New York Portfolio Clearing (NYPC) successfully launched operations on March 21, and cleared and settled almost 190,000 contracts in Eurodollar futures in its first week of operation.
NYPC, jointly owned by DTCC and NYSE Euronext, is expected to reduce risk and deliver capital efficiencies to the fixed income markets by providing a single margin calculation across cash trades cleared and settled at DTCC’s Fixed Income Clearing Corporation (FICC) and futures traded on NYSE Liffe U.S. and cleared through NYPC. This groundbreaking capability, called “one-pot” margining, creates significant margin efficiencies for member firms while improving transparency for regulatory purposes.
Out of the gate
NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext and the first U.S. futures exchange to use NYPC, began offering trading for Eurodollar futures on March 21, and 2-year, 5-year and 10-year U.S. Treasury futures on March 28, along with U.S. Bond and Ultra Bond futures, which will further boost volumes cleared through NYPC.
NYPC’s “open access” architecture will enable other derivatives exchanges and clearinghouses to link to the “one-pot” margining system, providing a viable alternative to the dominant vertical clearing model and enabling new entrants to compete in the U.S. futures market.
Initial clearing customers
Prior to launch, NYPC announced its initial roster of clearing firm customers. “We are excited to announce the approval of these influential clearing members, who represent some of the industry’s largest firms,” said Walter Lukken, CEO of NYPC. “Their support is a critical first step in achieving broad market validation and adoption for our one-pot margining model.”
The initial clearing firm customers are:
- Advantage Futures LLC
- Barclays Capital Inc.
- GETCO, LLC
- Goldman Sachs & Co.
- MF Global Inc.
- Morgan Stanley & Co., Incorporated
- Newedge USA, LLC
- Ronin Capital, LLC
- Rosenthal Collins Group, LLC
- UBS Securities, LLC
Several other major firms are in the process of becoming clearing members, subject to NYPC board approval, including Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc.
Composition of the Board
NYPC’s nine-person Board consists of three directors each from DTCC and NYSE, and three independent directors.
“The quality of directors we’ve attracted is exceptional, including executive level experience from the exchange, end-user and fixed-income trading communities,” said Lukken. “NYPC will benefit greatly from having these influential voices represented as we seek to challenge and compete in the fixed income futures market.”
The chairman of the NYPC Board is Murray Pozmanter, who is also DTCC managing director and general manager, Clearing Services (see article, page 15). The other DTCC directors are Michael Bodson, COO of DTCC and COO and president of DTC, NSCC and FICC; and Larry E. Thompson, managing director and general counsel.
The NYSE directors are Thomas Callahan, executive vice president and CEO of NYSE Liffe U.S.; Lynn Martin, COO of NYSE Liffe U.S. and senior vice president, NYSE Euronext; and Karl
Cooper, chief regulatory officer of NYSE Liffe U.S.
The independent directors are:
- Bernard “Bernie” Dan, president of Sun Holdings, LLC – the parent of Sun Trading, a registered U.S. broker/dealer focused on market-making activities across a range of asset classes. Dan brings extensive financial leadership experience to NYPC, having recently served as CEO of MF Global Holdings as well as CEO of the Chicago Board of Trade, where he oversaw the firm’s demutualization, its subsequent initial public offering and its acquisition by the CME.
- Richard Prager, managing director and global head of BlackRock’s Trading and Capital Markets for Fixed Income. Prager is a member of the Fixed Income Executive Committee, BlackRock’s Operating Committee and oversees and coordinates all trading across BlackRock’s fixed income platform.
- Tom Wipf, managing director at Morgan Stanley where he serves as head of Bank Resource Management, responsible for secured funding, securities lending, collateral management and counterparty portfolio management activities. Wipf is the current chair of the Treasury Market Practices Group, a professional organization supporting best practices in the markets for Treasury, agency debt and agency mortgage-backed securities.
The independent directors add significant independent expertise in the strategic development, risk management, regulation and operations of NYPC, according to Pozmanter. “We are thrilled to have these talented individuals – each a leader in his field – join our Board as we launch a truly innovative offering for the futures market,” he said. “They add an independent perspective and a diversity of experience that is needed to work through the complex issues facing financial markets today.” @