The Depository Trust & Clearing Corporation (DTCC) has filed applications to establish a limited purpose trust company that will house the functions of its Trade Information Warehouse for credit derivatives. The vendor has taken such a step to meet the enhanced risk and regulatory requirements of the current market, says Donald Donahue, DTCC chairman and CEO.
The new company, which will be called the Warehouse Trust Company, has therefore filed applications for membership in the Federal Reserve system and with the New York State Banking Department (NYSBD) to form a limited purpose trust company and will become a wholly owned subsidiary of DTCC Deriv/Serv. “In filing this application to create the Warehouse Trust Company, DTCC is responding to the expressed intentions from regulators globally to bring added risk protection and regulatory oversight to the credit derivatives market,” says Donahue.
The Warehouse, which acts as a central repository for OTC credit derivatives, will also be extending its reach into the European market by setting up a subsidiary in the region. “Our goal, as the operator of the only global trade repository for credit default swaps (CDS), is to align our infrastructure in a manner that is consistent with concerns of regulators and market participants and will allow us to continue, and possibly expand, the vital role we play in bringing greater certainty, transparency and reduced risk in the post-trade of OTC derivatives and the servicing of these instruments throughout their lifecycle,” contends Donahue.
He believes that the DTCC’s launch of the Warehouse in 2006 was instrumental in mitigating risk associated with multiple credit events in 2008 and this year. The vendor has also been engaged in a number of other activities, which it claims are aimed at reducing risk in the market. This includes working with all proposed central counterparty (CCP) solution providers as the market moves towards complying with global regulators’ calls for a process to guarantee the completion of trades in the CDS market.
“We are committed to providing equal access to all CCP providers, so they can leverage our trade repository in delivering their own services more cost-efficiently,” says Peter Axilrod, DTCC managing director of business development and DTCC Deriv/Serv.