DTCC pioneered ground-breaking derivatives services in 2006 when it established the Trade Information Warehouse (TIW), the industry’s first infrastructure for record retention and asset servicing of cleared and bilateral credit derivatives. TIW’s robust infrastructure provides automated operational capabilities across three service offerings -- the Warehouse, Lifecycle Event Processing, and Central Settlement -- for approximately $10 trillion of credit derivatives worldwide.
Warehouse: TIW’s Warehouse is a centralized, electronic database holding the most current details on the official, or “gold,” record for virtually all cleared and bilateral credit default swap (CDS) contracts outstanding in the global marketplace. The Warehouse contains more than 50,000 accounts representing derivatives counterparties across 95 countries. DTCC also offers CDS Kinetics, weekly stock and volume reports that deliver detail on global CDS contract activity; historical data older than six months is available as a separate report.
Warehouse services are available to all TIW users.
Lifecycle Event Processing: This comprehensive electronic service automates all phases of post-trade processing for over-the-counter (OTC) credit derivatives throughout their multiyear lifecycles. The post-trade events covered by the service are:
Payment calculation and bilateral netting – TIW calculates payments on all “gold calc” confirmed CDS contracts and creates real-time bilateral nets for each currency.
Renames and reorganizations – TIW supports the automated reprocessing of affected positions in the Warehouse to update positions to reflect a company name change or split position records to reflect the splitting of a corporation into one or more new corporations.
Credit events – TIW supports the trade processing associated with default events such as bankruptcy, failure to pay, and restructuring that may trigger pay-outs for the buyers of credit protection for the underlying reference entity of the credit derivatives. TIW’s credit event processing activity includes:
- Coupon payment recalculations and calculation of the credit event recovery and rebate amounts based on auction results;
- Automated exit of transactions for single-named trades exhausted by the credit event; and
- Factor adjustment and re-versioning to new Market RED ID for affected index transactions.
Loan early termination – TIW supports the early termination of loans for LCDS, loan CDS index (LCDX) and European loan-only CDS (ELCDS) transactions in the Warehouse.
Lifecycle Event Processing services are available to any firm that is a user of TIW, either directly as a participant or through a participant as a correspondent firm, as well as central counterparties (CCPs) that leverage lifecycle processing.
Central settlement:Through a partnership with CLS Bank International (CLS), TIW offers Central Settlement services for OTC credit derivatives contracts held at the Warehouse. Central Settlement automates the exchange of payments in multiple currencies due on bilaterally netted OTC CDS contracts, enabling the credit derivatives market to realize straight-through processing of contract obligations from trade confirmation to settlement with virtually no manual intervention.
The Central Settlement service is linked to TIW's Lifecycle Event Processing services. TIW calculates quarterly coupons and captures other payments, such as upfront fees and credit event payments, due between counterparties of a transaction based upon legally binding records kept in the TIW Warehouse. Payments between counterparties are then netted on a bilateral basis prior to sending settlement instructions to DTCC's partner, CLS, for payment in multiple currencies.
Central Settlement is available to all firms that are TIW users, either directly as a participant or through a participant as a correspondent firm. Authorized custodians and fund administrators can also be provided with access to accounts and modified reports by their participant customers.
DTCC in 2016 launched a transformative initiative for TIW that will move it from a mainframe application to the cloud and establish a private permissioned distributed ledger network for derivatives.
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