DTCC LAUNCHES TRADE DATE GUARANTEE, INCREASES CLEARING CAPACITY

Posted January 29, 2009

NEW YORK -- The Depository Trust & Clearing Corporation (DTCC) is launching a real-time, trade-date guarantee for all continuous net settlement (CNS) eligible trades, including equity, corporate bond and municipal bond transactions. In another development, DTCC has increased its equity clearing processing capacity to 500 million transactions per day.

DTCC’s equity clearing subsidiary, National Securities Clearing Corporation (NSCC), will apply its guarantee on trade date upon comparison for non-locked-in trades or validation for locked-in trades instead of T+1, which will reduce credit exposure for trading firms – and systemic risk across the industry.

“Maintaining confidence and stability in the marketplace and protecting our members under both ordinary and extraordinary circumstances is our highest priority,” says Michael C. Bodson, DTCC Executive Managing Director, Business Management & Strategy. “A real-time trade guarantee significantly enhances DTCC’s already robust risk management process and gives financial firms greater certainty that their trades will settle. Recent market events, including firm failures like Lehman Brothers and Madoff Securities, underscore the importance of a real-time trade guarantee — and the value of a central infrastructure provider like DTCC that can manage risk from a central vantage point across asset classes.”

The increase in capacity to 500 million transactions per day ensures that DTCC has the ability to handle unexpected spikes in trading volume. DTCC provides clearance and settlement services for virtually all broker-to-broker trades on the nine major and regional exchanges and 50+ electronic communications networks (ECNs) in the US. In the fourth quarter of 2008, NSCC experienced a 33 percent jump in equity volume, handling a daily average of nearly 170 million total transactions compared to the average daily volume of 128 million for 2008. On October 10, 2008, NSCC processed a peak record 315.6 million total transactions.

“DTCC’s members pay the lowest equities clearance fees in the world, and baked into that price is our enormous processing capacity, comprehensive risk management process and the netting down of trade obligations requiring financial settlement,” says Susan Cosgrove, Managing Director, Equities Clearance and Settlement Group, DTCC. “The total cost to provide equity clearing is less than $100 million annually. If we do the simple math, based on about 300 firms, the average cost per firm is roughly $300,000. DTCC has invested over the years in its technology infrastructure so that we are always prepared to handle trading volumes, including spikes in volume, at no additional cost to financial firms.”