The Depository Trust & Clearing Corporation (DTCC) has launched a new automated, global over-the-counter (OTC) equity derivatives cash flow matching and netting service (CFM), with all of the 14 dealers (G14) live on the platform.
DTCC said that 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 major market participants upon being selected by the industry following a RFP (Request for Proposal) process managed by the International Swaps and Derivatives Association (ISDA).
The initial service supports various equity derivative products, such as vanilla options and swaps traded between the G14 dealers.
JP Morgan managing director Lawrence Waller said the new automated cash flow matching and netting process for OTC Equity Derivatives facilitates seamless and timely settlement.
Deutsche Bank Market Initiatives director Martin Gould said that the CFM is an important step in furthering regulatory and industry objectives to bring greater transparency and risk mitigation to the global OTC equity derivatives market.
DTCC managing director and general manager of the Trade Information Warehouse Stewart Macbeth said that 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.
"We’ve seen the value that our Trade Information Warehouse’s automated netting and settlement functionality has brought to the OTC credit derivatives market and we believe the Equities Cash Flow Matching service can now also deliver similar benefits to another OTC derivatives asset class," Macbeth said.