DTCC Guidelines on Clearing Cash Transactions
The Depository Trust & Clearing Corporation (DTCC) has released a new white paper that describes ways to promote central clearing of US Treasury transactions.
Written by the subsidiary of the DTCC Fixed Income Clearing Corporation (FICC), the paper examines how the FICC’s open access model provides “the flexibility to allow a wide variety of market participants to access clearing.” central, while ensuring impartiality and fairness, ”DTCC said in a press release posted on its website Tuesday (October 5th).
DTCC provides clearing and settlement services for the US financial markets. In its latest article, the organization compares and contrasts the crucial distinctions between Treasury cleared and swap cleared markets, as well as key considerations for initiating a clearing mandate.
The paper – “Making the US Treasury Market Safer for All Participants: How FICC’s Open Access Model Promotes Central Clearing” – recommends that market differences be taken into account when deciding on these regulations.
“For example, several market players who do not engage in the swap market are essential liquidity providers to the US Treasury market,” DTCC said. “The systemic risk mitigation objectives of a clearing mandate will not be met if these market participants cannot effectively access clearing. “
The FICC offers numerous client compensation models for cash and US Treasury repo transactions, such as matching clearing, prime broker clearing, and sponsored clearing through FICC’s sponsored service, allowing market participants to choose a model that meets their needs.
“DTCC applauds the industry’s efforts to introduce higher levels of central clearing into US Treasury markets,” said Murray Pozmanter, head of clearing agency services and global business operations at DTCC. “The benefits of such a move are significant, including reduced settlement and counterparty risk, reduced risk of market disruption and discount sales, and improved market access and liquidity. “
But Pozmanter added that for such an effort to be effective, current market practices and approaches must be taken into account.
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