The National Securities Clearing Corporation (NSCC), a subsidiary of the Depository Trust and Clearing Corporation (DTCC), has gone live with its Securities Finance Transaction (SFT) clearing service.
The service supports the central clearing of SFTs, both between NSCC full-time members and intermediated by NSCC sponsoring members or agent clearing members. Through these membership and clearing transactions, the solution aims to improve capital efficiency and reduce systemic risk, the company says.
Members will be able to reduce their capital and balance sheet usage by novating their lending and borrowing activity to the NSCC, allowing for greater lending and borrowing capacities.
SFTs must be executed as overnight transactions, so as to maximise capital and balance sheet efficiencies. To reduce the operational burden of this, settlements can pair off daily against new activity with a price differential or mark-to market processed by the NSCC.
The service uses Aurora, Provable Markets’ SEC registered alternative trading system, and FIS’ Securities Lending Processing Platform.
Laura Klimpel, general manager of the Fixed Income Clearing Corporation at the DTCC, says: “Centrally clearing SFTs has the potential to transform the securities lending market for the better, with benefits including new borrowing and lending opportunities for a wide range of counterparties, balance sheet and capital optimisation opportunities, reduced operational burdens such as agent lender disclosure, and lowered systemic risk.”
