Mitigating Risk

DTCC’s TIW Continues to Seamlessly Manage Industry Credit Events Amid Market Uncertainty

By DTCC Connection Staff | May 06, 2020

DTCC’s TIW Continues to Seamlessly Manage Industry Credit Events Amid Market Uncertainty

The current period of unprecedented volatility and market uncertainty has resulted in record processing volumes across all of DTCC’s businesses, including our Repository and Derivatives (RDS) services. Daily submissions to the Global Trade Repository (GTR) have increased by more than 30% while DTCC’s Trade Information Warehouse (TIW) continues to efficiently and seamlessly provide lifecycle event processing for default events such as bankruptcy, failure to pay, and restructuring that may trigger pay-outs for the buyers of credit protection for the underlying reference entity of the credit derivatives.

This includes the February 2020 bankruptcy of the McClatchy Company, an American publisher of 29 daily newspapers in fourteen states including The Miami Herald and The Sacramento Bee. The California-based newspaper chain filed for Chapter 11 in New York, triggering a $6.9 billion gross payout on counterparties' default insurance on the publisher’s debt.

Nearly 19,000 positions were processed by the TIW in the event, with gross settlement obligations of $6.9 billion netted to $1.2 billion.

"The fact that we routinely manage the payment calculation and settlement of tens of thousands of positions for bankruptcies without causing any market disruption means TIW is operating the way it should, streamlining processes that used to be extremely cumbersome for market participants to handle," explained Marcus Denne, Executive Director, TIW Product Management.

The TIW has undertaken the processing of over 200 unique credit events since its creation more than 10 years ago, delivering tremendous efficiency and risk-mitigation benefits to the market.

The 2008 financial crisis resulted in a number of corporate mergers and defaults, each one constituting an event to be processed for the outstanding credit default swap positions on those entities. In October 2008, TIW processed its largest credit event to date, in terms of number of positions, with the Washington Mutual bankruptcy. And 2009 marked TIW’s biggest year for credit events, with 50 events processed in that 12-month period.

Other notable credit events include the Sears Roebuck bankruptcy, processed through TIW in January 2019, and the Thomas Cook default in September of the same year.

 

 

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