Clearing Cost Calculators Increase Transparency for Customers: How One Customer Uses the NSCC Cost Calculator
The word is out. NSCC’s new online clearing cost calculator, which launched in June 2009, is gaining traction among customers as a tool to quantify their net cost of doing business with DTCC quickly and accurately. Customers are also saving time and money by deploying the calculator to generate reports for their senior management and to give their own clients more precise cost projections.
The calculator is the latest resource developed by NSCC to bring greater clarity to its pricing model. NSCC’s clearing fees are the lowest in the world at an average of just one-third of a penny per transaction (or about 66-thousandths of one U.S. cent per 100 shares).
Located under the Customer Center section of www.dtcc.com, the calculator allows users to enter a series of variables into fields, including total monthly number of sides, average shares per side and average price for share (in U.S. dollars), and provides an estimate of a firm’s gross and net clearance fees as well as its clearing cost per side and per 100 shares.
The customer weighs in
DTCC recently spoke to William Bush, Transaction Desk Manager, LavaFlow ECN, a part of Citi’s Global Equities business, about his experiences using the equity clearing cost calculator. LavaFlow provides order and execution management services, smart order routing and other trading technology services.
Q. How does the calculator benefit your business?
A. The improvement in transparency is probably one of the biggest benefits of the calculator. It makes it clear and easy to understand how the fees are calculated. In the past, I usually referred to DTCC’s manual to look up the different pricing tiers and other cost information, such as value into and out of the net, to analyze our monthly clearing bill. Now all I have to do is enter basic data, such as our total sides for the month and discount rate, and the information is right there on the screen.
Q. In addition to total clearing costs for the month, the calculator provides the cost per side and per 100 shares for users. How do you use this information?
A. These data are particularly useful for management as it gives them greater insight into how clearing costs will change based on different volume estimations. We weren’t able to readily generate this type of granular information before. Now we can help our internal clients better understand each of the costs of the trading and clearance process.
Q. Was there a big learning curve when you first began using the calculator?
A. No, it was just the opposite. Once you plug in the relevant information, the calculator gives you its estimates immediately. I’d say that what used to take me 30 minutes to calculate I now accomplish in maybe two minutes. And as you can imagine, management is pleased that we now have a tool that quickly and easily estimates clearing costs and shows exactly how fees are calculated.
Q. Have you found other ways to use the calculator to support your business?
A. I’ve already used the calculator several times to evaluate new business opportunities and their potential for success. In fact, anytime we want to make a business decision related to clearing, we take advantage of the calculator. It’s become an integral part of the decision-making process for us internally. And I can tell you that in a tight cost environment, having a resource like this to help inform our business decisions is critical.
Q. Have you found the estimates to be accurate?
A. Yes. In fact, accuracy is the value the calculator brings to our business. I’ve found it to be extremely accurate each time I’ve used it – almost to the dollar. At this point, I have a high degree of confidence in the calculator as a trusted and reliable tool – and one I intend to continue using. @