Citadel and Morgan Stanley have executed the first trade on the DTCC’s Centrally Cleared Institutional Triparty (CCIT) service of its Fixed Income Clearing Corporation (FICC) subsidiary.
The CCIT service aims to expand the availability of central clearing in the repo market as well as extending central counterparty services.
“The combination of expanded market access for our clients and the overall reduction in counterparty credit risk is a major step forward for all participants in the repo market,” said Tom Wipf, vice chairman of institutional securities at Morgan Stanley.
“FICC has worked diligently over the past several years to bring this strategic product to market and we at Morgan Stanley are proud to partner with Citadel on this inaugural cleared repo trade.”
Last month the US Securities and Exchange Commission had approved rule changes allowing the expansion of the FICC business.
Adding new members to the FICC could reduce counterparty risk, the DTCC said, which is viewed as a key benefit due to guaranteed completion of settlement if a member defaults.
According to the DTCC, centrally clearing transactions at the FICC could also present new opportunities for possible balance sheet netting and capital relief, increasing lending capacity and income to investors.
“We are very pleased to have been able to work with Citadel and Morgan Stanley to take this next step to make CCIT a reality,” said Murray Pozmanter, DTCC managing director and head of clearing agency services.
“With a greater number of market participants leveraging the clearinghouse through the CCIT Service, we are able to strengthen both the safety and efficiency of the tri-party repo marketplace.”