NYSE Euronext, an exchange group offering financial products and services in Europe and the US, and The Depository Trust & Clearing Corporation (DTCC), a processor of mutual funds and insurance transactions, have agreed to create a joint venture for clearing US fixed income derivatives. NYSE Euronext plans to commit a $50 million financial guarantee as an additional contribution to reinforce the safety and soundness of the NYPC default fund.
The new clearing house, New York Portfolio Clearing (NYPC), will combine the capabilities of NYSE Euronext’s US futures exchange and DTCC’s Fixed Income Clearing Corporation (FICC) to offer innovative risk management, clearing and settlement efficiencies for US fixed income securities and derivatives.
Duncan Niederauer, CEO of NYSE Euronext, said: “In uniting NYSE Euronext’s 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 Donahue, Chairman and CEO of DTCC, said: “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. Additionally, regulators will gain the ability to monitor market participants’ total exposure across multiple interest rate asset classes in real-time.
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 definitive documentation and regulatory approval.
