DTCC: PROVIDING A PUBLIC SERVICE
DTCC clears and settles millions of securities transactions, valued in the billions, every day. In “DTCC For the Public Good,” the purpose that U.S. capital markets serve, market challenges that created the need for centralized clearing and the rise of DTCC are outlined. The educational paper reviews key advances in clearance and settlement and how these services have benefitted the markets. It also illustrates how DTCC provides stability in times of crisis, from the terrorist attacks of 9/11, to the 2008 financial crisis and the global COVID-19 pandemic.
ACCELERATED SECURITIES SETTLEMENT
DTCC has long worked with the industry to identify ways to enhance efficiency and reduce costs in post-trade processing. Following a multi-year, industry-wide effort, securities settlement was shortened in 2017 from T+3 to T+2 (or two business days after a trade is executed), achieving margin savings estimated at 25%. Shortening the settlement cycle further would reduce the risks that drive margin requirements and reduce costs to clearing members.
In a February 2021 white paper, “Advancing Together: Leading the Industry to Accelerated Settlement,” DTCC outlined a two-year industry roadmap for shortening the settlement cycle for U.S. equities to one business day after the trade is executed (T+1). DTCC is working with the Securities Industry and Financial Markets Association and the Investment Company Institute to advance this important effort. Access accelerated settlement resources.
DTCC actively explores how transformative technologies like distributed ledgers, cloud computing, artificial intelligence, smart contracts and robotics can further enhance the post-trade process by mitigating risk, creating efficiencies and reducing costs.
DTCC’s Business Innovation team spearheads its global initiatives around technology research, technical developmentand thought leadership. The team is responsible for ensuring effective collaboration with market participants and key stakeholders around the world to advance technologies, while promoting standardization and best practice. Access innovation resources.
DTCC continues to explore digital assets and tokenization. For example, Project Ion focuses on the benefits of technology in an accelerated settlement use case. Project Whitney explored the value in creating a modern digital infrastructure to support private market assets throughout their lifecycle.
OPERATONAL RESILENCY AND CYBER SECURITY
DTCC has a long history of engaging with policymakers globally on cyber security readiness and resiliency. Operational resilience and ongoing efforts to combat cyber threats are priorities for DTCC, its clients and industry participants. This work is vital to the efforts of financial institutions and market utilities to support clients and global financial markets in the face of growing cyber threats, and natural or operational disruptions. As part of these efforts, DTCC works with industry members and government agencies to raise awareness of and mitigate the impact of cyber-threats, and has stressed the importance of a robust threat information-sharing environment, particularly across critical infrastructures. DTCC serves on the board for the Analysis and Resilience Center (“ARC”) in addition to the Cloud Security Alliance (“CSA”), and serves as co-chair of the board for Sheltered Harbor (“SH”). Formerly known as the Financial Systemic Analysis and Resilience Center (“FSARC”), the ARC provides a forum for US financial services critical infrastructure operators to identify systemic risks and develop solutions to mitigate or resolve the potential impacts of these risks. Access cyber security resources.
GLOBAL DATA HARMONIZATION
As the global derivatives markets are highly interconnected, derivatives data must be consistent across all jurisdictions. Significant progress has been made on global data standardization for the purposes of monitoring OTC derivatives systemic risk and identifying market abuse. Coordination is critical to achieve the G20 goal of creating transparency in the global OTC derivatives market to mitigate systemic risk, and policymakers must implement recommended reforms to enable the aggregation and analysis of data reported to trade repositories across multiple jurisdictions. Access data harmonization resources.
DTCC is intensely focused on mitigating risk and enhancing the resiliency of the global financial marketplace. Risk management has undergone a dramatic transformation in the financial industry in recent years, with a broader, more sophisticated, and more diverse role. Responsibilities now include traditional financial risk categories, as well as operational, systemic, technology, vendor and physical risks, and business continuity management.
DTCC’s risk management framework and governance structure identifies addresses potential threats as part of its commitment to mitigate risks for the firm, its clients and industry stakeholders. DTCC takes a holistic view of risk and has adopted a consistent, enterprise-wide approach for measuring and managing risk. To support this work, DTCC established a Systemic Risk Office (SRO) in the wake of the 2008 financial crisis to further expand DTCC’s risk management capabilities. The SRO is dedicated to identifying, monitoring and containing potential systemic threats.
DIVERSITY, EQUALITY & INCLUSION
In the global marketplace, DTCC believes that firms must embrace diversity and inclusion, and reflect the communities and regions they serve to be best positioned for future success. Companies must actively drive the change they want to see and make it happen. DTCC is deeply committed to advocate for, and advance, policies and practices that promote diversity and inclusion, and to advance workplaces where the status quo can be challenged, unique perspectives are welcome and unconscious bias is addressed. Access diversity and inclusion resources.
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