The Fixed Income Clearing Corporation, the US clearing entity owned by the Depository Trust & Clearing Corporation (DTCC), has gone live with a sponsored general collateral (GC) solution.
Initial trades through this GC service have been executed by BNY Mellon (as tri-party), J.P. Morgan Securities (as sponsoring member) and Federated Hermes (as buy-side sponsored member).
This service will provide access to BNY Mellon’s tri-party repo (TPR) platform, enabling users to settle cleared repo transactions in a manner similar to how tri-party repo trades are handled outside of CCP clearing.
This enables sponsoring members and their clients (ie sponsored members) to submit TPR transactions in central clearing against an expanded range of collateral, including U.S. treasuries, agency mortgage-backed securities (agency MBS) and agency debentures.
BNY Mellon explains that, previously, sponsored members utilising cash in sponsored repo at FICC could only access US treasuries as collateral. With this development, sponsored members in the bank’s sponsored member programme can now also accept agency MBS as collateral, extending an US$11 trillion agency MBS market to repo clearing.
This service has been launched by DTCC in collaboration with BNY Mellon and with support from Broadridge.
DTCC head of clearing agency services Murray Pozmanter says: “FICC’s sponsored service has become an integral part of the U.S. repo market and the new sponsored GC service will enable us to [offer] broader access to central clearing”.
Andrea Pfenning, president and COO of BNY Mellon’s government securities services corporation, says that: “In addition to our existing settlement role for FICC’s sponsored service, where trades settle bilaterally, BNY Mellon will now provide settlement for FICC-sponsored GC service transactions via tri-party.”
Broadridge head of North American fixed income John Garahan says: “We have worked closely with DTCC and BNY Mellon over the past few years to bring DTCC’s recent enhancements to the sponsored service to life by helping to connect Broadridge users with FICC”.
Currently, 29 sponsored members and more than 1800 clients are using FICC’s sponsored service, accounting for $240bn to $300bn in daily trade volumes.
