NSCC Hits New Record for Transactions Processed
National Securities Clearing Corporation (NSCC) started the new year with two back-to-back volume records, processing 112.5 million and 102.7 million transactions on January 23 and January 22, respectively. These days also marked NSCC’s first time processing more than 100 million billable sides in a day. NSCC is a subsidiary of DTCC.
The peak on January 23, the largest trading day in history, surpassed by 14.2% the record of 98.5 million transactions set on August 16, 2007.
“Processing volumes in our equities business have been increasing rapidly over the past decade,” said Susan Cosgrove, DTCC managing director, Clearance and Settlement Group. “Not only do we see new levels for trading volume, those levels are sustained and compounded year over year. For the last several years, our new average daily volume has tracked the previous year’s peak days.” For example, in 2007, average daily volume was 53.9 million vs. 2006’s peak day of 50.1 million.
The benefits of increasing volume are shared with customers in the form of lower fees, as NSCC gains economies of scale which translate into lower pricing. For 2008, NSCC lowered fees for its clearing services, which is expected to result in approximately $88 million in annual savings to the industry.
Boosting capacity
“Bearing in mind safety and soundness being of highest priority,” Cosgrove said, “we will ensure our ability to handle the escalating volumes by significantly boosting the capacity limits of our equities clearance and risk management systems to 450 million sides per day by the end of this year.”
The systems can currently process up to 280 million sides per day.
At NSCC, activity is reported as transactions processed, while market volume is calculated in terms of shares traded. A single transaction can be for any amount of shares and represents the buy-side or sell-side of a trade.
Netting factor
NSCC’s Continuous Net Settlement system nets down or reduces the total number of trades, or sides, requiring settlement. For example, on January 23, NSCC reduced the value of obligations requiring settlement by 99% to $32.3 billion from $2.4 trillion. On a yearly basis in 2007, netting reduced financial settlement by 98% to $5.2 trillion from $283 trillion.
“Netting is a critical function that NSCC delivers to U.S. capital markets,” said Cosgrove. “We are committed to improving settlement efficiency and reducing operational risk and costs even as volumes rise.” @