DTCC is developing a common interface and formats for all industry participants, which would allow parties to create their own tools or leverage those provided by vendors. Business models for clearing of securities loans are still evolving, and key features are being actively discussed between agent lenders, borrowers, and NSCC. In addition, vendors would also be involved in the product development process. Where possible, the SFT Clearing service will leverage NSCC’s and DTC’s existing systems.
To capture maximum capital and balance sheet efficiencies, equities SFTs that are term transactions could be submitted to NSCC for clearing, allowing for the maximum netting benefits.
In Phase 1 of the development, the term would be limited to overnight equities SFTs.
- To minimize the operational burden of settling overnight obligations, settlements would be allowed to pair off daily against new activity, with NSCC calculating and processing price differential payment amounts that are created by the daily pair off and processed through DTC.
- All SFT Clearing activity (including all proprietary activity and institutional client activity) would be cleared through a client account designated for SFT activity alone that would not be able to be used to clear and settle cash market activity.
- SFT Clearing activities have the ability to settle DVP/RVP at DTC.
- Supports recall and buy-in processing and supports corporate action processing for most mandatory events and cash dividend processing.