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Inter-bank Market for Repurchase Agreements Reestablished

Move Will Greatly Expand Liquidity and Size of GCF Repo Market

New York, May 1, 2008 - The Fixed Income Clearing Corporation (FICC) announced today that the Securities and Exchange Commission has approved its proposal to resume offering its General Collateral Finance repurchase agreement (GCF Repo®) service to brokers whose customers settle their transactions at different settling banks.

FICC has set May 8 for resumption of the service.

GCF Repos are widely used for flexible short-term financing because they allow for expanded trading time, greater flexibility on collateral and increased liquidity for market participants. Since they can be netted in the clearing process, they also offer reduced transaction costs.

Under current rules, however, brokers are restricted from executing these repo agreements with their customers unless both customers can settle the transaction at the same settling bank.

The decision to restore inter-bank repo settlement is expected to allow for a resumption of inter-bank trading of GCF Repos and a gradual increase in the overall market volume of these instruments. In 2007, trading in GCF Repos averaged $374 billion a day.

Separate Market Segments

“Right now, this market has to operate in two separate segments. Restarting the inter-bank market for these repos will undoubtedly broaden the liquidity and trading opportunities for all the market participants,” said Murray Pozmanter, managing director, Clearing and Settlement Product Management for The Depository Trust & Clearing Corporation (DTCC), which is FICC’s parent company. “Under present rules,” Pozmanter added, “dealers are often quoted rates at one settling bank that differ from the rates at the other settling bank. The result is an inefficient market with limited liquidity. We want to end that inefficiency.”

FICC’s Government Securities Division initiated the GCF Repo service a decade ago in conjunction with The Bank of New York and JPMorgan Chase, the two banks that specialize in settling transactions involving U.S. government securities. The service allows dealers to trade GCF Repos throughout the day anonymously via inter-dealer brokers that clear and net their transactions through FICC.

Fund Transfer Problems

The limitation against inter-bank dealing was put in place in 2003 to address risk issues that arose during the daily transfer between the two banks of the funds and securities involved in the repos.

In its proposal to reinstate the inter-bank service, FICC said it has worked with the two settling banks to create a new set of rules and procedures to balance out the intra-day fund movements involving GCF Repo transactions. Under the new rules, what had been a routine of morning and evening fund transfers between the banks will now be netted into a single inter-bank movement of money at the end of the day.

Responsibility for Collateral

In place of the separate fund payments, inter-bank dealers at whichever bank is a net borrower on any given day will give FICC an interest in the securities and deposit accounts they maintain at that bank. FICC will then give the other bank, which was supposed to receive the funds, an interest in the collateral. FICC will also increase the collateral it requires its broker/dealers to post each day in order to clear their transactions.

When the fund transfers between the two banks are netted at the end of the day, the collateral holds against the dealers will be released as that day’s transactions are settled.

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 financial firms and third parties who market these products. DTCC’s depository provides custody and asset servicing for 3.5 million securities issues from the United States and 110 other countries and territories, valued at $40 trillion. Last year, DTCC settled more than $1.8 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com.