Source: Depository Trust & Clearing Corporation
The Depository Trust & Clearing Corporation's (DTCC) Deriv/SERV subsidiary today announced the signing of its 1,000th customer, further solidifying its position as the industry standard for post-trade processing in the global over-the-counter (OTC) derivatives market.
DTCC Deriv/SERV has the largest community of users for automated post-trade processing services in the marketplace, with a customer base of derivatives dealers and buy-side firms in 31 countries. Today, according to market participants, more than 90% of the credit default swaps traded worldwide are matched and confirmed on Deriv/SERV, up from 15% when Deriv/SERV was launched in late 2003. In 2006, Deriv/SERV processed more than 2.6 million OTC derivatives transactions. Average daily processing volumes have more than doubled since then, from approximately 10,000 in late 2006 to between 20,000 and 30,000 today.
"Reaching 1,000 customers is an important milestone in our history of service to the OTC derivatives community," said Janet Wynn, managing director and general manager, DTCC Deriv/SERV. "The industry's rapid adoption of electronic processing services since Deriv/SERV was launched less than four years ago demonstrates market participants' commitment to strengthening their operational infrastructure and reducing risk. We are proud to be helping them meet these goals."
Multiple Products and Functions on a Single Platform
Deriv/SERV's comprehensive processing platform supports multiple products and offers multiple functionalities. Its family of services includes automated matching and confirmation for a wide range of OTC derivatives products, payments matching and bi-lateral netting for OTC credit derivatives and maintenance of OTC credit derivatives contracts through to final settlement with its Trade Information Warehouse.
Deriv/SERV accommodates single name credit default swaps (CDS), CDS indices and tranches as well as both single name and indices CDS on loans, asset backed and mortgage backed securities. It also electronically matches and confirms OTC equity share and index options, swaps and variance swaps for the Americas, Europe, Japan and Asia Ex-Japan. These comprise all major OTC equity derivatives products for which there are ISDA (SDA (International Swaps and Derivatives Association) standard Master Confirmation Agreements (MCAs). The service also supports vanilla interest rate swaps and swaption trade variants.
Deriv/SERV is the only post-trade service provider used by virtually all major global derivatives dealers to process all three OTC derivatives products, enabling market participants to manage these instruments on a single platform.
Trade Information Warehouse
Last November, DTCC Deriv/SERV launched its Trade Information Warehouse, the industry's first and only global repository and comprehensive electronic platform for servicing OTC derivatives contracts over their multi-year lifecycles.
A database of the most up-to-date legally confirmed contracts, known as "golden copies," that flow from Deriv/SERV's matching and confirmation service constitute the foundation of the Warehouse. Enhancements and expansion of Warehouse functionality are ongoing. Automated payment calculation was introduced earlier this year. Centralized support of ISDA credit event protocols went live in August and user acceptance testing is well underway for central settlement of payments, a service Deriv/SERV is offering in partnership with CLS Bank International.
In a March 2006 letter to global regulators, the leading derivatives dealers identified Deriv/SERV's electronic platform and the development of the Trade Information Warehouse as "a major step forward in reducing operational risk and increasing operational efficiency in the credit derivatives market."
Initially supporting credit derivatives, Deriv/SERV plans to extend the Warehouse to other OTC derivative products in response to market demand.
"Delivering a large-scale, global industry initiative such as the Trade Information Warehouse from concept to launch in less than one year's time exemplifies how DTCC leverages its knowledge capital and repurposes technology to help customers in an emerging market segment automate, create efficiency, reduce risk and lower cost," said Peter Axilrod, managing director, DTCC Business Development.
Sustaining Market Growth
Deriv/SERV was launched following discussions with members of the OTC derivatives community who were concerned about operational risk in an industry with transaction volume growing at warp speed. The need to automate was further magnified with global regulators expressing concern about the industry's ability to securely sustain its growth level. According to ISDA the total notional value outstanding for credit default swaps increased 309% to $34.4 trillion at the end of 2006 from $8.4 trillion at the end of 2004.
"Electronic processing platforms such as Deriv/SERV have not only helped market participants sustain industry growth, they have also provided an essential structure for managing the volume surge during the recent turmoil in global credit markets," added Axilrod.
DTCC's Global Services
DTCC's global OTC derivatives services are offered by its subsidiary, DTCC Deriv/SERV LLC. DTCC's other global services to the securities industry include its Global Corporate Action Validation Service and EuroCCP, a U.K.-based clearing and settlement service for Europe. Initially EuroCCP will support Turquoise, a new pan-European trading platform being created by seven major investment banks.