DTCC, CLEARING CORPORATION PLAN JOINT, CENTRAL-COUNTERPARTY
INITIATIVE FOR OTC DERIVATIVES
Posted June 4, 2008
Under the agreement, Clearing Corporation members will benefit from its
netting and risk management processes and will leverage the asset
servicing capabilities of DTCC’s Trade Information Warehouse. The
Warehouse will be fully implemented in phases this year and next.
“Through the use of multilateral netting, margin collateral, and daily
marking-to-market of positions, the Clearing Corporation’s clearing
facility will improve capital efficiency, increase regulatory
transparency, lessen direct counterparty risk and reduce systemic risk
relating to the multi-trillion dollar market in credit default swaps,”
says Michael C. Dawley, Chairman of the Clearing Corporation.
Clearing Corporation members can use that entity as central counterparty
guarantor for OTC contracts in credit derivatives while using DTCC’s
Warehouse as the “golden” record for net open positions and post-trade
event processing.
The joint initiative will begin by supporting CDX North American High
Yield and Investment Grade indices. CDS products such as iTraxx indices,
index tranches, and single name products are scheduled for subsequent
rollouts throughout 2008 and 2009.
“We are pleased that the Clearing Corporation is utilizing the Trade Information Warehouse and its operational efficiencies to develop a solution that helps market participants reduce their counterparty risk exposure,” says Peter Axilrod, Managing Director, Business Development, DTCC. “We believe there is great benefit in the Warehouse’s ability to link with the Clearing Corporation and other complementary services providers because it enables industry members to avoid duplicating costs and to maximize operational and risk management investments.”