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NYSE And DTCC To Create Joint Venture

The joint venture will be for the clearing of U.S. fixed income securities and derivatives.

NYSE Euronext and DTCC are creating a joint venture for clearing U.S. fixed income derivatives.

The new clearing house, New York Portfolio Clearing , NYPC, will combine the capabilities of NYSE Euronext's U.S. futures exchange (NYSE Liffe U.S.) and DTCC's Fixed Income Clearing Corporation (FICC) to offer risk management, clearing and settlement efficiencies for U.S. fixed income securities and derivatives.

The initiative has been approved by the Boards of both companies and is expected to be operational in the second quarter of 2010, subject to regulatory approval.

Margining cash and derivatives in a "single pot," NYPC will bring together cash positions and their natural derivatives hedge in a manner designed to substantially improve operational and capital efficiency, the companies said in a joint release.

It will provide a single view of risk across asset classes. As a result, NYPC said it will offer a high level of market transparency that can be used to identify and moderate systemic market risks. It is expected to facilitate more orderly risk mitigation and reduce settlement risks, the release said.

"Recent market dislocation has underscored the need to improve market efficiencies and provide more thorough and timely information about the positions of participants across asset classes," Duncan L. Niederauer, CEO of NYSE Euronext said in the release.

"In uniting NYSE Euronext's proven strength and expertise in execution with DTCC's market-leading clearing capabilities, we will help to lower the traditional barriers between the cash and derivatives markets. NYPC will provide a more comprehensive view of participants' overall risk exposure and increases capital efficiency through a cross-asset class risk management program."

Donald F. Donahue, chairman and CEO of DTCC, added: "Partnering with one of the world's largest and most liquid exchange groups to create NYPC is a significant milestone in DTCC's mission to mitigate risk and safeguard the integrity of the U.S. financial system."

"By providing greater transparency of investment positions between cash and derivatives, NYPC will bring a superior match between traders' total portfolio risk and the underlying margin requirements," he said.

"Additionally, regulators will gain the ability to monitor market participants' total exposure across multiple interest rate asset classes in real-time."

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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