DTCC Connection

Jun 03, 2013 • DTCC Connection

DTCC Launches Member Transparency Initiative on Systemic Risk

by Philip Ballard

DTCC’s Systemic Risk team is kicking off its annual comprehensive member transparency initiative, helping to bring greater transparency and risk mitigation to the process, as well as enhancing member understanding of the systemic threats they may face as participants of the financial industry.

“This initiative, coupled with our numerous risk handbooks, periodic white papers and bilateral member engagements, benefits our members by helping them better understand the potential systemic risks facing their firms, DTCC and the industry at large,” said Michael Leibrock, DTCC Vice President, Systemic Risk.

The centerpiece of this transparency and education effort is the forthcoming Systemic Risk white paper to be released in summer 2013. The paper focuses on systemic risks of particular relevance to DTCC and its members, including cyber security threats, regulatory changes and implications, the sustained volumes of high-frequency trading in certain markets, and the proliferation of compliance-related breaches, among other issues.

Industry input

The paper builds on member feedback to DTCC’s 2011 systemic risk white paper, a member survey and other forms of industry feedback, combined with DTCC’s independent research and analysis. This version focuses on a more limited number of risks versus the 2011 version and reflects DTCC’s continued resolve to actively mitigate systemic risks facing the financial industry. The paper also highlights the key regulatory developments with respect to each discussed risk.

“As the parent company of three designated Systemically Important Financial Market Utilities, DTCC must provide a clear understanding of the evolving systemic risk threats to its members, as well as spell out DTCC’s comprehensive risk mitigation approach,” said Noel Donohoe, DTCC Managing Director and Chief Risk Officer. “This includes empowering members with tools they need to increase their ability to assess and respond to systemic risks.”

Education

In addition to the white paper, DTCC will continue to broaden its member education efforts with the following initiatives, some of which are already in place:

  • Development of Education Handbooks: Four handbooks, one each for DTC, NSCC, FICC/GSD and MBSD, have been published on the respective DTCC member websites and made available to DTCC’s supervisors. A fifth handbook for New York Portfolio Clearing (NYPC) will be completed mid-year 2013.
  • Member Handbook Updates: All published member education handbooks will be subject to at least an annual review process for any key changes to DTCC’s core products, services and risk management regimes.
  • Bilateral Meetings: On an annual basis DTCC’s systemic risk team conducts in-person meetings with many of DTCC’s members to discuss topical risk issues and to address any questions or concerns members raise about DTCC.
  • Industry Surveys and Forums: An extensive set of roundtable discussions was conducted with more than 100 attendees at DTCC’s Executive Forum in March (See story in the May 2013 issue of @DTCC). Based on a strong level of member participation in these sessions, DTCC is considering holding similar events on an annual basis. In addition, DTCC conducted a systemic risk survey in the first quarter 2013 and intends to follow this up with similar surveys going forward. The survey results can be viewed at: http://dtcc.com/news/press/releases/2013/dtcc_survey_shows_impact_of_new_regulations.php
  • DTCC Publications: In addition to the ongoing systemic risk series of articles in this publication, other features are planned to inform members about DTCC’s systemic risk management techniques and initiatives, such as webinars and multi-media events.
  • E-Learning Modules: An interactive E-Learning module was published on DTCC’s Government Securities Division website (GSD) in early 2013.

This article is the third in a series focusing on various aspects of DTCC’s Systemic Risk strategy and initiatives. For the first two stories see the April and May 2013 issues of @DTCC.

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