NYSE EURONEXT AND DTCC TO CREATE JOINT VENTURE FOR MORE EFFICIENT CLEARING OF U.S. FIXED INCOME SECURITIES AND DERIVATIVES
Will unite margining of cash positions with natural hedges for the first time
To provide unprecedented levels of transparency, single view of risk across asset classes
Industry veteran Dennis Dutterer to be appointed interim Chief Executive Officer
NEW YORK, NY – June 18, 2009 – NYSE Euronext (NYSE: NYX) and The Depository Trust & Clearing Corporation (DTCC) today agreed to create a joint venture for clearing U.S. fixed income derivatives. The new clearing house, New York Portfolio Clearing , “NYPC”, will combine the industry-leading capabilities of NYSE Euronext’s U.S. futures exchange (NYSE Liffe U.S.) and DTCC’s Fixed Income Clearing Corporation (FICC) to offer innovative risk management, clearing and settlement efficiencies for U.S. fixed income securities and derivatives. The initiative has been approved by the Boards of both companies and is expected to be operational in the second quarter of 2010, subject to definitive documentation and regulatory approval.
Margining cash and derivatives in a “single pot,” NYPC will bring together cash positions and their natural derivatives hedge in a manner designed to substantially improve operational and capital efficiency. It will provide a single view of risk across asset classes. As a result, NYPC intends to offer an unprecedented level of market transparency that can be used to identify and moderate systemic market risks. It is expected to facilitate more orderly risk mitigation and reduce settlement risks.
“Recent market dislocation has underscored the need to improve market efficiencies and provide more thorough and timely information about the positions of participants across asset classes,” said Duncan L. Niederauer, Chief Executive Officer of NYSE Euronext. “In uniting NYSE Euronext’s proven strength and expertise in execution with DTCC’s market-leading clearing capabilities, we will help to lower the traditional barriers between the cash and derivatives markets. NYPC will provide a more comprehensive view of participants’ overall risk exposure and increases capital efficiency through a cross-asset class risk management program.”
“Partnering with one of the world’s largest and most liquid exchange groups to create NYPC is a significant milestone in DTCC’s mission to mitigate risk and safeguard the integrity of the U.S. financial system,” added Donald F. Donahue, Chairman and Chief Executive Officer of DTCC. “By providing greater transparency of investment positions between cash and derivatives, NYPC will bring a superior match between traders’ total portfolio risk and the underlying margin requirements. Additionally, regulators will gain the ability to monitor market participants’ total exposure across multiple interest rate asset classes in real-time."
NYSE Euronext and DTCC have entered into an exclusive arrangement to pursue a 50/50 joint venture. 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 Registered Derivatives Clearing Organization status approval from the U.S. Commodity Futures Trading Commission as well as other required regulatory approvals, NYPC initially will clear interest rate products traded on NYSE Liffe U.S. , with the ability to add other exchanges in the future. 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.
NYSE Liffe U.S. intends to continue its successful partnership with The Options Clearing Corp., for its precious metals and MSCI equity index products.
"This groundbreaking clearing initiative is a clear demonstration of the serious, long-term commitment of NYSE Liffe U.S. to establish a world-class U.S. futures exchange for our customers," said Thomas F. Callahan, Chief Executive Officer of NYSE Liffe U.S. "In partnership with DTCC, we now have the ability to differentiate NYSE Liffe U.S. not only with innovative products, market leading technology, and competitive pricing, but also with powerful risk management, clearing and settlement efficiencies in the fixed income markets."
"We are very pleased to extend the tremendous efficiencies FICC currently delivers to the U.S. Treasury, Agency, MBS and Repo markets into the interest rate derivatives market," said Murray Pozmanter, DTCC Managing Director, Fixed Income Clearance and Settlement Group. "Through NYPC, DTCC’s growing membership of sellside and buyside firms will be able to achieve enhanced capital efficiencies to more effectively manage their businesses."
Dennis Dutterer will be appointed as interim CEO of NYPC. Bringing more than 25 years of experience to his new role, Mr. Dutterer will oversee a full-time executive team and work closely with the Board of Directors. He previously spent 20 years at The Clearing Corporation, progressing from general counsel to president and CEO and member of the Board of Directors. He also served as interim president and CEO at the Chicago Board of Trade, a partner at the Washington Law firm Wiley, Rein & Fielding and general counsel of the Commodity Futures Trading Commission.
About NYSE Euronext
NYSE Euronext (NYX) is the world's most diverse exchange group, offering a broad and growing array of financial products and services in Europe and the United States that include cash equities, futures, options, exchange-traded products, bonds, market data, and commercial technology solutions. With over 8,000 listed issues globally, NYSE Euronext's equities markets - the New York Stock Exchange, Euronext, NYSE Arca, and NYSE Amex - represent nearly 40% of the world's cash equities trading volume - 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. NYSE Euronext offers comprehensive global commercial technology, connectivity, and market data products and services through its innovative trading solutions unit, NYSE Technologies. NYSE Euronext is part of the S&P 500 index and the only exchange operator in the S&P 100 index. For more information, please visit: 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.
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