DTCC Connection

Feb 01, 2011 • DTCC Connection

Inside the Settlement Advisory Board

by Michael Scholl


Related Information

SAB Glossary

The DTCC Settlement Advisory Board (SAB) is a forum that is sponsored and hosted by DTCC for DTCC and its customers to discuss the current, planned and future settlement-related capabilities of DTC and NSCC. The board, which consists of representatives from firms and from multiple areas of DTCC, meets three times a year. It is one of many advisory bodies created by DTCC to ensure a good working relationship with the firms that use its subsidiaries’ services.


The DTCC Settlement Advisory Board (SAB) is a forum that is sponsored and hosted by DTCC for DTCC and its customers to discuss the current, planned and future settlement-related capabilities of DTC and NSCC. The board, which consists of representatives from firms and from multiple areas of DTCC, meets three times a year. It is one of many advisory bodies created by DTCC to ensure a good working relationship with the firms that use its subsidiaries’ services.


“We rely on SAB members for guidance, expertise and feedback on settlement issues and as a sounding board for potential DTC/NSCC solutions,” said Susan Cosgrove, DTCC managing director, Clearance and Settlement/Equities. “We also use the advisory board as a vehicle to brainstorm new ideas and to inform and engage participants about settlement-related initiatives and topics.”


Customers use the SAB to advise DTCC on project prioritization, provide input on business requirements and address operational, processing and risk management issues.


Who’s on the SAB

The firms represented on the SAB include The Bank of New York Mellon, Goldman Sachs, Citigroup, Merrill Lynch, JPMorgan Chase, Morgan Stanley, State Street Bank and Trust Co. and Wells Fargo. The SAB has co-chairs, one representing a broker/dealer and the other representing a custody bank.


Questions for the co-chairs

@dtcc recently spoke with current SAB co-chairs Gregory Hogan, vice president of Asset Servicing at The Bank of New York Mellon, and Trevor Williams, head of Settlements and Securities Lending Operations for the Americas at Goldman Sachs.


How does the SAB’s work strengthen the industry?

Hogan: The advisory board is effective in this respect because it is a representation of experienced and knowledgeable professionals from both member firms and DTCC. Many of the representatives have a considerable amount of influence in the industry and within their organizations.


Usually, there is no shortage of debate at board meetings and our discussions have influenced many initiatives, such as settlement rollover, chilled securities, ID Net, the Obligation Warehouse, Receiver Authorized Delivery processing and liquidity management. (See box for a glossary of terms.)


Trevor Williams, head of Settlements and Securities Lending Operations for the Americas, Goldman Sachs

Has the SAB fostered a stronger relationship between broker/dealers and banks to work collaboratively to enhance the settlement process?

Williams:In any partnership where there is the potential for divergent views, it’s imperative to understand each negotiating partner’s concerns as we attempt to maximize value for all involved. The SAB creates a forum that is crucial for vetting and fully appreciating strategic changes to the settlement process, from all vantage points.


What is the role of a co-chair of the Settlement Advisory Board?

Hogan:As the custody bank co-chair, I view my role to be a partner to the broker/ dealer co-chair and the DTCC board representatives. As a team, we decide which topics will be presented in the board agenda. We also lead discussions and debates, and raise important topics and initiatives that we feel are challenging the industry.


What are some of the SAB’s most important initiatives?

Hogan: The development of ID Net and the Obligation Warehouse have been on our agenda for each meeting held over the last two years. DTCC intraday liquidity is another topic that surfaces through a variety of initiatives, such as Settlement Progress Payments (SPP) and Principal and Income withdrawals.


Can you give our readers examples of issues that broker/dealers have raised over the past few years that the SAB helped to successfully address?

Williams: The most notable are efforts to drive customer uptake of ID Net and recent progress in frozen letter processing. Both of those are good examples of SAB members partnering to reduce settlement friction while concurrently addressing systemic and counterparty risk.


Could you take the example of ID Net to explain the SAB’s contribution in developing and marketing DTCC products?


Gregory Hogan, vice president, Asset Servicing, The Bank of New York Mellon

Hogan:We have seen steady progress in expanding usage of ID Net with some major firms signing on. Board members that are ID Net customers use SAB meetings to share their experiences and help explain ID Net’s benefits to the other members. Since the SAB is made up of senior representatives who are in positions to influence decisions within their companies, I feel that the discussions, updates and information shared within the board on these types of topics help build momentum towards a greater critical mass within the industry.


Risk mitigation has become an industry priority. Can you explain how broker/ dealers and banks work together through the SAB to address issues of risk?

Williams: I expect counterparty and systemic risk, juxtaposed with liquidity concerns, to be a focus in 2011. As we reevaluate our stance on systemic and counterparty risk in today’s shifting landscape, we have to challenge all assumptions. The SAB has created a positive forum where we can challenge conventional wisdom through debate and discourse.


What else is the board focusing on now?

Hogan: Recent discussions have focused on chilled securities and Settlement Web reengineering, along with preliminary conversations around what the effort would be to compress the settlement cycle from T+3 to T+2. We will also continue to pursue liquidity issues along with ID Net and the Obligation Warehouse.


Has your participation on the board benefitted you and your firm?

Hogan: Yes. Participating on boards such as this not only helps Bank of New York Mellon stay close to important industry developments, it also allows our firm to get out in front of certain initiatives that may affect us more than others.


In addition, participation on the board allows me to network with other SAB members. Such networking is valuable because I can leverage these relationships to address mutual customer concerns that arise among our firms.


Williams: We appreciate the connectivity the SAB gives us to DTCC initiatives, in addition to the opportunity to partner on symbiotic solutions with our colleagues @


dtccdotcom