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Treasury & Capital Markets
DTCC eyes new clearing workflow for OTC cash equities trade
Initiative seeks to deliver greater post-trade efficiencies as European markets prepare for accelerated settlement
The Asset 12 Jun 2024

The Depository Trust & Clearing Corporation (DTCC) is working with Cboe Clear Europe, a central counterparty clearing house (CCP), to deliver an enhanced post-trade workflow for over-the-counter (OTC) cash equities trades to help increase settlement efficiencies across UK and European markets.

The service will bring OTC cash equities trades into Cboe Clear Europe’s cleared environment, which can then be netted against on-exchange transactions for settlement purposes, delivering potentially significant efficiencies.

As part of this initiative, DTCC and Cboe Clear Europe will develop a proof of concept that links DTCC Central Trade Matching (CTM) platform’s tri-party trade matching workflow with Cboe Clear Europe.

This connection will allow prime brokers to receive a golden copy of transaction details when a match is achieved between a hedge fund and executing broker via DTCC’s CTM service. Once the prime broker enters into this tri-party match, CTM automatically sends those matched trades to the central counterparty, providing netting and clearing benefits to mutual clients.

The new workflow will help reduce operational and settlement risk, as well as post-trade friction as additional markets consider and prepare for accelerated settlement.

“We are pleased to be working with Cboe Clear Europe on this important initiative to bring greater post-trade efficiencies to the industry as the global markets look to accelerate to a T+1 settlement cycle,” says Val Wotton, managing director and general manager, DTCC institutional trade processing. “Cboe Clear Europe’s extensive venue coverage combined with CTM’s large client base will deliver increased operational efficiency and netting opportunities across European trading venues.”

The benefits of this initiative include reductions in post-trade processing time, risks associated with OTC transactions, and settlement costs between executing brokers and prime brokers, DTCC says. The joint solution will also help facilitate a reduction of capital requirements when moving from OTC to CCP settlement as well as lower trade fails and defaults.

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