DTCC Launches Sponsored Collateral Service
Posted by Colin Lambert. Last updated: September 8, 2021
Post-trade market infrastructure, the Depository Trust & Clearing Corporation (DTCC), has announced the launch of its Sponsored General Collateral (GC) Service, a new offering from its Fixed Income Clearing Corporation (FICC) subsidiary. Additionally, DTCC says the first trades have been executed by BNY Mellon, Federated Hermes and JP Morgan Securities.
The new Sponsored GC Service allows Sponsoring Members and their clients to submit triparty repo transactions executed on a general collateral basis across US Treasury securities, agency debentures and agency mortgage-backed securities collateral to central clearing. Users benefit from a reduction in operational and counterparty risk, potential balance sheet and capital relief, and access to greater market liquidity. The new service has been launched in collaboration with BNY Mellon and with the support of Broadridge.
“FICC’s Sponsored Service has become an integral part of the US repo market, and the new Sponsored GC Service will enable us to further enhance risk management through broader access to central clearing,” says Murray Pozmanter, head of clearing agency services at DTCC.
As part of this offering, cleared repo transactions will settle on the triparty platform of BNY Mellon, similar to how triparty repo transactions are handled outside of central clearing. By enabling access to FICC via BNY Mellon’s triparty repo platform, users benefit from an operationally efficient way to clear their repo transactions – including overnight and term repo transactions. BNY Mellon will also act as a Sponsoring Member for clients seeking to participate in cleared repo via the new service.
“Triparty sits at the heart of BNY Mellon’s collateral management offering, providing operational efficiencies and promoting collateral optimisation and mobilization for more than $3.6 trillion in balances on our platform,” adds Andrea Pfenning, president & COO of BNY Mellon Government Securities Services Corp. “In addition to our existing settlement role for FICC’s Sponsored Service where trades settle bilaterally, BNY Mellon will now provide settlement for FICC Sponsored GC Service transactions via triparty.”
To make this trade a reality, DTCC says it worked closely with Broadridge to support the connectivity of JP Morgan Securities and other Sponsoring Members into central clearing, enabling these Members to submit and process their Sponsored activity at FICC. “We’ve worked very closely with DTCC and BNY Mellon over the past few years to bring DTCC’s recent enhancements to the Sponsored Service to life by helping to connect Broadridge users with FICC,” says John Garahan, head of North American fixed income at Broadridge.