The US depository says the new utility will consist of a comprehensive database containing the 'golden copy' of each trade – and a central support infrastructure to standardise and automate 'downstream' processes throughout the life of each contract.

The initial release, scheduled for mid-year, will concentrate on maintaining the current state of each contract as well as calculating and bilaterally netting the cash flows associated with each contract.

DTCC expects decisions around the timing and content of subsequent releases, including possible extensions to other OTC derivatives beyond credit derivatives, to be made over the course of this year. It is expected that the infrastructure will eventually accommodate over-the-counter dealing in rates, equities, FX and commodities derivatives.

Michael Bodson, managing director, global head of operations for Morgan Stanley, and chairman of DTCC’s OTC Derivatives Operations and Planning Committee describes the maintenance and support of OTC derivatives contracts over their life as the next big issue facing the industry: "This represents a giant leap forward to solve that problem, and is essential to support expected market growth. We expect that the industry will see enormous efficiency gains and operational risk reduction."

The initiative follows unconstrained growth in credit derivatives and regulatory pressure to reduce risk. Leading banks in the market are to meet with regulators on Thursday to discuss progress in cutting confirmation backlogs and introducing automation.

Guido Buehler, managing director, global head of fixed income and FX operations, UBS Investment Bank, and member of DTCC’s OTC Derivatives Operations and Planning Committee, says the DTCC's Deriv/Serv platform already provides auto-confirmations for dealers and buy-side firms in a community environment.

"In addition to all of the leading dealers, over 200 traditional and non-traditional asset managers worldwide already use the service," he points out. "We will be working in conjunction with the buy-side community on the design and implementation of this next step in order to achieve true STP."

Asset managers have been invited to contribute and are broadly supportive. Joseph Sack, executive vice president and advisor to the Asset Managers Division at the Bond Market Association, comments: "Asset managers appreciate having a seat at the table concerning this initiative and believe that a longer term solution will enhance efficiency and engender a greater confidence in the industry’s processing infrastructure on all sides of this growing market."

DTCC has been working closely with 11 leading global dealers to develop the overall concept and detailed design of the service. The project will be overseen by a Senior Operations Group, which has been established by the OTC Derivatives Operations and Planning Committee of DTCC’s Board to make implementation recommendations to the Board Committee.

Peter Axilrod, managing director, DTCC business sevelopment, says: "This initiative will require a significant effort not only from DTCC, but also from the market participants themselves. We are fortunate to have the focus of very senior management of leading participants in the OTC derivatives market. This is really how success will be achieved."