- Innovative New Clearing Solution for U.S. Fixed Income Cash, Derivative Markets Progressing for Launch Q2 2010-
NYSE EURONEXT & DTCC FINALIZE JOINT VENTURE AGREEMENT TO CREATE NEW YORK PORTFOLIO CLEARING
New York , October 13, 2009 – NYSE Euronext (NYX) and The Depository Trust & Clearing Corporation (DTCC) today announced they have finalized their formal agreement to create their innovative new joint venture, New York Portfolio Clearing (NYPC). A draft application for NYPC to be granted status as a Derivative Clearing Organization with the Commodity Futures Trading Commission (CFTC) and draft amendments to the rules of DTCC’s Fixed Income Clearing Corporation (FICC) are expected to be circulated to the CFTC and Securities and Exchange Commission (SEC ), respectively, in the coming weeks. NYPC expects to be operational in the second quarter of 2010, pending regulatory approval.
“NYSE Euronext is thrilled to finalize this groundbreaking agreement with DTCC,” said Thomas F. Callahan, Chief Executive Officer of NYSE Liffe U.S. “NYPC is a story of innovation. Because of the strength of our Global Derivatives franchise, NYSE Euronext is singularly positioned to partner with DTCC on this important initiative due to our proprietary technology, strong capital base, broad market connectivity, and our industry-leading futures clearing expertise.”
NYPC has the potential to provide substantial capital relief to the industry, while opening the U.S. futures market to new competition. By margining cash and derivatives markets in a “single pot,” rather than through existing cross-margining agreements, NYPC will be the first to bring together cash positions and their natural derivatives hedge in an open manner designed to substantially improve both operational and capital efficiency. At the same time, NYPC will significantly increase transparency by giving regulators a more comprehensive tool to manage and mitigate systemic risk across asset classes. FICC handled about $4.5 trillion in trading each day in the fixed income market in 2008.
“Through our open access model, DTCC intends to support competition in the U.S. futures markets. By extending the unique NYPC risk methodology to multiple markets and products, we will offer our unique capital efficiencies to a wide range of customers and market participants,” said Murray Pozmanter, DTCC Managing Director, Fixed Income Clearance and Settlement Group. “DTCC looked at several potential providers of derivatives clearing technology. We decided after careful review that NYSE Euronext has the robust, proven and ready technology and appropriate safeguards to ensure a successful launch of this initiative. The other providers did not have the technology to meet those criteria.”
NYPC’s risk and margin methodology will be unique in the industry. The new clearing house will promote competition in the U.S. futures market by accepting and clearing trades from multiple qualifying trading platforms and clearing organizations after an initial period designed to successfully launch and ensure NYPC’s systems and risk management are working optimally and consistent with the requirements of regulators. “A sequential rollout has been endorsed by our Board and our customers as a prudent strategy to minimize implementation risk and to ensure the success of New York Portfolio Clearing,” Pozmanter said.
NYPC will be a 50/50 joint venture between NYSE Euronext and DTCC. 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. Pending required regulatory approvals, NYPC initially plans to clear interest rate products traded on NYSE Liffe U.S. NYPC will be powered by NYSE Euronext’s market leading clearing technology, TRS/CPS , which currently facilitates member position management for the NYSE Liffe market in London and ICE Clear Europe. DTCC will provide FICC’s market-leading capabilities in risk management, settlement, banking and reference data systems.
About NYSE Euronext
NYSE Euronext (NYX) is a leading global operator of financial markets and provider of innovative trading technologies. The company's exchanges in Europe and the United States trade equities, futures, options, fixed-income and exchange-traded products. With more than 8,000 listed issues, NYSE Euronext's equities markets -- the New York Stock Exchange, NYSE Euronext, NYSE Amex and NYSE Alternext as well as NYSE Arca – represent nearly 40 percent of the world's equities trading, the most liquidity of any global exchange group. NYSE Euronext also operates NYSE Liffe, the leading European derivatives business and the world's second-largest derivatives business by value of trading. The company offers comprehensive commercial technology, connectivity and market data products and services through NYSE Technologies. NYSE Euronext is in the S&P 500 index, and is the only exchange operator in the S&P 100 index and Fortune 500. For more information, please visit:http://www.nyx.com
The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, U.S. government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with financial firms and third parties who market these products. DTCC's depository provides custody and asset servicing for more than 3.5 million securities issues from the United States and 117 other countries and territories, valued at $27.6 trillion. Last year, DTCC settled more than $1.88 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com.
Fixed Income Clearing Corporation (FICC), was created in 2003 to reduce costs and give DTCC customers a common approach to fixed income transaction processing by integrating the Government Securities Clearing Corporation (originally created in 1986) and the Mortgage-Backed Securities Clearing Corporation (originally created in 1979). FICC’s Government Securities Division provides real-time trade matching, clearing, risk management and netting for trades in US Government debt issues, including repurchase agreements or repos (processing over $1 quadrillion in 2008). The Mortgage-Backed Securities Division provides real-time automated and trade matching, trade confirmation, risk management, netting and electronic pool notification to the mortgage-backed securities market (processing over $113 trillion in 2008).
Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning NYSE Euronext's plans, objectives, expectations and intentions and other statements that are not historical or current facts. Forward-looking statements are based on NYSE Euronext's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could cause NYSE Euronext's results to differ materially from current expectations include, but are not limited to: NYSE Euronext's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk and U.S. and global competition, and other factors detailed in NYSE Euronext's reference document for 2008 ("document de référence") filed with the French Autorité des Marchés Financiers (Registered on April 28, 2009 under No. R. 09-031), 2008 Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission or the French Autorité des Marchés Financiers. In addition, these statements are based on a number of assumptions that are subject to change. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by NYSE Euronext that the projections will prove to be correct. This press release speaks only as of this date. NYSE Euronext disclaims any duty to update the information herein.