The Depository Trust & Clearing Corporation (DTCC) has gained regulatory approval to expand its fixed income clearing service into repo markets.
The Securities and Exchange Commission (SEC) recently approved rule changes, which allowed the expansion of the DTCC’s Fixed Income Clearing Corporation (FICC) business.
Institutional investors will be able to participate in the FICC directly in the Centrally Cleared Institutional Triparty (CCIT) service or through a sponsoring member bank.
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.
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, the DTCC added.
Murray Pozmanter, head of clearing agency services at DTCC, explained the repo market is a critical source of funding for broker-dealers and an important cash management tool for institutional counterparties.
“We believe the larger group of market participants able to use central clearing through the CCIT Service and sponsored membership program strengthens the entire marketplace,” he said.