Investment Operations


Securities Financing Transactions SFT DTCC

New service leveraged Provable Markets’ Aurora, and connectivity and integration from FIS to clear first trade

Infrastructure giant Depository Trust & Clearing Corporation (DTCC) has confirmed that its subsidiary National Securities Clearing Corporation (NSCC) has gone live with its Securities Financing Transaction (SFT) Clearing Service. The first trade was successfully executed between two leading market participant firms and cleared by NSCC, leveraging Provable Markets’ SEC Registered Alternative Trading System, Aurora, and connectivity and integration from FIS Securities Lending Processing Platform (formerly Loanet).

According to DTCC, the new service supports the central clearing of SFTs, which are any transactions where securities are used to borrow cash or vice versa, between NSCC full-service Members, as well as the central clearing of clients’ SFTs intermediated by Sponsoring Members or Agent Clearing Members. The US Securities and Exchange Commission (SEC) approved NSCC’s proposal to operate the SFT Clearing Service as a central clearing and settlement infrastructure for overnight borrows and loans of equity securities in May 2022.

The SFT Clearing Service was delivered to maximize capital efficiency and mitigate systemic risk by introducing more membership and cleared transaction opportunities for firms, DTCC said in a statement, adding that, with the new service, NSCC members can reduce their capital and balance sheet usage by novating their lending and borrowing activity, including activity with third-party NSCC Members and with their institutional clients, to the clearing corporation, thereby creating new possibilities for increased lending and borrowing capacity.

“Centrally clearing SFTs has the potential to transform the securities lending market for the better, with benefits including new borrowing and lending opportunities for a wide range of counterparties, balance sheet and capital optimization opportunities, reduced operational burdens such as Agent Lender Disclosure (ALD), and lowered systemic risk,” said Laura Klimpel, DTCC General Manager of Fixed Income Clearing Corporation (FICC) & Head of SIFMU Business Development.

To capture maximum capital and balance sheet efficiencies, all SFTs are required to be executed as overnight transactions. However, to minimize the operational burden of settling overnight obligations, settlements are allowed to pair off daily against new activity, with NSCC calculating and processing a Price Differential/mark-to-market (MTM), that are created by the daily pair off. The terms and conditions for the use of the SFT Clearing Service are set forth in NSCC’s Rules.