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. Benefits 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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