DTCC signs 500th customer to Deriv/Serv matching and confirmation service
13 June 2006 | 1588 views | 0
The Depository Trust & Clearing Corporation (DTCC) signed the 500th customer on to its Deriv/SERV matching and confirmation service, reaching another milestone in its goal to automate processing in the global over-the-counter (OTC) derivatives market.
A five-fold increase in its client base since June 2005, Deriv/SERV is the largest service provider in the market and has become the recognized global standard in post-trade processing of credit default swaps (CDS). Deriv/SERV's customers include all of the major derivatives dealers globally, and continue to broaden in scope to include a rapidly growing number of hedge funds, as well as investment managers. Recent firms who have signed on to the service include Acuity Capital Management LLC, Discovery Capital Management, Claren Road Asset Management, Federated Investors and Lord Abbett.
More than one-third of Deriv/SERV customers are based overseas, located in the U.K., Europe, Japan, Asia/Pacific, Australia and Latin America.
"The rapid rate at which firms are coming on to Deriv/SERV clearly demonstrates the priority the OTC derivatives community is placing on strengthening their operational efficiency and risk management," said Janet Wynn, general manager and managing director DTCC Deriv/SERV. "Our goal for the industry is to provide a one-stop, centralized, automated environment for the entire lifecycle of an OTC derivatives contract, promoting seamless straight-through processing, from affirmation in the front-office through to all other processing steps for all post-trade events of a contract's lifecycle."
Major market participants estimate that about 70% of CDS confirmations are automated through Deriv/SERV, up from 15% in 2004. The total notional value outstanding for CDS has also grown to about $17.0 trillion at the end of 2005 from approximately $3.7 trillion at the end of 2003.
DTCC Deriv/SERV entered the OTC derivatives market in late 2003, in collaboration with key market participants who were looking to build greater operational processing efficiency in a market that was growing at swift speed. Focusing first on automated matching and confirmation for credit default swaps, the service has since been enhanced to offer the same capability for interest rate derivatives and equity derivatives. The platform also provides a payment matching and bilateral netting service for CDS.
Deriv/SERV continues to expand its platform. Last week, DTCC, working with leading inter-dealer brokers, announced the launch of AffirmXpress(TM), a single-screen post-trade affirmation platform that allows traders and front-office staff to affirm credit derivative trades from multiple inter-dealer brokers (IDBs).
In February, it announced plans to create a Trade Information Warehouse, providing the global market with an industry infrastructure that will centralize the most up-to-date record of each derivatives contract and standardize and automate the processing of payments and other "downstream" events.
Background on DTCC Deriv/SERV LLC:
DTCC's derivatives services are offered through DTCC Deriv/SERV LLC, a wholly owned subsidiary of DTCC. Deriv/SERV is a global service offering focused on automating the entire life cycle of OTC derivatives. The service line includes:
Affirmation: AffirmXpress(TM) is DTCC's first foray to bring automation into the front-office for OTC derivatives. It is a single-screen post-trade affirmation platform that lets traders and front-office staff affirm credit derivative trades from multiple IDBs. Initially, AffirmXpress will support credit derivatives, including single-name and index credit default swaps (CDS), and tranched index swaps. Future releases will include interest rate and equity derivatives products.
Matching and Confirmation: Deriv/SERV provides automated matching and confirmation for OTC derivatives contracts, including credit, equity and interest rate derivatives. According to major market participants, 70% of credit derivatives traded globally are electronically confirmed through Deriv/SERV, up from 15% in 2004.
Payments: Deriv/SERV provides payment matching and bilateral netting services, providing greater accuracy and straight-through processing. In 2005, more than 3.5 million payment transactions were processed through Deriv/SERV.
Trade Information Warehouse: The warehouse will comprise a comprehensive database containing the most up-to-date record of each contract, as well as a processing component that will standardize and automate "downstream" processing over a contract's life cycle. Beginning with credit derivatives, this global infrastructure solution, which is being developed in close collaboration with leading dealers and buy-side firms for launch later this year, will eventually accommodate interest rates, equities and other OTC derivatives.