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DTCC Opens Up Repo Clearing to Non-40 Act Firms

Top clearing and settlement firm DTCC announced that State Street Bank and Trust Company and funds managed by Capula Investment Management LLP together completed the first cleared sponsored repo transactions as a collateral provider. DTCC said that although its Fixed Income Clearing Corporation has operated its Sponsored DVP Repo Service since 2005, it only expanded participation in this service beyond registered investment companies in May 2017.Previously, buy-side firms, which include mutual fund companies and money market funds, have been able to provide only the cash side of a centrally cleared trade, Reuters reported. “Today, with the addition of institutional participation as collateral providers, we have achieved our goal of providing a true cleared repo solution for the buyside, lowering risk in the market,” said Murray Pozmanter, DTCC Managing Director and Head of Clearing Agency Services. “As more firms take advantage of the new repo clearing solution, fire-sale risk and price degradation are reduced as result of centralized liquidation services.” Industry observers say that the transaction facilitates DTCC’s aims to bring the buy-side into providing liquidity to the repo market which has traditionally been represented by broker-dealers and banks, which continue to leave that business due to increased capital pressures.

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