Transactions completed by Citadel in both cash and repo highlight the potential of the Sponsored Service to significantly increase centrally cleared US Treasury activity, reducing the risks of bilateral clearing referenced in the TMPG white paper on clearing in the Treasury market
New York/London/Hong Kong/Singapore/Sydney, June 24, 2019 ‒ The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced its subsidiary Fixed Income Clearing Corporation (FICC) has achieved yet another milestone in the transformation of the U.S. Treasury market toward central clearing as Citadel successfully executed and cleared both cash and repo trades via FICC’s recently expanded Sponsored Service model.
The 2019 expansion of the Sponsored Service broadened the category of market participants who can participate as sponsors, and enabled sponsor member clients to transact in clearing with market participants other than their sponsors (i.e. “done-away” activity). It is through this expansion that Palafox LLC, part of the Citadel organization, became the first sponsor to facilitate centrally cleared “done away” cash and repo trades on behalf of its affiliated sponsored member client, Citadel’s Global Fixed Income Master Fund Ltd.
“The greatest benefit of allowing different types of firms to be sponsors is that FICC has now made it possible to bring a much larger percentage of the market into clearing while maintaining our robust risk management standards,” said Murray Pozmanter, DTCC Managing Director and Head of Clearing Agency Services. “This should create needed capacity for the market, while at the same time reducing systemic risk.”
Following the 2017 expansion, which allowed Buy Side firms beyond Money Funds and Mutual Funds to participate in the service as sponsored members, DTCC received increased interest from Dealers, Non-US Banks, and Prime Brokers that were not previously able to be sponsors. The rise of interest across market participants prompted FICC to propose its latest approved expansion.
“We continue to support FICC’s efforts to expand the accessibility of central clearing for cash and repo trading and are excited to be a part of this important milestone in the evolution of the U.S. Treasury markets,” said Dan Dufresne, Managing Director and Global Treasurer at Citadel. “There is significant momentum building behind clearing and that benefits all market participants.”
With over 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, data reporting and information services across asset classes, bringing increased security and soundness to financial markets. In 2018, DTCC’s subsidiaries processed securities transactions valued at more than U.S. $1.85 quadrillion. Its depository provides custody and asset servicing for securities issues from 170 countries and territories valued at U.S. $52.2 trillion. DTCC’s Global Trade Repository service, through locally registered, licensed, or approved trade repositories, processes over 14 billion messages annually. To learn more, please visit us at www.dtcc.com or connect with us on LinkedIn, Twitter, YouTube and Facebook.