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DTCC Chooses CLS Bank as Global Settlement Partner for OTC Derivatives Market

DTCC Deriv/SERV Warehouse Will Provide Link to Multi-Currency Settlement

December 13, 2006 - The Depository Trust & Clearing Corporation (DTCC) announced today the selection of CLS Bank International (CLS) to provide central settlement of payments for over-the-counter (OTC) derivatives contracts housed in DTCC Deriv/SERV's Trade Information Warehouse.

The partnering of these two industry-owned organizations will provide an integrated global payment processing infrastructure for the OTC derivatives market, linking the Trade Information Warehouse with a central settlement facility. Initially supporting credit derivatives, the solution is designed to be extended to other OTC derivatives products including rates, equities, and commodities - the timing of which will be determined through collaboration with warehouse customers.

"This strategic partnership will provide an automated, seamless processing and settlement environment for the handling of OTC derivatives contracts on a global basis," said Robert McGrail, executive managing director, Domestic and International Core Services, DTCC. "After an extensive review and selection process by DTCC and its Board's OTC Derivatives Operations and Planning Committee, CLS became the logical choice because of our shared customer base, and CLS' reputation for resiliency, reliability and broad experience handling foreign exchange."

CLS provides global settlement services in 15 currencies, and is an integral part of the foreign exchange market, settling 270,000 instructions equivalent to approximately $2.9 trillion each day. Like DTCC, CLS operates on an "at cost" basis for the benefit of the financial services industry.

"Leveraging CLS' existing settlement infrastructure and global reach, including 57 member banks and 800-plus international banks, brokers and other customers who access CLS indirectly as third-parties through members made CLS the logical provider," said Guido Buehler, managing director, UBS Investment Bank, and member of DTCC's OTC Derivatives Operations and Planning Board Committee. "CLS will support the settlement of warehouse payment obligations in the 9 trade warehouse currencies currently supported with the option to add more currencies in the future."

Combining Strengths to Transform a Market

"We are pleased to be partnering with DTCC, bringing together Deriv/SERV's strength in automating OTC derivatives processing with CLS' multi-currency expertise and robust settlement infrastructure. It is excellent to see the financial industry leveraging the CLS infrastructure," said Rob Close, President and Chief Executive Officer, CLS Bank International. "We share DTCC's vision of a strategic partnership that will support the global expansion of the OTC derivatives market and reduce cost and risk, and CLS is committed to working with DTCC to expand this solution to other OTC derivatives products over time."

While most OTC credit derivative transactions are now matched and confirmed electronically through Deriv/SERV, market participants still bilaterally settle payments over the life of each contract in a fragmented and non-standardized manner. The Trade Information Warehouse automates and centralizes the most up-to-date information about a derivatives contract, and will link this data with CLS' electronic settlement process, so that payments will take place automatically, resulting in more efficient, accurate and complete payment processing.

Through CLS, warehouse customers will gain settlement certainty - all payment instructions generated by the warehouse and settled by CLS will be final and irrevocable in immediately available funds. The Deriv/SERV warehouse will receive real-time information on the status of all payment instructions that have been submitted to CLS Bank.

DTCC launched the Trade Information Warehouse in November in close collaboration with key OTC derivatives market participants, creating a centralized and secure global post-trade processing infrastructure. The warehouse builds on DTCC's Deriv/SERV platform, which today automates confirmations for more than 80% of credit derivatives trades globally.

The Request for Proposal process began in September, and involved confidential discussions with a number of financial institutions. The decision was finalized last week by DTCC and its OTC Derivatives Operations and Planning Board Committee. DTCC and CLS will begin working immediately to complete the necessary connectivity and development, as well as legal arrangements and necessary regulatory approval, required to deliver this seamless solution to the marketplace. A definitive timeframe for implementation of this new settlement capability will be announced in 2007.

About CLS

Continuous Linked Settlement (CLS®) eliminates settlement risk through the world's first simultaneous and irrevocable global multi-currency settlement system. The CLS service is offered by CLS Bank International ("CLS Bank"), and is supported by 69 of the world's largest global financial institutions who are shareholders of CLS Group, the ultimate holding company of CLS Bank.

Over 800 institutions are now settling payment instructions derived from foreign exchange deals through CLS Bank. Of these, 57 are CLS Bank Members, and an additional 750 banks, brokers, funds and corporates are using the CLS Bank service as Member customers ("third parties"). Previously institutions had to rely on a global network of correspondents and a degree of faith that they had received their payments in one currency as they paid away another - CLS turns this faith into certainty.

CLS Bank links to the Real Time Gross Settlement systems operated by Central Banks in fifteen currencies (US Dollar, Euro, UK Sterling, Japanese Yen, Swiss Franc, Canadian Dollar, Australian Dollar, Swedish Krona, Danish Krone, Norwegian Krone, the Singapore Dollar, the Hong Kong Dollar, the New Zealand Dollar, the Korean Won and the South African Rand). CLS Bank is based in New York and is an Edge Corporation bank supervised by the Federal Reserve. For further information, please visit the CLS Website at www.cls-group.com.

About DTCC

The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC's depository provides custody and asset servicing for more than 2.5 million securities issues from the United States and 100 other countries and territories, valued at $31.2 trillion. Last year, DTCC settled more than $1.4 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. DTCC's derivatives services are offered through DTCC Deriv/SERV LLC, a wholly owned subsidiary of DTCC. For more information on DTCC, visit www.dtcc.com.

Additional background on DTCC Deriv/SERV's Trade Information Warehouse

DTCC Deriv/SERV's Trade Information Warehouse is made up of two components:

1. a comprehensive trade database containing the "official legal record" for all contracts eligible for automated Deriv/SERV confirmation, and,
2. a central support infrastructure that automates and standardizes post-trade processes (such as payments, notional adjustments and contract term changes) over the life of each contract, which can extend five or more years.

The warehouse automates many processes that occur throughout a contract's life cycle, which today involve significant manual effort. This includes bilateral contract and cash flow reconciliation. Other post-confirmation processes, such as credit event processing and assignment processing, will be made much more efficient. From a risk management perspective, the warehouse helps firms ensure accurate balance sheet information for corporate and regulatory reporting purposes, support accurate collateral management, and promote correct and complete payments.