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Susan Cosgrove, DTCC Managing Director, Clearance and Settlement/Equities | October 1, 2009


In the U.S. capital markets, the industry is well served by an automated post-trade process that seamlessly clears, guarantees and settles trades that on a peak day can top 19 billion shares, or average about $2 trillion. However, regulators, policymakers and financial firms are justifiably concerned about ex-clearing trades, which are managed broker-to-broker using highly manual and error-prone processes, including phone calls and faxes to exchange information to ensure final settlement.

The process is inefficient and expensive – and, more significantly, fraught with operational and counterparty risk. The problem is particularly acute for correspondent clearers, who process ex-clearing trades on behalf of their customers. But this increased risk extends beyond just the parties to the trade. It also flows directly into the financial system itself. Because these trades are processed outside of NSCC’s systems, it is impossible to estimate their numbers – making them essentially invisible to regulators and the industry and creating systemic risk during a time when financial firms are searching for new risk mitigation strategies.

Download the Congressional Testimony: Transforming the Processing of Fails and Other Open Obligations