DTCC EXECUTIVE BACKS CONCEPT OF SINGLE TRADE REPOSITORY FOR OTC DERIVATIVES

Posted July 21, 2009

WASHINGTON, D.C. – Donald F. Donahue, Chairman and Chief Executive Officer of The Depository Trust & Clearing Corporation (DTCC), today stressed that a single trade repository for over-the-counter (OTC) derivatives contracts is essential to mitigating risk and enhancing transparency in the market. Donahue made his remarks as part of his keynote address at a US Chamber of Commerce discussion titled “Modernizing Derivatives Oversight: Developing Policy for the 21st Century.”

“DTCC strongly urges Congress and regulators to codify into law the continued operation of a central global repository for OTC credit derivatives,” says Donahue. “We believe that having all of this information residing in a single place is a crucial contribution to reducing risk and promoting market efficiency. When markets are in turmoil, it is critical that regulators have the ability to see the full details on the underlying trading positions of derivatives contracts from a central vantage point to quickly assess systemic risk across the financial system—and to bring greater transparency to the market. This snapshot of the market can only be provided by a single global repository.”

DTCC operates the Trade Information Warehouse -- a comprehensive repository and post-trade processing infrastructure for OTC credit derivatives. The Warehouse handles the calculation, netting, and central settlement of payment obligations between counterparties, and automates the processing of “credit events” – situations where the protection against default provided by a credit default swap is activated.

DTCC has publicly stated that it will support all efforts to create CCP services planned in the US and overseas, on a non-discriminatory basis.

“We believe that when central counterparties (CCPs) and a global repository work in tandem to support each other’s functions, risk can be significantly mitigated, and transparency enhanced in the marketplace,” says Donahue. “This powerful combination is what is needed to ensure the business community has the necessary risk benefits and financing flexibility, and our policy makers have the assurance that the integrity of the financial system will be maintained. If we consider that globally there are about six CCPs planned to be launched either in Europe or in the US, we can recognize the potential for fragmentation of data about the market, if there’s no central repository storing all the data in one place.”