DTCC and Markit Launch Cash on Transfer for the Syndicated Loan Market
The Depository Trust & Clearing Corporation (DTCC) has launched its Loan/Serv Cash on Transfer service in conjunction with Markit. The DTCC service, coupled with Markit’s loan settlement platform, gives the global syndicated loan market its first delivery versus payment (DVP) platform for secondary loan trading.
In the current trading process, there is no assurance that cash settles simultaneously with the change of ownership recorded by agent banks at the time of trade settlement. This leaves the seller on each trade at risk of no longer being the lender of record of the loan asset without ensuring that cash payment has been received.
Cash on Transfer links the buyer, seller, agent bank, trade processing platform and counterparty accounts, allowing for cash and legal ownership of the asset to move simultaneously on the agreed trade settlement date.
The service went live after a four-month pilot that included BNY Mellon, Citi, JP Morgan, MJX Asset Management and Sankaty Advisors.
Cash on Transfer will initially support US dollar trades and will expand over the next year to support cash settlement in 50 currencies.