The Depository Trust & Clearing Corporation (DTCC) has come up with two measures that will further mitigate risk for the industry and ensure greater certainty for market participants. One is the plan to implement a real-time trade date guarantee for all continuous net settlement eligible trades, including equity, corporate bond and municipal bond transactions. The other is that its equity clearing processing capacity has been increased to an unprecedented 500 million transactions per day.

DTCC's equity clearing subsidiary, National Securities Clearing Corporation will apply its guarantee on trade date upon comparison for non-locked-in trades or validation for locked-in trades instead of T+1, which will reduce credit exposure for trading firms, and systemic risk across the industry. Currently, the trade guarantee is applied at midnight of T+1, which represents a delay before NSCC steps in between the two sides of a trade and assumes the buyer's credit risk and the seller's delivery risk in the event either side defaults. NSCC is expected to file a rule change with the Securities and Exchange Commission (SEC) in 1Q 2009 seeking approval for its real-time trade guarantee. The decision to move to a real-time trade guarantee was recently approved by DTCC's Board of Directors.

"Maintaining confidence and stability in the marketplace and protecting our members under both ordinary and extraordinary circumstances is our highest priority. A real-time trade guarantee significantly enhances DTCC's already robust risk management process and gives financial firms greater certainty that their trades will settle," said Michael C. Bodson, DTCC executive managing director, business management and strategy, in a press release. "Recent market events, including firm failures like Lehman Brothers and Madoff Securities, underscore the importance of a real-time trade guarantee — and the value of a central infrastructure provider like DTCC that can manage risk from a central vantage point across asset classes," Bodson added.