DTCC and Cboe Clear Europe to create new OTC cash equities clearing workflow

The pair intend to develop a proof of concept that links DTCC’s tri-party trade matching workflow with Cboe Clear Europe.

DTCC and Cboe Clear Europe are set to team up to create a new clearing workflow for OTC cash equities clearing.

The new service will bring OTC cash equities trades into Cboe Clear Europe’s cleared environment, which can then be netted against on-exchange transactions for settlement purposes.

Creating a link between DTCC’s Institutional Trade Processing (ITP) central matching service, CTM, makes up the first part of the joint initiative. Subject to regulatory approvals, this is projected to go live in Q2 of next year.

Cboe Clear Europe will be the first CCP to connect to CTM.

“This joint solution enables us to bring greater efficiencies to our clients, helping to optimise their current post-trade workflows and operational processes as the global financial markets look to accelerate settlement cycles,” said Vikesh Patel, president, Cboe Clear Europe.

As part of the initiative, DTCC and Cboe Clear Europe each intend to develop a proof of concept that links Cboe Clear Europe with the tri-party trade matching workflow of CTM.

Prime brokers will receive a golden copy of transaction details when a match is achieved between a hedge fund and executing broker via DTCC’s CTM service. CTM could then automatically send matched trades to the CCP, providing netting and clearing benefits to Cboe Clear Europe and DTCC’s mutual clients.

The pair claim the new workflow could help reduce settlement and operational risk and will help facilitate a reduction in capital requirements when moving from OTC to CCP settlement, as well as lower trade fails and defaults.

“We are pleased to be working with Cboe Clear Europe on this important initiative to bring greater post-trade efficiencies to the industry as the global markets look to accelerate to a T+1 settlement cycle,” said Val Wotton, managing director and general manager, DTCC Institutional Trade Processing.

“Cboe Clear Europe’s extensive venue coverage combined with CTM’s large client base will deliver increased operational efficiency and netting opportunities across European trading venues.”