The Depository Trust & Clearing Corporation has launched an automated over-the-counter equity derivatives cash flow matching and netting service with all of the 14 major dealers live on the platform.
"In an environment where risk mitigation is paramount, the OTC derivatives community has placed great priority in promoting improved certainty in the market,” says Lawrence Waller, managing director, J.P. Morgan. “The new automated cash flow matching and netting process for OTC equity derivatives facilitates seamless and timely settlement. J.P. Morgan is pleased to be working with the DTCC and our peers to bring such global solutions to market.”
The creation and use of the CFM system was part of a commitment the G14 made to global regulators in their 1 March 2010 letter to the US Federal Reserve to strengthen the operational infrastructure of the OTC derivatives market. DTCC’s Deriv/Serv subsidiary was selected as the vendor and launched the service in collaboration with market participants upon being selected by the industry following a request for proposal process managed by the International Swaps and Derivatives Association.
The CFM system is the first of its kind in the OTC equity derivatives space. The initial service supports various equity derivative products, such as vanilla options and swaps traded between the G14 dealers.
“DTCC is focused on partnering with users of OTC derivatives markets, service providers, law makers and regulators to achieve our collective goal of reducing risk and protecting the soundness of the financial system,” says Stewart Macbeth, managing director, DTCC and general manager of the Trade Information Warehouse. “In launching this new service, DTCC is working to help the industry attain a greater degree of accuracy, certainty and operational efficiency in the processing of OTC equity derivatives payment obligations.”
