The Depository Trust and Clearing Corporation (DTCC) is to expand its matching and confirmation facility, dubbed Deriv/Serv, to include equity derivatives.The equity derivatives service will provide automated matching and confirmation for over-the-counter equity index options and share options. It will handle new trades, terminations, increases, amendments and exits.
Deriv/Serv currently operates as a credit default swap (CDS) matching and confirmation service. The new equity derivatives service will go live next month and a similar platform for interest rate swaps and swaptions is planned for the end of the year.
The new service should reduce operational risks, and produce cost and time savings to its users. The system will automatically correct mismatches and reduce processing times.
Five banks - Citigroup, Deutsche Bank, Goldman Sachs, JP Morgan Chase and Morgan Stanley - have signed up to the new service. They all currently use the Deriv/Serv CDS platform.
Joe Willing, managing director in the equities department of JP Morgan Chase in London, expects the service to increase trading volumes and result in swifter trade resolution. He reckons confirmation will take place on trade day or T+1, compared with anything up to a week at the moment. The reduction in operational risk is also a highly desirable service, he said.
A spokesperson at the DTCC in New York said he expects several more banks to sign up to the service ahead of its launch. But he conceded that the system has yet to attract a critical mass of dealers.
A total of 32 banks have signed up to the DTCC's CDS matching and confirmation service since its launch late last year. This includes the top 15 dealers, said the DTCC spokesman. The system charges per trade and is priced at cost.
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