DTCC’s proposal to expand the Sponsored Service of its subsidiary Fixed Income Clearing Corporation (FICC) has been approved by the Securities and Exchange Commission (SEC).
The expansion broadens the category of market participants who can participate as sponsors.
Additionally, it also changes how the service can be used, with sponsors now able to let their clients trade with counterparties other than themselves.
Murray Pozmanter, managing director and head of clearing agency services at DTCC, said: “The greatest benefit of allowing different types of firms to be sponsors is that FICC has now made it possible to bring a much larger percentage of the market into clearing while maintaining our robust risk management standards.”
Pozmanter continued: “This should create needed capacity for the market, while at the same time reducing systemic risk.”
Jim Hraska, managing director and general manager at DTCC, FICC Services, cited: “We anticipate this expansion will have a positive impact on the Treasury market. In order to create a robust cleared market, you need to be able to provide access to as many participants as possible on both the long and short sides of the equation.”
He continued: “Buy-side participation, therefore, is crucial because they are the true cash lenders and cash borrowers the market needs, and many have struggled over the years to get capacity due to constraints on dealers’ balance sheets.”
