DTCC Sets Requirements to Use Government Securities Netting Services

Fixed Income Clearing Corporation (FICC), a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (DTCC), has set minimum requirements to allow Registered Investment Companies (RICs)—buy-side market participants—to become members of the Government Securities Division (GSD), which provides netting services for trading U.S. government securities.
By Jake Safane(2147484770)
Fixed Income Clearing Corporation (FICC), a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (DTCC), has set minimum requirements to allow Registered Investment Companies (RICs)—buy-side market participants—to become members of the Government Securities Division (GSD), which provides netting services for trading U.S. government securities.

In order to set the minimum financial requirement of $100 million in net asset value for RICs to become members of GSD, FICC filed a proposed rule change with the Securities and Exchange Commission (SEC). Pending regulatory approval, RICs will be able to use GSD’s netting services, gain the operational efficiencies of using a central counterparty such as guaranteeing trade settlement and centralizing collateral for counterparty exposure, and they will also gain other membership benefits such as automated reporting.

“We are pleased to offer buy-side firms the benefits of GSD’s netting services and the advantages of a central counterparty, which help firms reduce risk, enhance transparency and lower costs in the trading of U.S. Government securities,” says Murray Pozmanter, managing director and general manager of DTCC’s Clearing Services. “With both existing and new members submitting trades to GSD, a broader, more centralized view of the market will also help regulators monitor a firm’s exposure to these financial instruments.”

Aside from gaining membership to GSD, RICs are also currently eligible to become members of the other arm of FICC—Mortgage-Backed Securities Division (MBSD). “MBSD membership enables firms to fulfill the Treasury Market Practices Group (TMPG) recommendations for margining of forward-settling agency mortgage-backed securities (MBS) transactions, with which firms are expected to be in compliance by the end of the year,” the company says.

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