The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced the launch of its Sponsored General Collateral (GC) Service, a new offering from its Fixed Income Clearing Corporation (FICC) subsidiary, and that the first trades have been executed by BNY Mellon, Federated Hermes and J.P. Morgan Securities LLC.
The new Sponsored GC Service allows Sponsoring Members and their Sponsored Member Clients to submit triparty repo transactions executed on a general collateral basis across U.S. Treasury securities, agency debentures and agency mortgage-backed securities collateral to central clearing. Users benefit from a reduction in operational and counterparty risk, potential balance sheet and capital relief, and access to greater market liquidity. The new service has been launched in collaboration with BNY Mellon and with the support of Broadridge.
“We are pleased to work with BNY Mellon, Federated Hermes and J.P. Morgan Securities in making this new service a reality,” stated Murray Pozmanter, Head of Clearing Agency Services at DTCC. “FICC’s Sponsored Service has become an integral part of the U.S. repo market, and the new Sponsored GC Service will enable us to further enhance risk management through broader access to central clearing. We look forward to welcoming clients to the service while also continuing our work with Broadridge.”
As part of this offering, cleared repo transactions will settle on the triparty platform of BNY Mellon, similar to how triparty repo transactions are handled outside of central clearing today. By enabling access to FICC via BNY Mellon’s triparty repo platform, users benefit from an operationally efficient way to clear their repo transactions – including overnight and term repo transactions. BNY Mellon will also act as a Sponsoring Member for Sponsored Member Clients seeking to participate in cleared repo via the new Sponsored GC Service.
“Triparty sits at the heart of BNY Mellon’s collateral management offering, providing operational efficiencies and promoting collateral optimization and mobilization for more than $3.6 trillion in balances on our platform,” adds Andrea Pfenning, President & COO of BNY Mellon Government Securities Services Corp. “In addition to our existing settlement role for FICC’s Sponsored Service where trades settle bilaterally, BNY Mellon will now provide settlement for FICC Sponsored GC Service transactions via triparty. We are pleased to be playing an integral role supporting this product for FICC and the broader market.”
To make this trade a reality, DTCC worked closely with Broadridge to support the connectivity of J.P. Morgan Securities and other Sponsoring Members into central clearing, enabling these Members to submit and process their Sponsored activity at FICC.
“We’ve worked very closely with DTCC and BNY Mellon over the past few years to bring DTCC’s recent enhancements to the Sponsored Service to life by helping to connect Broadridge users with FICC,” said John Garahan, Head of North American Fixed Income at Broadridge. “Broadridge is excited to roll out this latest offering under FICC’s Sponsored Service umbrella to enable clients to take full advantage of these programs.”
Today, 29 Sponsored Members and over 1800 Sponsored Member clients use FICC’s Sponsored Service, representing approximately $240bn-$300bn in daily volumes. Additional Sponsored Members are expected to join the service in the coming months, including firms representing agency lending activity, foreign clients, supranationals, municipalities and home loan banks.