Obligation Warehouse Opens for Participant Testing
The industry achieved a milestone in January as several firms took steps to begin internal testing of the Obligation Warehouse (OW), an enhanced service that will automate the processing of ex-clearing trades and other open obligations as well as the management of fails. The OW, expected to go live in 3Q 2010 pending regulatory approval, is an offering of National Securities Clearing Corporation (NSCC).
“Because ex-clearing trades are currently processed outside NSCC’s systems, they are highly manual, time-consuming and risk-prone,” said Susan Cosgrove, DTCC managing director, Clearance and Settlement/Equities. “By bringing these transactions into the OW, we will give the industry a standardized and cost-effective process for managing ex-clearing processes and any resulting fails. The OW will also serve as a repository of this information, providing a complete view of the equities markets to enhance transparency and mitigate systemic risk.”
Customers that successfully complete testing will have the opportunity to participate in a limited pilot production of the OW starting in February.
Replacing RECAPS
The OW is an enhancement to NSCC’s Reconfirmation and Pricing Service (RECAPS) and will offer the following enhanced features and functionality:
- Allow broker/dealers to submit ex-clearing trades and other obligations for automated real-time matching and confirmation;
- Eliminate the burdens of manually managing ex-clearing and non-Continuous Net Settlement (CNS) fails by automating the process and consolidating and storing the transactions in a central location;
Ensuring a smooth transition
The launch of customer testing follows the completion of several months of internal testing by NSCC, which included a front-to-back functional review to ensure the service is fully integrated. With that phase completed, NSCC launched the OW in its Participant Services Environment (PSE) in January so firms could begin testing their own coding to ensure it can properly interface with the OW.
Participant Services Environment (PSE) in January so firms could begin testing their own coding to ensure it can properly interface with the OW. “Participant testing allows firms to fix any bugs or kinks in their coding before the system goes live,” said Thomas Sakaris, DTCC vice president, Clearance and Settlement/Equities. “When customers make changes and modifications in a test environment, it helps ensure a seamless and hassle-free transition when the service goes live.”
During participant testing, firms will run a series of tests on different business events and types of transactions to see if their systems are communicating correctly with the OW. The scripted test will include submitting requests for comparison, notification of delivery, the opening or closing of obligations due to mandatory reorganizations, RECAPS and participant swings, to name a few.
“Once the firms input the information into the OW, we process it as if the service were live and give them output, which they reconcile with their own records to see if the data correspond,” said Janice DiTore, DTCC director, Clearance and Settlement/Equities. “Once firms complete the script they have the flexibility to perform additional testing or move into pilot production, where they will have access to many of the OW’s functionalities. @
[For more information on the Obligation Warehouse, contact Janice DiTore, DTCC director, Clearance and Settlement/Equities, at 212.855.7659 or JDiTore@dtcc.com.]