DTCC Boosts Processing Capacity for Equity Clearance and Settlement by More Than 150%
To keep ahead of transaction volumes that have been rising sharply over the past several years, DTCC has significantly increased the capacity of its mainframe database for equity processing. The system, called Trade Repository Processing (TRP), can now process at least 160 million sides per day. This 167% increase is nearly triple the previous capacity of 60 million sides.
What’s more, the TRP can handle the additional volume within the same time frames, thanks to changes that make the system perform more efficiently. In addition, for current volumes, the upgrade allows DTCC to deliver certain participant reports, such as the Consolidated Trade Summary, up to 45 minutes earlier.
The redesign, which required no systems changes on the part of customers, went live August 11, following months of testing.
More horsepower and transparent, too
Jacob Feuchtwanger, DTCC managing director, Information Services
"Imagine retooling your car's engine so that, instead of going 60 miles per hour, it can now go 160 with better gas mileage," said Robert Yodice, DTCC director, Clearance and Settlement Group. "That's analogous to what we've done with the TRP."
The project to upgrade the TRP entailed a full-scale structural reconfiguration, yielding dramatic increases in capacity, performance and efficiency. "We recognized an opportunity to make significant improvements by reengineering several of the system's core processes, rather than simply enhancing them," Yodice said.
The redesign was transparent to the industry, leaving customers' systems unaffected and keeping all existing formats and procedures in place.
Ahead of the curve
The original TRP database, rolled out in 2003 with processing capacity of 60 million sides per day, handled the industry’s steady volume increases without a blip.
But by 2005, DTCC decided it was time to expand the system's capacity. Peak processing volumes, which have been climbing steadily over the past several years, hit 36.5 million transactions in 2005. Through July of this year, the average number of transactions processed grew to 32.8 million per day, with peak days of more than 50 million transactions. This trend is attributable in part to the industry's smaller trade sizes due to decimalization, algorithmic trading activity and the expansion of new trading platforms.
"The completion of this project ensures the industry is well ahead of the volume curve, and also has more than sufficient capacity to handle peak days," said Jacob Feuchtwanger, DTCC managing director, Information Services, who oversaw the project.
Full-court press
The TRP redesign began during the fourth quarter of 2005. "Having observed the system in operation since 2003, the staff was able to identify efficiencies that could be gained by re-engineering the database and some of the trade process components," said Al Gambale, DTCC vice president, Information Services. "We eliminated redundancies and expanded trade capacity by organizing the data more efficiently."
Concurrently, DTCC upgraded its risk database to accommodate higher volumes, as every incoming trade must be filtered through DTCC's risk assessment system. Database-specific system upgrades were implemented, as well as changes to the application software, to improve the system's speed and efficiency. In addition, various processes in Risk Management’s overnight cycle were eliminated to compress timeframes for processing.
DTCC completed initial testing of the system in May, and then followed up with tougher tests. These included stress testing up to three times the current peak-day trading volume, and running the new TRP database parallel with the existing system for eight weeks to ensure functionality.
Key changes
One major improvement is that the TRP has been restructured to index all incoming trades by settlement date. Yodice used the example of a file cabinet to explain how this works. "Now the system creates separate 'drawers' for all trades settling on specific dates, whereas before all incoming trades were lumped together," he said.
This pre-sorting feature means that now the TRP only has to access one day’s settlement drawer, which streamlines netting and settlement by eliminating the need for the system to sift through all trades residing in the system every day. The indexing of trades up front also yielded another efficiency: the elimination of a separate database whose function was to net down the trades.
A new approach to the handling of trade records is an additional change. Now, only information necessary for netting and settlement is entered into the TRP system, which enables the system to run more efficiently by decreasing the size of each record received by almost 70%.
This also eliminates unnecessary redundancy between the TRP and Risk Management system, which retains all details of the trades in its historical database. Now the sole repository for this information will be Risk Management, which increased the capacity of the historical database as part of its systems upgrade. @