The Federal Reserve Board had approved the Depository Trust & Clearing Corporation’s (DTCC) application to establish a DTCC subsidiary that is a member of the Federal Reserve System to operate the Trade Information Warehouse for over the-counter (OTC) credit derivatives.
The new DTCC subsidiary will be called the Warehouse Trust Company. Its regulation is an important step forward in furthering regulatory and industry objectives to bring greater transparency and added risk mitigation to the global OTC credit derivatives market. While the Federal Reserve and the New York State Banking Department will directly regulate the Warehouse Trust, it is also expected to be subject to a global co-operative oversight framework involving other US and non-US regulators. DTCC fully supports such a co-operative oversight framework and embraces the concept of regulatory harmonisation across borders.
“As the operator of the global processing infrastructure and trade repository for the OTC credit derivatives market, DTCC is committed to working with regulators and market participants worldwide to protect the safety and soundness of the OTC derivatives market,” said Peter Axilrod, DTCC managing director for new business development. “In establishing the Warehouse Trust as a regulated entity, our aim is to ensure that regulators, wherever they are located, have unfettered access to the information they need to assess risk exposure in this global market, and that industry participants have the assurance of that regulatory oversight over the critical infrastructure that supports their market activities.”
The Trade Information Warehouse provides a wide array of automated downstream processing services for recorded contracts, including the netting and settlement of credit default swap (CDS) payment obligations in multiple currencies (through a partnership with CLS Bank International), processing of credit events (such as bankruptcies) and so-called ‘successor’ events, such as mergers, acquisitions and reorganisations. The warehouse today contains virtually all OTC credit derivatives traded worldwide.
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