DTCC and CLS Bank International Launch Central Settlement of OTC Credit Derivative Trades
The Depository Trust & Clearing Corporation (DTCC) and CLS Bank International (CLS) have announced the launch of their central settlement service for over-the-counter (OTC) credit derivatives transactions. The service, provided through DTCC’s Trade Information Warehouse, is an automated solution for calculating, netting and issuing payments between counterparties to bilateral contracts. The new service aims to reduce operating risks for users by replacing manually processed bilateral payments with automated, netted payments. In the first quarterly central settlement cycle for the new service on 20 December 2007, the companies report that the amount of trading obligations requiring financial settlement was reduced by 98%, from US$14.3bn gross in aggregate US dollar terms to US$288m net. Gross settlements by the 14 participating OTC derivatives dealers were consolidated from 340,000 to 123 net settlements. Payments were made in five currencies: the US dollar, euro, Japanese yen, UK pound and Swiss franc.