The Depository Trust & Clearing Corporation (DTCC) announced that State Street and funds managed by Capula Investment Management completed the first cleared sponsored repo transactions as a collateral provider.
Although DTCC’s subsidiary Fixed Income Clearing Corporation has operated its Sponsored DVP Repo Service since 2005, it only expanded participation in this service beyond Registered Investment Companies in May 2017. Since then, this service has seen volumes double previous peaks. Historically, the involvement of cash providers has brought only one side of the institutional marketplace into the clearinghouse. Now, with the participation of the first collateral provider clients in the Sponsored DVP Repo Service, the buyside is fully represented in the clearinghouse.
Centrally clearing these repo transactions by non-Registered Investment Companies at FICC also provides opportunities for members to see potential balance sheet netting and capital relief, which, in turn, may afford buyside clients increased capacity and income. FICC is now actively onboarding new sponsors and buyside clients into the Sponsored DVP Repo Service. FICC is the leading provider of trade comparison, netting and settlement for the government securities market.
Murray Pozmanter, DTCC Managing Director and Head of Clearing Agency Services, said: “As more firms take advantage of the new repo clearing solution, fire-sale risk and price degradation are reduced as result of centralized liquidation services.”