Galen Stops looks at the tie up between the DTCC and Euroclear and asks if it could pave the way for interoperability in the derivatives market.
The Memorandum of Understanding signed between the
Depository Trust and Clearing Corporation (DTCC) in the US and
Euroclear in Europe could be a step towards
interoperability into the derivatives market but
challenges lie ahead.
The deal, which was announced this week, contains two
distinct parts. The first part is 'The Margin Transit Utility'
which is a straight through processing solution for margin
transactions. It will connect the entire chain of OTC
derivatives margin transactions for both bilateral and
centrally cleared derivatives.
The Margin Transit Utility will be introduced for US dollar
cash in Q1 2014, Euro cash in Q2 2014 and it has tentatively
been proposed to include US and European securities in Q3 of
the same year.
"For the margin transit part of the agreement, one of the
drivers is the number of margin calls and the challenges
resulting from the settlement of those calls, the funding of
collateral, the reporting and the record keeping.
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