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Nov 25, 2013 • Press Releases

DTCC Limit Monitoring to Provide an Early Warning System to Help Identify Unusual Trading Activity and Trading Limit Breaches

New York—November 25, 2013—The Depository Trust & Clearing Corporation (DTCC) announced that National Securities Clearing Corporation (NSCC) has filed a proposed rule change with the Securities and Exchange Commission (SEC) to provide its members with a new tool designed to serve as an early warning system that alerts those firms to trading activity that is nearing defined trading limits. Subject to regulatory approval of the filing, the tool will enable firms to effectively manage potential risk exposure for both their own accounts and their clients’ accounts for the trading in equities, corporate and municipal bonds, and unit investment trust instruments.

“DTCC continues to work in collaboration with the industry to identify ways to help strengthen critical market infrastructure by developing tools to better manage trading activity across the equity markets,” said Andrew Gray, DTCC managing director, Core Business Management. “DTCC Limit Monitoring offers a holistic view of broker-to-broker trading cleared from exchanges and SROs.”

How It Works

NSCC’s Universal Trade Capture (UTC) platform - a service that streamlines the way U.S. equity trade data is captured and distributed throughout the clearance process - will feed DTCC Limit Monitoring all broker-to-broker trading cleared from exchanges, Electronic Trading Systems, and dark pools and other liquidity destinations in the U.S., including Real-Time Trade Matching (RTTM®) trades. NSCC members that are either required to use the service under NSCC’s rules or who elect to use the service will input trading alert criteria, specifically identifying trading limits based on the net-notional value for trading activity of their clients and for their own trading desks. If trading activity exceeds the pre-set early warning levels or established trading limits, DTCC Limit Monitoring will generate and deliver a warning or breach message. While NSCC members will be responsible for ensuring that the trading limits are appropriate, NSCC, at its discretion, may review those limits and discuss concerns with its members if the limits set are not aligned with recent trading activity.

When Can NSCC Members Use the Tool

Pending SEC approval, DTCC Limit Monitoring is expected to produce message outputs for NSCC members that have registered for the service by mid-January, 2014. The timeline for members to begin using the tool is as follows:

  • November, 2013: Tool open to NSCC members to establish risk entities and associated limits.
  • December, 2013: NSCC will begin providing its members with end-of-day reports to assist in verifying associated pre-set limits are aligned with current trading activity.
  • January, 2014: All functionality will be operating, including email notification for breaches of pre-set limits.
  • “DTCC continually examines how to further mitigate systemic risk in the financial markets given our role as the clearing and settlement organization for U.S. cash securities trading and as a leading financial infrastructure for the global capital markets,” said Murray Pozmanter, DTCC managing director and general manager, Clearing Services. “Providing our members with the DTCC Limit Monitoring tool – which red-flags unusual or unexpected trading activity which may indicate a trading error or that a customer is trading outside the limits set by its clearing firm, will help preserve the resiliency of the market in the event of a technical issue.”

    In September, 2012, the financial services industry formed a working committee comprised of exchanges, self-regulatory organizations (SROs), broker-dealers, buy-side firms and clearing organizations to discuss what actions the industry can take to improve the stability of the markets and how to better protect the system from unprecedented and unexpected future events. DTCC was an active participant in this working group. In response to these discussions, the DTCC Limit Monitoring tool was introduced, which monitors all broker-to-broker trading cleared from exchanges and SROs. While other market participants may be developing additional risk management tools in connection with these recent industry-wide efforts, the proposed DTCC Limit Monitoring would be separate from and would operate completely independently from any such tools.

    The effectiveness of DTCC Limit Monitoring in addressing risk depends on its use by NSCC members, particularly those members that clear for other firms, and depends on their inclusion of the tool within their broader risk management strategies. Under the proposed rule change, certain of NSCC members would be required to register for the DTCC Limit Monitoring tool.

    About DTCC

    DTCC has operating facilities and data centers around the world and, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions for thousands of institutions worldwide. With 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry, simplifying the complexities of clearance, settlement, asset servicing, global data management and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, derivatives, money market instruments, syndicated loans, mutual funds, alternative investment products, and insurance transactions. In 2012, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from 131 countries and territories valued at US$37.2 trillion. DTCC’s global trade repositories record more than US$500 trillion in gross notional value of transactions made worldwide.

For Release: Immediately

Bari Trontz


(212) 855-4825