The Depository Trust & Clearing Corporation’s (DTCC) recent white paper – “Settlement Landscape in the U.S. Financial Markets: 2014 and Beyond,” – outlines DTCC’s current priorities in helping reduce risk, improve operating efficiencies and drive down costs for clients in settlement processing.
The paper provides a high-level snapshot of the future direction of the settlement space in relation to new regulations and changes developing from the Dodd-Frank Act. The white paper serves as a broad update to “A Roadmap for Promoting Intraday Settlement Finality in U.S. Markets,” published in December 2012, which outlined (DTCC’s) efforts to strengthen risk management and efficiency in settlement processing in the U.S. equities markets.
Several key settlement initiatives and services are described in the new white paper including:
- Pre-Settlement Matching (Settlement Matching) - In 2013, The Depository Trust Company (DTC), a subsidiary of DTCC, rolled out its plan to promote intraday settlement finality and reduce credit and liquidity risk associated with reclaims by a more inclusive pre-settlement matching mechanism.
- Money Market Instrument (MMI) Processing - In December 2013, DTC published a detailed plan for proposed enhancements to its settlement processing for money market instruments (MMIs), which will improve intraday settlement finality and which should reduce credit and liquidity risk in the MMI market.
- ACATS Transfers of CNS-Eligible Securities – As part of a series of initiatives designed to improve efficiency and reduce risks associated with transactions processed through NSCC’s Automated Customer Accounts Transfer service (ACATS), a new ACATS settlement process has been developed for ACATS transfers of CNS-eligible securities and assets that are eligible for settlement at DTC, but not in CNS (non-CNS DTC-eligible assets).
- DTCC and Euroclear Propose Collateral Processing Joint Venture - The venture will initially focus on launching a Margin Transit Utility (MTU), which is currently under development, that will provide straight through processing to the settlement of margin obligations, and on piloting a Collateral Management Utility (CMU) to address the pressing problem of sub-optimal collateral mobility and allocation at a global level. When fully operational, the utilities will be integrated to provide a seamless front-to-back collateral processing platform.
- Shortening the Trade Settlement Cycle in the U.S. to T+2 - In April 2014, DTCC published a formal recommendation to the industry to move to T+2 from the current T+3 settlement cycle.
- Standard Settlement Instructions (SSI) Utility - In September 2013, DTCC and Omgeo announced plans to establish a user-governed global repository to store and communicate the “golden copy” of standing settlement instructions (SSIs) for a variety of products and geographies. This undertaking is part of an overall effort to standardize and centralize key client reference data functions and place them under user governance.
Download the White Paper:
Settlement Landscape in the U.S. Financial Markets: 2014 and Beyond