central settlement - Depository Trust and Clearing Corporation by wuzhenguang


									The Depository Trust & Clearing Corporation

central settlement

  central settlement is a service offered by Dtcc’s trade Information Warehouse (Warehouse), through a partner-
  ship with cls Bank International (cls), that automates the exchange of payments in multiple currencies due
  on bilaterally netted, over-the-counter (Otc) credit derivatives contracts held at the Warehouse. the service
  provides the Otc credit derivatives market with the capability to realize straight-through processing of contract
  obligations from trade confirmation to settlement with virtually no manual intervention.

  Overview                                                        the underlying gross payment cashflows and the associ-
                                                                  ated trade record for each.
  DTCC’s Trade Information Warehouse provides post trade
  processing service for the OTC credit derivatives market.       Enhances control and promotes greater certainty by pro-
  With the Central Settlement service’s link to the Ware-         viding advance notification to participants and settlement
  house’s lifecycle processing function, the Warehouse            agents of their settlement amounts.
  calculates quarterly coupon and captures other payments
  (such as upfront fees, credit event payments) due between
                                                                  How the service works
  counterparties of a transaction based upon legally bind-
  ing records kept in the Warehouse’s central repository.         Through a link with the Warehouse’s lifecycle process-
  Payments between counterparties are then netted on a            ing functionality, DTCC provides continuous netting of
  bilateral basis prior to sending settlement instructions to     Warehouse-generated payments and reporting of net and
  DTCC’s partner, CLS, for payment in multiple currencies.        gross payment information to participants through the
                                                                  web interface or computer-to-computer connection. This
                                                                  service also bilaterally nets payments by customer ac-
  Who can use the service                                         count, currency and counterparty.
  The Central Settlement service is available to any firm
                                                                  In accordance with established cutoff times, DTCC locks
  that is a participant in the Trade Information Warehouse,
                                                                  down net payment amounts. It then creates payment
  either directly as a participant, or through a participant as
                                                                  instructions for CLS-eligible accounts. CLS provides the
  a correspondent firm. Authorized custodians and fund ad-
                                                                  Warehouse with real-time information on the status of
  ministrators can also be provided with access to accounts
                                                                  the cash flow instructions submitted and sends Ware-
  and modified reports by their participant customers. As
                                                                  house settlement amounts to CLS Settlement Members
  of December 30, 2011, 80% of all trade volume market par-
                                                                  that settle on behalf of Warehouse participants. Funds are
  ticipants settled through the Central Settlement service
                                                                  transferred between the parties through CLS in any of the
  with DTCC and CLS. The industry continues to strongly
  encourage as a best practice market participants to sign        following nine currencies, depending on the terms of the
  up for this service.                                            contract: Swiss Franc, Euro, British Pound, Japanese Yen,
                                                                  US Dollar, Australian Dollar, Canadian Dollar, Hong Kong
                                                                  Dollar and Singapore Dollar.
                                                                  Once settlement is completed, DTCC and CLS provide
  The principal benefits of Central Settlement are:               reports to Warehouse users and Settlement Members,
  Ensures timeliness and certainty of payments. Increases         respectively, and cash flows are marked “settled” in the
  efficiency by simplifying the settlement process.               Warehouse.

  Provides a full audit trail and link between trade confir-      DTCC provides a series of search screens for Warehouse
  mation and settlement, linking all bilateral nets back to       participants and Central Settlement participants to
monitor and track both net and gross payments in detail,   For more information
including both a 21-day cash-flow report and a history
                                                           Please visit www.dtcc.com.
capability. DTCC also provides customized reports to
third-party providers, such as custodian banks and CLS
Settlement Members to assist in the tracking and recon-    This description is for informational purposes only. This service is
ciliation of the settlement amounts.                       governed by applicable Rules, Procedures, and Service Guides for
                                                           each DTCC subsidiary, which contain the full terms, conditions,
                                                           and limitations applicable to this Service.
                                                           DTCC’s derivatives services are offered through DTCC Deriv/SERV LLC.

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