The first cleared collateral provider sponsored repo transactions have been completed by State Street Bank and Trust and funds managed by Capula Investment Management LLP.
New York/London/Hong Kong/Singapore/Sydney, January 30, 2018 – The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced the start of a new era of buyside participation in the cleared repo market as State Street Bank and Trust Company and funds managed by Capula Investment Management LLP, complete the first cleared sponsored repo transactions as a collateral provider.
This marks a significant step in furthering buyside participation in CCP clearing and bringing greater risk mitigation to the repo market. Although DTCC’s subsidiary Fixed Income Clearing Corporation (FICC) has operated its Sponsored DVP Repo Service since 2005, it only expanded participation in this service beyond Registered Investment Companies (RICs) in May 2017. Since then, this service has seen volumes double previous peaks. Historically, the involvement of cash providers has brought only one side of the institutional marketplace into the clearinghouse. Now, with the participation of the first collateral provider clients in the Sponsored DVP Repo Service, the buyside is fully represented in the clearinghouse.
“Today, with the addition of institutional participation as collateral providers, we have achieved our goal of providing a true cleared repo solution for the buyside, lowering risk in the market,” said Murray Pozmanter, DTCC Managing Director and Head of Clearing Agency Services. “As more firms take advantage of the new repo clearing solution, fire-sale risk and price degradation are reduced as result of centralized liquidation services.”
Centrally clearing these repo transactions by non-Registered Investment Companies at FICC also provides opportunities for members to see potential balance sheet netting and capital relief, which, in turn, may afford buyside clients increased capacity and income.
“We are excited to expand our partnership with DTCC,” said Gino Timperio, senior vice president and head of Funding and Collateral Transformation at State Street. “Through the sponsored service, our non-’40 Act clients will now benefit from the capacity and counterparty strength associated with a centrally cleared platform.”
FICC is now actively onboarding new sponsors and buyside clients into the Sponsored DVP Repo Service. FICC is the leading provider of trade comparison, netting and settlement for the government securities market.
With 45 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 16 countries, DTCC, through its subsidiaries, automates, centralizes and standardizes the processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers. Industry owned and governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to financial markets. In 2016, DTCC’s subsidiaries processed securities transactions valued at more than U.S. $1.5 quadrillion. Its depository provides custody and asset servicing for securities issues from over 130 countries and territories valued at U.S. $49.2 trillion. DTCC’s Global Trade Repository maintains approximately 40 million open OTC positions per week and processes over one billion messages per month.