DTCC recently announced the launch of a multi-year, transformational initiative across its core Equities business, enabling a more agile, resilient, and scalable processing foundation for the industry. With the launch of the new Future of Clearing & Securities Services microsite and the release of the Functional Change Document, DTCC is providing clients with a comprehensive account of the planned initiatives and enhancements and a roadmap through 2027.
To get an inside look at what’s to come, DTCC Connection spoke with Val Wotton, Managing Director and Head of NSCC, DTC & DTCC Institutional Trade Processing, to understand the scope of these upcoming functional changes and the impact to clients.
DC: Can you describe the current state of Clearing & Settlement processing – and the future target state you hope to reach?
VW: Without question, DTCC has built the most powerful processing engine that stretches across the entire trade lifecycle, processing close to $530 trillion in equity transactions in 2024. We play a vital role in ensuring the resilience and stability of global financial markets, and this is a responsibility to the industry that we take very seriously. We are fully capable of continuing to support the industry’s needs, as we have done so for the past 50-plus years. However, to meet the rapidly evolving needs of the modern financial markets, we cannot remain fixed in place – we must advance to a more progressive and flexible model.
It seems hard to believe, but even with the successful implementation of T+1 last year, core processing within equities Clearing & Settlement at DTCC has mostly remained unchanged for the past decade. Our vision is the transformation of our entire enterprise into a unified and integrated service, delivering a simplified client experience, streamlined applications for seamless servicing, and enhanced data capabilities and offerings.
We are not only future-proofing our businesses to support a digital revolution, but we are looking for even more efficient ways of getting things done – embracing standards and retiring proprietary processes, improving the client experience, expanding capabilities through technology and innovation, driving business value with capital and liquidity optimization, and building operational resilience.
DC: How will DTCC advance to this new, flexible model?
VW: A key component of our proposed flexible model is modernizing through innovative technology and streamlining our processes, which can ensure our ability to support the ever-changing needs of the industry for many years to come.
Additionally, given the criticality of services provided across DTCC, resilience is the cornerstone of our business and technology strategies. Building on top of investments in our estate in foundational resilience over the past few years, we are introducing a new data center rotation program to strengthen our resiliency model through transferring production workloads to an alternate site and operating for an extended period. This new resiliency model will go live in 2026.
"We are not only future-proofing our businesses to support a digital revolution, but we are looking for even more efficient ways of getting things done."
DC: What are some of the major initiatives that clients should prepare for?
VW: With the publication of our Functional Change Document, our goal was to provide a detailed roadmap and a first look of how and where we plan to shift our models over the next three years. As always, improving our clients’ experience remains at the forefront of our approach. We aim to upgrade client connectivity options with a new interface that supports distributed connections and lightweight messaging, simplifying client interactions through modern, standardized interfaces.
We have also mapped out several enhancements and simplifications to our processing structure, which stem from an analysis performed on our internal infrastructure to examine usage and understand opportunities. Our most notable changes include 24/5 Extended Clearing and Auto-Partial Settlement, which will reduce counterparty risk and increase liquidity.
Additionally, we are looking to support other capital and settlement efficiencies and build connectivity to other Central Counterparties (CCPs), Central Securities Depositories (CSDs), and Options Clearing Corp (OCC). Some of these enhancements include supporting settlement of partial deliver orders, establishing a link to OCC to centrally clear ETF portfolios with Option underlying components, expansion of data fields on member messages, and simplifying member profiles and settlement workflows to drive greater transaction throughput.
DC: This seems like a significant undertaking, but one that will ultimately benefit all those involved. Can you speak to the timeline and what clients should do to prepare?
VW: Our roadmap highlights the development timeline through 2027. Some of these projects are already well underway, and in other areas, we are only starting to lay the groundwork. In other places, the changes outlined may be subject to regulatory review and approval, which could impact both the enhancement design and implementation timelines.
The intention of the high-level overview of the functional changes and simplification efforts being proposed by DTCC is so that clients and external partners can begin forecasting their budgets for any required development resources.
Related: DTCC’s NSCC to Increase Clearing Hours to Support Extended Trading
Specifically, the functional changes occurring between Clearing and Settlement will kick things off this year. For Clearing, changes will include innovations to enhance Universal Trade Capture (UTC), reducing settlement cycles for ACATS, and improving the clearing process and capital efficiency for ETFs. Our Settlement changes will be on a larger scale and include enhancements that will support the settlement of partial deliver orders, expansion of data fields on client messages, and simplification to client profiles and settlement workflows to overall drive greater transaction throughput.
Clients and partners should start familiarizing themselves with enhancements and changes described in the Functional Change Document as well as the documentation and testing timeframes outlined in the roadmap. This document provides more transparency on what our enhancements mean for our clients.
To support clients prior to go-live, DTCC will be offering several types of testing, including an ISO20022 message simulator, User Acceptance Testing, and Connectivity testing. Based on client feedback, we will also introduce new ISO 20022 interfaces and new reporting output as an additional offering, which will allow users to incrementally migrate from legacy formats onto new client interfaces from Q4 2026 until go-live in Q3 2027.
On top of this, we encourage our clients to participate in self-preparatory activities which include managing and updating client profiles in existing systems to realize the modernized system target state behavior and leveraging collated system metrics around usage to identify areas of impact ahead of anticipated migrations and go live dates. Clients and partners should endeavor to participate in available testing and the before mentioned activities to ensure a smooth transition to the future state.
To request usage reports and for other questions on this initiative, we encourage our clients to contact us directly at [email protected].
DC: What should clients expect for the next few years? How will the industry stay up to date on this project?
VW: Our functional change document was created as a first-step, detailed explanation of what we hope to achieve. The expected magnitude of this transformation effort necessitates the coordination and participation of our industry partners as it will be a critical piece to enable the successful implementation of our planned changes.
Related: Read about DTCC Modernization Initiatives
Alongside our paper, we have also created a microsite. We encourage all our partners to bookmark this site as we expect this site to evolve with more documentation, FAQs, and videos as we progress through this initiative. We are also planning a series of client webinars, kicking off on May 1, to support firms as they begin to think about the scope and impact of these projects.
These changes will potentially impact many touchpoints within the Equities Clearing and Settlement business, so careful planning and coordination is needed to ensure transparency into every timeline, every test plan, every planned code deployment and implementation.