Enhancements to risk management, growth in data services and the Global Trade Repository (GTR) businesses and new industry alliances helped The Depository Trust & Clearing Corporation (DTCC) deliver a range of innovative solutions in 2014 to strengthen its ability to protect the stability and integrity of global financial markets and support the diverse and growing needs of clients.
In a conversation with DTCC Connection, Michael Bodson, DTCC President and CEO, reflects on a highly productive year at DTCC and talks about some of the organization’s key accomplishments.
“Unlike previous years, such as 2008 and the financial crisis or 2012 and Superstorm Sandy, outside events did not dictate our direction or force us to deviate from our strategy in 2014,” Bodson said. “In our core businesses, we continued our track record of functioning at the highest levels, and we remain a rock-solid, battle-tested, robust processing engine that seamlessly executes every single day. We also continue to drive innovation with new post-trade processing solutions leveraging our industry-owned and governed utility model. We intend to capitalize on the momentum we’ve built over the past few years to deliver outstanding results for our clients.”
Global Trade Repository
DTCC’s GTR continued to extend its reach last year to help financial firms meet new reporting requirements in several jurisdictions. Today, GTR supports reporting regimes in the U.S., three separate Canadian provinces, APAC (Australia, Hong Kong, Japan, Singapore) and Europe, where reporting of derivatives trades to European trade repositories, a key requirement under European Market Infrastructure Regulation (EMIR), began in February 2014.
The GTR is the largest and only global repository in the world. It covers all five major over-the-counter (OTC) and exchange-traded derivatives asset classes in nine jurisdictions across more than 20 countries, including 100% of the top 30 global banks. It holds 35 million open OTC derivatives trades and processes around 260 million messages per week globally, with 170 million coming from Europe alone.
“DTCC’s Global Trade Repository continues to represent one of the biggest and most ambitious initiatives in our company’s history,” Bodson said. “We worked collaboratively with clients to assist them in meeting their reporting obligations and took a number of important steps last year to address and resolve any challenges we encountered.”
Risk management continues to be at the heart of everything at DTCC and is reflected in the launch of several new services in 2014. For example, the launch of the Limit Monitoring platform in April addressed a concern raised by regulators over the need to develop more comprehensive pre- and post-trade tools to mitigate the risks resulting from potential technology glitches. This risk management tool offers the industry an early warning system that alerts clearing firms to trading activity that is nearing the position limits they have set for their own and their correspondents’ accounts, enabling them to step in and effectively manage potential risk.
Bodson also pointed to the completion of the third phase of DTCC’s Settlement Matching initiative, which is designed to enhance intraday settlement finality through the elimination of reclaim processing and promote “best practices” for institutional trade matching.
Furthermore, DTCC expanded Omgeo ALERT last year to create a new Standing Settlement Instruction (SSI) Utility that will serve as the industry’s “Golden Copy” for SSIs.
Bodson explained that by creating a central SSI Utility, market participants can consolidate SSI information across all counterparties, matching platforms and asset classes into one database in order to reduce risk and cost.
“These initiatives demonstrate our commitment to continually looking for opportunities to squeeze more risk out of the system and enhance the stability and integrity of global financial markets,” Bodson said. “We remain focused on strengthening our core products and services and have a number of exciting initiatives planned for 2015 to continue building on that legacy.”
In 2014, DTCC’s Global Markets Entity Identifier (GMEI) Utility, its legal entity identifier (LEI) solution offered in collaboration with SWIFT, established itself as a leader in its field. Since its launch two years ago, the GMEI Utility has issued more than 165,000 legal entity identifiers (LEIs) from over 140 jurisdictions, representing approximately a 50% share of the LEIs issued worldwide. To continue building on this success, DTCC signed three strategic partnership agreements in 2014 with NordLEI, LuxCSD and CDS in Canada to provide expanded support to the industry in these key markets.
Also in 2014, the GMEI utility ranked first overall in the TABB Group’s inaugural comprehensive quarterly ranking of the 14 LEI providers across the world’s financial centers (read story). LEI providers were measured based on data validity and size with the GMEI utility receiving a total comprehensiveness score of 97%.
One of DTCC’s most important accomplishments in 2014 was launching three new businesses in collaboration with clients and other industry-owned infrastructure organizations globally – building on the “super-utility” strategy articulated in 2013 to create new solutions that address some of the financial industries most critical problems.
- Clarient: This new utility will simplify and streamline client onboarding and client lifecycle events while supporting ongoing regulatory compliance. This comprehensive client reference data and document solution provides greater standardization and transparency while reducing risk and cost related client reference data and document management. (read story)
- Soltra: Established in partnership with The Financial Services Information Sharing and Analysis Center (FS-ISAC), Soltra leverages FS-ISAC’s 14 years of information-sharing and analysis for critical infrastructure as well as DTCC’s expertise in high-scale, high-reliability, critical infrastructure for data processing. A true cross-industry initiative, over 125 FS-ISAC members and representatives from other critical sectors, government entities and the private sector contributed to the requirements, architecture and design of Soltra’s automation software, the Soltra EdgeTM solution. (Soltra web site)
- DTCC-Euroclear Global Collateral: Formed in the third quarter of 2014, the joint venture brings together two of the industry's largest post-trade market infrastructures, to develop new solutions that will help streamline margin processing and enhance access to securities collateral worldwide. (read story)
“These initiatives reflect the tremendous potential that exists when firms and market infrastructures think boldly and creatively about challenges facing financial services and work in partnership to rethink and evolve the industry’s operating model,” Bodson said. “They create new opportunities to mitigate operational risk, optimize financial and human capital and deliver real cost savings to the industry.”