Securities Financing Industry News | Laura Klimpel discusses DTCC’s clearing service for SFTs


The Depository Trust & Clearing Corporation (DTCC), through its equity clearing subsidiary, the National Securities Clearing Corporation (NSCC), is considering deploying central clearing for securities financing transactions (SFT).

New SFT clearing service, which is subject to regulatory approval, will leverage existing NSCC and DTC systems, says Laura Klimpel, Business Development Manager for Systemically Important Utilities (SIFMU) at DTCC .

Klimpel points out that the new service will provide a number of benefits to the industry, including opportunities to improve capital efficiency for borrowers and agent lenders and reduce counterparty risk by entrusting NSCC with execution. settlement obligations.

Commenting on the main features of the service, Klimpel told SFT: “To achieve maximum capital and balance sheet efficiency, SFTs eligible for clearing through NSCC will have a duration of one business day (like day-to-day SFTs). ) and will be entered into by Members of NSCC or by Beneficial Owners who are appointed or sponsored as Members of NSCC by a Full Service NSCC Member.

“The settlements would be allowed to match daily to a new activity, with the NSCC calculating and processing price differential payment amounts created by the daily pair and processed by DTC,” Klimpel comments.

Additionally, Klimpel points out that SFT clearing activities will have the ability to settle delivery versus payment (DVP) / receipt versus payment (RVP) to DTC, and NSCC will take over the processing of recalls and redemptions. The processing of corporate actions will be supported for most mandatory events and the processing of cash dividends.

SFTs are securities lending transactions in which the parties exchange equity securities for cash and simultaneously agree to exchange the same securities and cash, plus or minus a rate payment, at a future date.

The centralized clearing of stock lending and borrowing transactions through the NSCC takes advantage of DTCC’s existing clearing capabilities, risk management and efficient infrastructure to provide the market with a stock lending service to the market. centralized clearing.

This service reduces risk, provides opportunities for improving capital efficiency and promotes transparency, Klimpel explains.

In July, NSCC Boosted Exchange Traded Fund (ETF) Solution to Streamline and Simplify ETF Collateral Management Process and Add New Fixed Income ETF Capabilities.

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