The National Securities Clearing Corporation (NSCC), the subsidiary of the Depository Trust & Clearing Corporation (DTCC), has bolstered its exchange traded fund (ETF) solution.
The automated solution streamlines and simplifies the ETF collateral management process and adds new fixed income ETF capabilities.
NSCC explains this is a critical step to freeing up capital and increasing operational efficiency during market uncertainty and volatility.
The solution fully automates the exchange of ETF collateral, which NSCC says reduces risks in the ETF fund process from trade date to settlement date.
With this enhancement, NSCC will process create/redeem instructions, generate payment orders, and ensure collateral is exchanged between authorised participants and servicing agents – all within a no-touch process.
By closely integrating the collateral process within the existing NSCC settlement process, NSCC can free up capital for its members by reducing the amount of collateral required on components that are eligible for NSCC’s netting process.
Additionally, NSCC has further expanded the ETF service to support the clearing of certain fixed income ETFs, including corporate and municipal bonds.
Orders for corporate and municipal bond ETFs can now be processed through NSCC and included in the same trade guarantee provided to securities cleared and settled at NSCC.
Michele Hillery, general manager of equity clearing and DTC Settlement Service at DTCC, says: “DTCC worked closely with our clients to introduce an innovative solution that automates the exchange of ETF collateral, a previously manual process that was done outside of NSCC.”
Hillery adds: “With the ongoing volatility in the markets, this automated solution provides the industry much-welcome balance sheet relief and a faster and simplified workflow to support ETF orders.”
