About Securities Financing Transaction (SFT) Clearing
The DTCC Securities Financing Transaction (SFT) Clearing service provides central clearing for equity lending and borrowing transactions, leveraging the clearing capabilities, risk management, and efficient infrastructure of the DTCC equities clearing subsidiary, National Securities Clearing Corporation (NSCC). The SFT Clearing service introduces central clearing for equity securities financing transactions, including lending, borrowing and repo to:
- Support central clearing of institutional clients’ equity SFTs intermediated by sponsoring members.
- Support central clearing of equity SFTs between full service NSCC members.
- Maximize capital efficiency and mitigates systemic risks by introducing more membership and cleared transaction opportunities for market participants.
When the SFT Clearing service is launched, the key parameters will include:
- Requirement to submit SFTs to NSCC on a locked-in/matched basis by an approved submitter.
- All SFT activity will have a term with overnight being supported on day 1. Settlements would be allowed to pair off daily against new activity to minimize the operational burden of settling overnight obligations. NSCC would calculate and process price differences/mark-to-market that are created by the daily pair off.
- 100% in cash collateral would be required to settle each cleared SFT. However, a member would be permitted, but not required, to post additional haircut above 100% (for example, 102%) to such clients.
- SFTs settle RVP/DVP at DTC.
- Upon the initial settlement of the SFT, NSCC would novate and guarantee its final settlement.
- NSCC will generally support the activity in CNS eligible securities.
- NSCC would process certain mandatory corporate actions and cash dividends for novated SFTs.