New York Portfolio Clearing, LLC (NYPC) announced today that the Commodity Futures Trading Commission (CFTC) has granted the final regulatory approval necessary to allow for "one-pot" margining of interest rate futures positions cleared by NYPC with U.S. Treasury and agency securities and repurchase agreements cleared by The Depository Trust & Clearing Corporation's (DTCC) Fixed Income Clearing Corporation (FICC). NYPC expects to begin operations on March 21st.
Earlier this week, the Securities and Exchange Commission (SEC) granted a reciprocal approval to FICC allowing for the "one-pot" cross-margining arrangement with NYPC. The regulatory approvals allow NYPC and FICC to proceed with their plan to offer unprecedented "one-pot" margining for fixed income cash and futures positions, reducing risk and delivering significant capital efficiencies to the markets. In 2010, FICC cleared and settled transactions valued at average of about $4.6 trillion daily.
"Today marks a historic day for competition and choice in the futures industry," said Walt Lukken, Chief Executive Officer of NYPC. "In receiving these final regulatory approvals, NYPC is now ready to offer unprecedented capital and operational efficiencies to the fixed income markets. While long in the making, I believe NYPC's value will prove worthy of the wait."
Lukken continued: "In reaching this momentous day, I want to commend the respective staffs and Commissions of both the CFTC and SEC, as well as the Federal Reserve staff, for their hard work, careful analysis and extraordinary dedication to this project. This is a firsthand example of how regulatory cooperation can work for the betterment of the markets post-financial crisis."
NYPC is a joint venture of DTCC and NYSE Euronext (NYX) created to deliver unique capital efficiencies to the market by netting and reducing risks between a clearing member's portfolio of cash bonds and derivatives. It will also provide important operational efficiencies to its members, including the "locked-in" trade delivery process that allows expiring futures to be seamlessly submitted to FICC for physical delivery.
NYPC will initially clear Eurodollar and U.S. Treasury Futures for NYSE Liffe U.S. Its "open access" architecture will enable other derivatives exchanges and clearinghouses to link into the "one-pot" margining system, providing a viable alternative to the dominant vertical clearing model and enabling new entrants to compete in the U.S. futures market.
At launch, "one-pot" margining of cash and futures positions will only be available for the proprietary accounts of common members of NYPC and FICC.