Options Clearing Corporation (OCC) has selected a new automated platform from Securities Finance Trust Company (SFTC), the operating arm of eSecLending, to help with its default management process.
While the platform, Auction Platform Services (APS), is an SFTC product, OCC worked with the company to input certain functionalities that the CCP wanted. SFTC will also market the product to other CCPs and financial market participants interested in reforming their default management processes.
“APS is a significantly enhanced version of a previous generation auction platform originally used for our securities lending business,” says Chris Poikonen, executive vice president at SFTC. “We updated the technology, increased the functionality, and converted it to a hosted software solution with the goal of appealing to a broader set of financial markets participants interested in conducting their own auctions.”
OCC used APS for its most recent default management simulation exercise with successful participation from clearing members in November, and the platform will now allow the CCP to have a more efficient process in the event of an actual default.
“It provides a huge automated boost to what we do,” says Joe Pelligrini, vice president, business operations at the OCC. Still, he explains, OCC will be able to maintain control of what should be auctioned off, and in a way that can help price assets more fairly.
“Our research suggested that while many CCPs actively utilized auctions as a means to liquidate defaulting member positions, they did not have robust technology in place to help facilitate the process. APS is effectively replacing manual processes with a highly scalable, automated, efficiency tool that dramatically improves this aspect of default management. A process that used to take hours or even days can now be achieved in a matter of minutes allowing the CCPs to focus on the most important aspects of loss prevention for their members,” says Poikonen.
APS offers a choice in auction formats including blind/sealed bid auctions and Dutch auctions. In addition to the adoption by OCC, SFTC is targeting CCPs globally for the platform’s use.
U.S. CCP Automates Default Management Process
Options Clearing Corporation (OCC) has selected a new automated platform from Securities Finance Trust Company (SFTC), the operating arm of eSecLending, to help with its default management process.