DTCC Connection

Aug 02, 2010 • DTCC Connection

ID Net Delivers Results in Netting Buyside Trades

by Craig Donner


BNY Mellon is a recent adopter of ID Net, a joint service offered by The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC) that extends the benefits of netting to institutional trade settlement. BNY Mellon, a global custodian with more than $23 trillion in assets under custody and administration, signed on for ID Net with the goal of bringing new efficiencies and cost savings to its post-trade process.


BNY Mellon Team members for ID Net processing: (clockwise from bottom) Steven Salamida, Greg Stevens, Robert Jones

The service allows brokers to combine their affirmed institutional equity trades with other trades that they may have in NSCC’s Continuous Net Settlement (CNS) system. ID Net also meets the needs of the custodian banks that are on the other side of settling these trades by continuing to process their part of the transactions on a trade-for-trade basis.


Thanks to the participation of BNY Mellon and other new customers, ID Net has experienced an approximate 85% surge in processing volumes since the beginning of the year.


To learn more about the benefits of institutional netting and the customer experience with ID Net, @dtcc recently spoke to two BNY Mellon vice presidents, Gregory Hogan and Bruce Hammer.


Q. BNY Mellon has been using ID Net for several months now. Has the service met your expectations?


Hogan: Our experience has been very positive so far. ID Net has delivered on its value proposition of assisting in lowering our settlement costs when applied, and making the post-trade process more efficient. We look forward to more firms joining the service.


Q. Were there other factors that influenced BNY Mellon’s decision to become an early adopter of ID Net?


Hogan: Yes. BNY Mellon is one of the largest global custodians in the world and we take seriously our responsibility to provide leadership on key issues facing the industry. Because we expect institutional netting to become increasingly prominent in the future, we felt strongly about the need to participate in ID Net and help move the industry in that direction.


More BNY Mellon team members for ID Net processing (from left): Richard Clifton, Isaak Natanson, Bruce Hammer, Robert Breslin

Q. What do you consider the number-one benefit for the industry?


Hogan: That’s a difficult question to answer because there are several benefits in using the service. If I had to pick any, I’d say the cost savings that result from ID Net-eligible trades coupled with the ability for broker/dealers to reduce CNS and Inventory Management System expenses.


Q. Turning to the issue of development, how would you describe the process of getting your systems compatible with ID Net?


Hammer:It was smooth and more efficient than we had anticipated. Development costs were lower than our initial projections, the coding changes were relatively simple and straightforward, and it took us less time to implement than we had planned.


Q. Did you encounter any unexpected challenges during the development phase?


Hammer: Not really. DTCC worked closely with us throughout the process and partnered with us to solve issues that did arise. In one particular case, we suggested an enhancement to the service to facilitate reconciliation. DTC adopted our suggestion and now supports a combined screen-based view of a bank’s ID Net and ID transaction details, which provides customers with an efficient method for reconciling deliveries. DTC’s willingness to listen was very helpful.


Q. Have there been any unexpected benefits to ID Net?


Hogan:Institutional trade settlement is a fairly mature process, so much of the programming was written and completed years ago. We saw the deployment of ID Net as an opportunity to conduct a thorough, top-to-bottom review of our programming to determine if there were anomalies in our systems that might cause inefficiencies in institutional trade settlement. By analyzing ID Net and ID transaction flows, we were able to make enhancements to our own programming that have made our processes more efficient.


Q. Any last thoughts?


Hammer: Based on our experience at BNY Mellon, I would encourage more firms to participate in ID Net. As the service continues to build critical mass, participants will realize increased cost savings and efficiencies while moving the industry closer to full institutional netting. @


dtccdotcom