Waters Rankings 2015: Best Sell-Side Clearing Provider ─ The DTCC

Cost pressures and diminishing profit margins have seen many tier-one banks exit the business altogether or downsize their clearing activities. And indeed, whereas Goldman Sachs and JPMorgan had won this award in past years, an industry utility—the Depository Trust & Clearing Corporation (DTCC)—has taken the prize for the second year in a row. A quick look at the initiatives the DTCC has delivered on this year explains why, but a theme emerges throughout all of them: that surety of clearing starts with better affinity for data.

To start with, the DTCC focused this year on global data harmonization, recommendations about which it presented to the IOSCO Committee on Payments and Market Infrastructure (CPMI) this June. The top-line priority remains standardization of approximately 30 data reporting fields for credit derivatives, with the goal of a unified trade identifier (UTI) coming to fruition by next year.

Another project that has gone live is Clarient, a new standardized reference data service and entity hub for verifying client information, developed in concert by the DTCC, six major banks, and several global buy-side firms. The hub provides greater standardization and transparency for a range of identification processes demanded by client on-boarding, from traditional KYC checks to Fatca. The DTCC also made news in this space this July, after soaking up the intellectual property and technology assets of the once promising but now-defunct provider Counterparty Link.

Finally, patience has begun to pay off in the push for T+2 settlement, as all four SEC commissioners this summer expressed support for the implementation of the shortened trading cycle by 2017, in the hope of reducing systemic risk and bringing the US in line with other global markets. The DTCC has additionally partnered with Sifma, the Investment Company Institute (ICI) and other industry participants in forming both a working group and steering committee to back the T+2 push, which no longer seems a pipedream. 

These three areas all illustrate the crucial role the DTCC now plays in nudging the industry forward, with a long view toward stability. While still a utility at heart, it is fair to say that as clearing and settlement have evolved well beyond their past, the DTCC has evolved as well—into something far more essential.

Cost pressures and diminishing margins have seen many tier-one banks exit the business altogether or downsize their clearing activities. And indeed, whereas Goldman Sachs and JPMorgan had won this award in past years, an industry utility—the Depository Trust & Clearing Corporation (DTCC)—has taken the prize for the second year in a row.