DTCC’s Trade Information Warehouse provides post trade processing service for OTC credit derivatives contract positions throughout their multi-year lifecycles. Various events can occur which require action to be taken to facilitate the terms of the contracts in the Warehouse, and DTCC’s Warehouse is equipped to automate the processing associated with those events. The events include:
Payment calculation and bilateral netting – The Warehouse calculates payments on all “gold calc” confirmed CDS contracts and creates real-time bilateral nets for each currency.
Central Settlement – In partnership with CLS Bank International, DTCC provides central, automated settlement of payments for contracts processed through the Warehouse’s Central Settlement service.
Credit events – The Warehouse supports the trade processing associated with events of defaults, such as bankruptcy, failure to pay and restructuring, that may trigger pay-outs for the buyers of the credit protection for the underlying reference entity of the credit derivative.
Automated Warehouse event processing includes:
Loan Early Termination – The early termination of loans are supported for LCDS, LCDX and ELCDS transactions in the Warehouse.
Renames and Reorganizations – The Warehouse supports the automated re-processing of the affected positions in the Warehouse either to update the position to reflect the company name change or split the position records to reflect the splitting of the corporation into one or more new corporations.
Lifecycle Event Processing is available to any firm that is a participant in the Trade Information Warehouse, either directly as a participant, or through a participant as a correspondent firm. This service is also available to central counterparties (CCPs) leveraging lifecycle process.
The principal benefits of Lifecycle Event Processing are:
For credit events and restructuring events, DTCC is notified of an event through a public announcement by an International Swaps and Derivatives Association (ISDA) Determinations Committee through the establishment of the Big Bang and Small Bang protocols. Based on the auction results managed by the industry, the Warehouse calculates payments and, where appropriate, sends the payments for central settlement in multiple currencies at CLS Bank International. The Warehouse is able to handle multiple credit events simultaneously, reducing risk to participants.
For renaming events, the Warehouse automatically converts old names to new names for all applicable transactions in the Warehouse.
For a reorganization, the Warehouse exits the original trade, creates a new trade based on the new information and recalculates payments based on the new information.
For restructuring events, the Warehouse also supports the trigger notification process prior to the auction determination. The trigger notifications are reported by the Warehouse to the ISDA Determinations Committee to help serve in its decision as whether an auction event should be held for the relevant maturity buckets. Based on the ISDA Determinations Committee decision, separate auctions are subsequently held, based on maturity buckets. The processing of the recovery amount calculations follow the same workflow as provided for credit event processing.
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Last updated April 19, 2012
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