Ten Major Clearing Organizations Join in Calling for Global Central Counterparty Solution

The Depository Trust & Clearing Corporation (DTCC), the world's largest securities clearance and settlement organization, has announced that ten major clearing organizations are cosponsoring a conference on global clearing for the financial services industry. The conference will take place in London, January 31 to February 2, 2001.

DTCC called for the conference in a recent white paper on central counterparties (CCPs), which said that a global clearing solution was needed to help lower costs, reduce risk and facilitate the growth of trading in a wide array of financial instruments worldwide.

"The response to our white paper has been extremely positive," said Jill M. Considine, Chairman & CEO of DTCC. "The fact that these leading clearing houses have joined us is indicative of the industry's commitment and strong sense of urgency in finding a global solution to cross-border clearance and settlement. We believe this conference will encourage the type of dialogue and partnering needed to develop a truly global perspective."

The ten clearing organizations in Europe, Asia and the Americas that have agreed to cosponsor the conference are:

Europe

ClearnetSBFSA, Paris
Eurex Clearing AG, Frankfurt
London Clearing House (LCH)

Asia

Hong Kong Exchanges and Clearing Limited (HKEx)
Singapore Exchange Limited (SGX)
Tokyo Stock Exchange (TSE)

The Americas

The Brazilian Clearing and Depository Corporation (CBLC), São Paulo
The Canadian Depository for Securities Limited (CDS), Toronto, Ontario
The Depository Trust & Clearing Corporation, New York
The Options Clearing Corporation (OCC), Chicago, Illinois

"The next generation of clearing capabilities will be challenging and expensive, with every region of the world planning major infrastructure investments in the next five to ten years," said Considine. "We must address issues of cross-border risk and capital optimization and avoid duplicating investments wherever possible." Considine noted that the white paper does not prescribe a single CCP solution, but rather identifies issues that require discussion, a shared understanding and mutual agreement across the industry.

A central counterparty is a specialized clearing institution that facilitates securities trading by standing between buyers and sellers to ensure that money and securities change hands smoothly and efficiently. This can include guaranteeing trade completion and netting down the value of obligations requiring financial settlement. In the U.S. equities market, this reduction can be as much as 97 percent.

The white paper issued on October 30 cited a number of benefits resulting from a CCP:

Standardizing processing which will translate into lower operating costs;
Reducing risk during settlement (through better risk management practices, multilateral netting and settlement guarantees);
Anonymity among trading parties; and
Reducing the number of trades requiring settlement, improving liquidity and effectively increasing market capacity.

A copy of the white paper, Central Counterparties: Development, Cooperation and Consolidation, can be found on DTCC's Web site in the "White Papers" section at: http://www.dtcc.com/whitepapers/whitebody.html