DTCC’s FICC launches new contingency liquidity calculator

New tool coincides with new SEC requirements for expanded US Treasury clearing, simulating estimated CCLF obligations linked to FICC Government Securities Division membership.

DTCC’s Fixed Income Clearing Corporation (FICC) has launched an interactive, public facing Capped Contingency Liquidity Facility (CCLF) calculator to support the expansion of US Treasury clearing.

With the size of transactions in the US Treasury market now exceeding $7 trillion daily, CCLF is will serve as a risk management tool used for managing FICC’s liquidity risk linked to settlement activity.

Participants will be able to input their current settlement activity into the calculator to estimate and understand the CCLF-related liquidity obligations that could arise from membership, DTCC said.

CCLF is a rules-based liquidity resource facility able to offer FICC additional liquid financial resources to meet its cash settlement requirements in the event of a default of the largest Government Securities Division (GSD) family of affiliated netting members.

Ahead of potential funding needs, GSD netting members can include their determined CCLF obligation amounts into their own liquidity plans.

Although the CCLF obligation is a committed obligation for the netting members, does not require pre-funding or deposits of the obligation amount are not required by FICC.

Netting members instead provide up-front attestations linked to their ability to provide such CCLF amounts as an ongoing FICC membership requirement.

“By providing the public CCLF calculator, we continue to increase transparency into our financial risk management program, empowering potential members to understand their role and obligations as a FICC GSD member,” said Tim Hulse, managing director, financial risk and governance at DTCC.

“CCLF provides a critical backstop to address the financial impact of volatility and stress across repo markets while safeguarding the industry and individual members.”

The CCLF calculator requires a range of data points to be provided by users. Once provided and entered on screen, the calculator processes the data points using the existing GSD CCLF engine logic, which then provides an estimated individual CCLF obligation.

“FICC recognizes that many firms are considering membership with GSD to comply with the final SEC rule on expanded clearing of US Treasury activity,” said Claire Lough, executive director, financial risk and governance at DTCC.

“This calculator will enable market participants to simulate their potential CCLF obligations to assist in understanding what is required of a GSD Netting Member.”