The Federal Reserve and several large firms across the industry voiced strong concerns almost 40 years ago about the safety and soundness of the existing processes for clearing and settling U.S. government securities, including the risks associated with the failure of a few major firms, the inefficiencies of manual paper processing of trade confirmations, and bilateral trade-for-trade settlement.
In response, the Government Securities Clearing Corporation (GSCC) was established in 1986 by National Securities Clearing Corporation (NSCC) as an industry utility to provide for the clearing and settlement of U.S. government securities.
Like the role NSCC plays in the equities market, GSCC compared transactions and acted as the counterparty for settlement purposes for each net position. This served an important role to maintain the liquidity and integrity of the market for U.S. government securities.
FICC was created in 2003 to give DTCC clients a consolidated, common approach to fixed income transaction processing by integrating the GSCC and the Mortgage-Backed Securities Clearing Corporation (MBSCC). FICC would continue the same services that GSCC and MBSCC provided, but through separate divisions: GSD and Mortgage-Backed Securities Division.
After the 2008 financial crisis, FICC was designated as “systemically important,” pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). FICC is regulated by the U.S. Securities and Exchange Commission, and, under Dodd-Frank, is overseen by the Board of Governors of the Federal Reserve System.