Michael McClain, DTCC Managing Director & General Manager, Equity Clearing & Settlement Services
Modernization is an opportunity to deliver some capabilities we’ve wanted to provide for a long time. But this effort doesn’t mean we’ve put other functionality on hold: we’ve also built out our legacy systems for important buy-side services like FICC triparty repo and equity finance for NSCC.
While each business line is modernizing, we’re not taking a siloed approach. We’re asking questions like, can we build one clearing system that can clear multiple asset classes? We want to become more nimble, take advantage of economies of scale and create a more harmonized client experience.
The innovation work we’re doing through projects like ION is also a tremendous help to the business. ION allows us to test the technology and functionality of these big ideas for Equities Clearance and Settlement -- like DLT, intraday slices, T-0 settlement – to see how they work in real-life situations. Not every idea will make it to the finish line but two of them likely will be part of our modernization plans: the DVP settlement model and T-0 settlement. DVP, the winner by far with clients, reduces their margin requirements. T-0 settlement, although tough to implement, also gets an enthusiastic response from our members.
We plan to make a number of these new services – probably less than half – optional for clients, but others will require the industry to change with us. For those, we need to be sure the value of their investment far exceeds their costs. We will not make any decisions unilaterally: they will all be considered in collaboration and consultation with our stakeholders – including small, medium and large sized clients, on the buy side and sell side. Different firms and market segments will derive different levels of benefits from various modernization changes and long transition periods, two to three years, will be needed in many cases – APIs, for example -- for firms to make the necessary changes on their end.