Systemically Important Financial Market Utilities (SIFMUs)
SIFMUs are “systemically important financial markets utilities.” On July 18, 2012, the U.S. Financial Stability Oversight Council (Council) designated, among others, DTCC subsidiaries National Securities Clearing Corporation (NSCC), The Depository Trust Company (DTC) and Fixed Income Clearing Corporation (FICC) as Systemically Important Financial Market Utilities (SIFMUs) under Title VIII of the U.S. Dodd-Frank Act. This designation was on the basis that a failure or a disruption to any one of these DTCC subsidiaries could increase the risk of significant liquidity problems spreading among financial institutions or markets and thereby threaten the stability of the financial system in the United States.
This designation requires the company to meet prescribed risk management standards and subjects it to heightened oversight by U.S. regulatory authorities.
With financial infrastructures expected to play an even larger role in global risk management in the future, DTCC took important steps in 2012 to strengthen its risk controls and improve its ability to manage risk. The company developed a new suite of reverse stress tests that requires a bottom-up approach that will help identify potential vulnerabilities and opportunities to strengthen the control environment across the entire risk spectrum. Additionally, DTCC made numerous improvements to the way it conducts simulated closeout exercises. For example, the company developed the DTCC Closeout Playbook, which documents the steps to take during a participant closeout at the enterprise level and helps to streamline the overall closeout process, in the event of a participant failure.
Proposed Changes to DTCC’s Corporate Structure