DTCC Connection

Sep 01, 2012 • DTCC Connection

NYSE Euronext Retools Equities Clearing via UTC

By Bari Trontz


NYSE Euronext went live with DTCC’s Universal Trade Capture (UTC) in May 2012. Since then, the system’s ability to streamline the way U.S. equity trade data is captured and distributed during the clearance process has helped the exchange achieve risk reduction, cost savings and standardization.

@DTCC sat down with DTCC Board Member and Executive Vice President of NYSE Operations, Louis Pastina, along with Robert Hesdra, Vice President of NYSE Operations, to discuss how NYSE Euronext benefits from the UTC platform.

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In an effort to streamline its equity trade processing, NYSE Euronext has been implementing standardization for all its self-regulatory organizations (SROs) in the U.S. and Europe. “UTC was very timely for us,” said Pastina. “It fit perfectly into our strategy of standardizing our platforms.”


Connection to UTC, via the FIX (Financial Information eXchange) messaging platform, completed the standardization of NYSE Euronext’s matching engine. NYSE Euronext data now travels to DTCC from one central source, replacing the legacy system that used separate data feeds for the New York Stock Exchange, NYSE Arca and NYSE MKT.


DTCC Board Member and Executive Vice President of NYSE Operations, Louis Pastina (left) and Robert Hesdra, Vice President of NYSE Operations

“UTC helps [us] streamline our processing and reduce message traffic to DTCC, which will relieve capacity strains we may encounter moving forward,” Pastina explained. “It also simplifies the lives of our member firms, which before UTC, had to process this data in different formats.”


What steps did NYSE take to achieve a seamless conversion to UTC?


Hesdra: We outlined, in partnership with DTCC, a robust testing strategy and aggressively communicated with our customers. In addition, we rolled out the new processing capabilities in phases, avoiding the risk of a “big bang.” We rolled out on three consecutive Fridays, so we had the weekend ahead of us to resolve any issues before the start of the new week. The implementation was very smooth, and without issue for our clearing firm customers. It was terrific.


Pastina: NYSE Euronext and DTCC have the same philosophy in managing risk, and the conversion was very well communicated to the industry from both our organizations. I think the communication aspect was almost as important as the implementation schedule. All around, this was really a great success.


How much trading volume comes from NYSE to DTCC via the UTC format?


Hesdra: Almost all of NYSE comparison data is being sent to DTCC in the UTC format today. On average we send approximately 18 million sides daily and on our record peak day we sent almost 60 million sides to DTCC. So far the system’s performance has met all expectations.


What are some of the benefits NYSE has experienced using UTC?


Hesdra: One immediate benefit is that UTC allows us to provide additional data elements to customers via the output to assist with trade reconciliation. It also helps the markets and the clearing corporation understand the issues and concerns of the industry in regard to reconciling data from different sources and establishing standards. In addition, the UTC format lays the groundwork for future enhancements being planned by NYSE. Lastly, it lays the foundation for future risk-mitigating projects, such as T+1 settlement.


What are some of NYSE’s other initiatives to enhance post-trade capabilities?


Hesdra: We are currently developing a new match engine under our Universal Trading Platform project, which will send NYSE executions to post-trade in a new report message. This new message is similar to the new UTC input format that we recently converted to. We expect this change to cut comparison message traffic dramatically with DTCC by eliminating omnibus processing, which reduces risk and infrastructure costs for NYSE.


In what ways are you revamping your processing to help manage your risk profile?


Hesdra: We are eliminating our reliance on legacy omnibus accounts. We plan on sending buy and sell clearing firm information in one message to DTCC and leveraging DTCC’s anonymity indicator process.


Time is risk. How does the ability to process and report trades in real time via UTC help to reduce risk in the industry?


Hesdra: NYSE began sending comparison data to DTCC in near-real-time in 2002. DTCC now provides that data in real-time to clearing firm participants. This gives firms the opportunity to perform near-real-time reconciliation, monitoring risk and exposure during the day, which is a huge improvement in risk management.


Do you have some words of post-trade-processing advice for the industry?


Hesdra: Yes. All SROs should convert to the UTC input format and all clearing firms should begin taking the UTC output from DTCC in real time. The sooner this is accomplished, the easier it will be to establish comparison reconciliation standards in the industry and to reduce counterparty and settlement risk.


How has your conversion to FIX and UTC supported member firms’ realtime reconciliation needs?


Hesdra: With the introduction of UTC, all markets will have one common input format and customers will receive one common output from DTCC. Industry standards are slowly being developed and enhanced data elements are reflected on the output to improve the reconciliation process. This will help firms manage their interfaces more efficiently and consistently.


Yankees or Mets?


Hesdra: We are both Yankee fans!@

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