New York/London/Hong Kong/Singapore/Sydney,April 1, 2019 – The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced its proposal to expand the Sponsored Service of its subsidiary Fixed Income Clearing Corporation (FICC) has been approved by the Securities and Exchange Commission (SEC). DTCC views this as the latest milestone in the transformation of the Treasury market.
This expansion broadens the category of market participants who can participate as sponsors. It also changes how the service can be used, with sponsors now able to let their clients trade with counterparties other than themselves, providing sponsored members with the same execution flexibility they have in the bi-lateral market today.
“The greatest benefit of allowing different types of firms to be sponsors is that FICC has now made it possible to bring a much larger percentage of the market into clearing while maintaining our robust risk management standards,” said Murray Pozmanter, DTCC Managing Director and Head of Clearing Agency Services. “This should create needed capacity for the market, while at the same time reducing systemic risk.”
Following the 2017 expansion, which allowed Buy Side firms beyond Money Funds and Mutual Funds to participate in the service as sponsored members, DTCC received increased interest from Dealers, Non-US Banks, and Prime Brokers that were not previously able to be sponsors. The rise of interest across market participants prompted FICC to propose its latest approved expansion.
“We anticipate this expansion will have a positive impact on the Treasury market,” said Jim Hraska, DTCC Managing Director and General Manager, FICC Services. “In order to create a robust cleared market, you need to be able to provide access to as many participants as possible on both the long and short sides of the equation. Buy Side participation, therefore, is crucial because they are the true cash lenders and cash borrowers the market needs, and many have struggled over the years to get capacity due to constraints on dealers’ balance sheets.”
J.P. Morgan has completed the first cleared repo transaction under the new Category 2 Sponsoring Member classification. This important milestone comes immediately following the recent Securities and Exchange Commission (SEC) approval for DTCC subsidiary Fixed Income Clearing Corporation (FICC) to expand its Sponsored Service.
“J.P. Morgan is a leader in providing innovative solutions to our clients.”said Brian Connell, J.P. Morgan Managing Director, Fixed IncomeFinancing. “We were excited to participate in the original Sponsored Repoprogram and we believe the expansion of the program will continue to streamline dealer balance sheets and further enhance repo market liquidity.”
In addition to J.P. Morgan, there are now over a dozen Category 2 Sponsoring Members approved, or in the process of approval, to leverage the new service.