Depository Trust and Clearing Corp. to Offer Real-Time Trade Date Guarantees

The Depository Trust and Clearing Corp. yesterday said it will begin providing real-time trade date guarantees for all continuous net settlement eligible trades, including municipal bonds.

The move, which also applies to equities and corporate bonds, will help reduce counterparty and systemic risk, the company says.

On locked-in trades, the company will guarantee in real time that the buyer receives the security and the seller receives its payment, regardless of a default by either party. In the past, DTCC did not guarantee trades in this way until midnight of the day following a trade.

DTCC processed 7.1 million municipal interdealer transactions with a total value of $2.1 trillion in 2008, the company said.

The company is filing a rule change with the Securities and Exchange Commission seeking approval. The company's board has already approved the move.

The company said it has planned to move to a real-time trade guarantee for some time, and that need has become more apparent given the recent market conditions.

"Recent market events, including firm failures like Lehman Brothers and Madoff Securities, underscore the importance of a real-time trade guarantee - and the value of a central infrastructure provider like DTCC that can manage risk from a central vantage point across asset classes," DTCC executive managing director Michael Bodson said in a statement.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER