The US Depository Trust & Clearing Corporation (DTCC) has launched an automated payment reconciliation service for credit default swaps in accordance with the International Swaps and Derivatives Association (ISDA) cash flow matching recommendations.
The ISDA recently released a consultation paper that called for automated trade verification, confirmation and legal execution for all OTC derivatives trades by June 2005, and automated cash flow matching and cross-product netting and portfolio reconciliation to be in place by December 2006.
The DTCC says 12 dealers tested its new payment reconciliation service last year and the system could ultimately pave the way for netting of cash flows between trading partners.
Furthermore, the DTCC plans to upgrade its platform in April to allow members - specifically buy-side firms - to do assignments and partial terminations of credit default swaps.
The DTCC introduced Deriv/Serv, a automated matching service for credit default swaps in 2003. So far 10 dealers are live on the system, with additional dealers and buy-side firms expected to join in early 2004.
Peter Axilrod, managing director, DTCC's new business development, says the corporation will be rolling out a number of services over the next few months.
"We believe the recommendations announced by ISDA will help move OTC derivatives automation ahead that much faster," says Axilrod.