offers a Progress Report on Global Data Repository Issues | |||
|---|---|---|---|
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In 2009, global regulators agreed to develop a framework to monitor and store market data. Five years later, while much progress has been made, there is still a long way to go. Marisol Collazo, head of DTCC's U.S. data repository, tells us what is happening now, and what the market can expect over the next 18 months. | |||
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DTCC's initial vision called for a single repository to be reported into and used by all G-20 regulatory bodies, for all asset classes, including credit, equities, interest rates, commodities and FX. However, as of 2015, there are six approved trade repositories in Europe, and four provisionally-registered swap data repositories in the U.S.[6][7]
In July 2012, it was announced that DTCC and SWIFT had been named by the Commodity Futures Trading Commission (CFTC) to provide the CFTC Interim Compliant Identifier (CICI) for legal entities involved in over-the-counter (OTC) derivatives trading, part of a global legal entity identifier (LEI) system being built across jurisdictions.[8] The initial designation was for a two year term, but has been extended on two occasions. DTCC's Global Markets Entity Identifier (GMEI), as it is now known, creates and assigns LEIs.
As of 2016, GMEI hold about 50 percent of the global market in LEI issuance, with over 200,000 issuances in 184 jurisdictions.[9]
MarkitSERV
In September 2009, the DTCC and Markit launched a joint venture called MarkitSERV, which combines the two organizations' electronic trade confirmation and workflow platforms to provide a single gateway for over-the-counter (OTC) derivative trade processing.[10] In April 2013, Markit purchased DTCC's share to become sole owner.
Omgeo
In October of 2013, DTCC became whole owner of post-trade operations firm Omgeo[11], which DTCC and Thomson Reuters launched in 2001.[12] Before Omgeo became a wholly-owned subsidiary, DTCC and Thomson Reuters served as equal owners and strategic partners. Thomson Reuters continues as a key service provider to and partner with Omgeo. [13]
Clarient Global
In July 2014, DTCC launched Clarient Global LLC along with six big banks. Clarient's key product, Clarient Entity Hub, is a central repository for information about banks' institutional clients designed to help the banks cope with internal risk management requirements and Know Your Customer (KYC), Foreign Account Tax Compliance Act (FATCA) and other client data and documentation challenges.[14]
Clarient went live with its first customers in June 2015 and by the end of its first year had signed over 90 clients for its Clarient Entity Hub.[15]
DTCC Euroclear Global Collateral
In September 2014, Euroclear and DTCC created a joint venture to focus on collateral processing. The joint venture combines a margin transit utility (MTU) for straight-through processing of margin obligation settlement with a collateral management utility (CMU) that addresses collateral optimization challenges.[16]
Blockchain Partnership with IBM
In January of 2017, DTCC said it was partnering with IBM to put the payment and record-keeping system for credit-default swaps on a blockchain by early 2018. The move is designed to reduce redundancies and cut costs. IBM, as well as the blockchain startups R3 and Axoni, will help DTCC create the single network of credit-swaps users.[17]
First U.S. Buy-Side Cleared Repo
In January 2018, Capula Investment Management and State Street executed the first US buy-side cleared repo trade through the DTCC’s fixed income clearing house. The repo services, operated by DTCC's Fixed Income Clearing Corporation, aims to bring the buy-side into providing liquidity to the repo market, which has traditionally been represented by banks and brokers.[18]
Cloud Partnership with Snowflake
On September 27, 2022, the DTCC announced a partnership with Snowflake, the Data Cloud company, to transform how data is accessed, shared and leveraged across a number of its services. DTCC said it aimed to use the Snowflake Data Cloud to further promote market transparency, reduce risk, and provide greater operational efficiency.[19]
Key People[edit]
- Michael Bodson, President and CEO
- Robert Druskin, Non-Executive Chairman
- Susan Cosgrove, Managing Director and CFO
- Andrew Gray, Managing Director and Group Chief Risk Officer
- Lynn Bishop, Managing Director and Chief Information Officer (CIO)
References[edit]
- ↑ DTCC Plans to Open New Office in Dublin and Begins Recruitment Process. DTCC.
- ↑ Why Did Robinhood Ground GameStop? Look at Clearing. WSJ.com.
- ↑ Clearinghouses Are Intended to Reduce Risk. They Can Amplify It.. Bloomberg Businessweek.
- ↑ "Responding to Wall Street's Paperwork Crisis”. Depository Trust & Clearing Corporation.
- ↑ DTCC GTR. DTCC.
- ↑ List of registered trade repositories. ESMA.
- ↑ Swap Data Repository Organizations. CFTC.
- ↑ /2012/dtcc_swift_compliant_identifier.php Press Release. DTCC.
- ↑ DTCC’s Legal Entity Identifier Service Surpasses 200,000 LEIs. DTCC.
- ↑ Markit and DTCC launch OTC derivatives trade processing JV. Finextra.
- ↑ DTCC To Acquire Full Ownership of Omgeo. BusinessWire, via Yahoo! News.
- ↑ About. www.Omgeo.com.
- ↑ DTCC Acquires 100% of Omgeo. Omgeo.
- ↑ DTCC Collaborates With the Industry to Launch New Client Data and Documentation Utility. DTCC.
- ↑ OVER 90 CLIENTS SIGN TO ADOPT CLARIENT ENTITY HUB AS THEIR KYC AND CLIENT ENTITY DATA UTILITY. Clarient.
- ↑ DTCC and Euroclear create collateral processing Joint Venture. GlobalCollateral.
- ↑ IBM Partners With Wall Street to Bring Blockchain to CDS Market. Bloomberg.
- ↑ DTCC processes first US buy-side cleared repo trade. The Trade.
- ↑ DTCC PARTNERS WITH SNOWFLAKE TO TRANSFORM FINANCIAL INDUSTRY DATA ECOSYSTEM. DTCC.