DTCC Connection

Oct 01, 2010 • DTCC Connection

'Collaboration, Innovation and Leadership'

by Helen Cunningham


Donald F. Donahue, DTCC chairman and CEO, gave a landmark speech at DTCC's Executive Forum on September 27. He discussed how DTCC, in the postfinancial- crisis period, must rethink and re-imagine its processes, with a heightened focus on risk management. Excerpts from Donahue’s speech, “Collaboration, Innovation and Leadership,” follow. To view video clips of his remarks, visit www.dtcc.com.


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We at DTCC understand that the bar of regulatory expectations on risk has been raised and what used to be normal or standard operating procedure is fast becoming history. As a result, we’re now initiating a top-tobottom transformation in how DTCC thinks about risk, how we oversee risk, how we manage risk and how we plan to address risk – and I mean all aspects of risk – both within DTCC and within the financial system we are a key part of. This is a sweeping all-hands-on-deck initiative that comes at the direction of our Board.


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We’re ratcheting up the organization’s RIQ – our risk intelligence quotient. We need to re-think years of habits and behaviors in order to recognize and tackle risk in all its variations…old and new. Fundamentally, this is a zero-based remaking of our approach. We’re going to start at the baseline, and that may force us to re-think many of the assumptions behind the practices we’ve employed and the services we’ve been offering our participants for decades. In other words, we will find ourselves looking at things and doing things very differently.


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We all know that remaking an entire process with far more checks and balances will not be easy or cheap. There will be costs involved, and that will likely drive some increases in fees. We will be aiming to provide you some guidance on this later next month. Just as important, we need to collaborate with you in this effort. We need to run ideas and tolerances and procedures by you. We can’t – and won’t – do this in a vacuum.


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DTCC has long had a close working relationship with our regulators, a relationship we value highly. The new world of risk mitigation will demand that this become an even closer, more tightly coordinated relationship for DTCC as well as for all financial institutions. Our regulators need to observe and play a major role in this remaking of our risk knowledge, and we want to ensure that they do so.


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Earlier this year, we spent a lot of time and effort meeting with European policymakers to educate them on who we are and what we do, and to make sure that the European regulatory consensus on OTC derivatives also provided for reporting those trades to a single repository for each asset class.


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But we’ve been doing more than simply talking. We’ve taken concrete steps to allay European concerns about access to the data that we hold in our trade repositories. Last month, we launched a European subsidiary – called DTCC Derivatives Repository Ltd – which will maintain global credit default swap data identical to that maintained in our New-York-based Trade Information Warehouse. This European-based repository will support a wide variety of critical functions, including, most importantly, CDS trade reporting to support the transparency needs of regulators and the public.


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Last year, as you may recall, DTCC won the contract to build a similar repository for global OTC equity derivatives, and we have now opened that facility in London as well. Our goal is to avoid a proliferation of redundant trade repositories that would fragment data and introduce further systemic risk. We’ve made clear to regulatory agencies that function outside the U.S. that the data we collect from across the globe will be available to any of them with a legitimate interest.


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