DTCC's Real-Time Payment Processing Service for Credit Default Swaps Goes Live.

NEW YORK -- As part of its effort to continue to transform and automate the over the counter (OTC) derivatives market, The Depository Trust & Clearing Corporation (DTCC) announced that it has successfully launched key enhancements to its payment matching and netting service, providing real-time input and matching and bilateral netting.

While initially being used for credit default swaps, the new enhancements allow DTCC to also provide payment processing for the entire OTC derivatives market. The new features facilitate bilateral payment netting, which is the adding and subtracting of all financial obligations between two trading parties, resulting in a single net payment. In addition, the enhanced service also provides an on-line, real-time inquiry and electronic messaging facility that can help accelerate the investigation and resolution process for unmatched payments.

"With the increased automation of OTC derivatives, these enhancements help simplify the way derivative transactions are handled and are bringing more cost efficiency to what has historically been a very manual and error-prone process," said Richard Ingram, global head of OTC Derivatives Settlements at Morgan Stanley. "In addition, by providing a central payments database and ultimately multi-currency settlement, DTCC is helping add further risk management and tighter controls to a rapidly growing industry."

These enhancements follow November's announcement that DTCC has brought into initial production an OTC equity derivatives matching and confirmation service. A plan to launch an interest rate derivatives matching and confirmation service is also slated for this quarter

Through DTCC's central payments system, the 30 leading dealers and buy-side firms now using the payments system can input and reconcile their payments at any time, for any transaction, whether originally matched and confirmed by DTCC's Deriv/SERV trade confirmation services, or confirmed elsewhere. It also leverages trade and account information captured in the Deriv/SERV trade system enabling the service to find and match payments more quickly, thereby increasing the level of efficiency of the cash flow matching process.

"DTCC also plans to help reduce settlement risks further by introducing full value-date settlement of payments in multiple currencies, management and matching of Standing Settlement Instructions and buy-side specific features such as payment affirmation, in 2005. Features such as rate reset notices for interest rate-related payments as well as features for other OTC derivatives asset classes are also in the development schedule," said Peter Axilrod, DTCC managing director, New Business Development. "Working closely with ISDA (International Swaps and Derivatives Association) and representatives from all aspects of the OTC derivatives community, our goal is to provide an end-to-end, straight through processing environment from trade confirmation to settlement, helping further reduce operational risk in the OTC derivatives market."

The original payment reconciliation service, launched in February 2004, required all firms to submit to DTCC batch files of all payment data related to their credit default trades six weeks prior to the quarterly payment date for these transactions. The service has been growing at an extremely rapid rate, over 50% quarter to quarter, with in excess of 530,000 payments processed in the first quarter of 2005. DTCC expects the recent enhancements to increase industry adoption even further, because it adds flexibility to the service by allowing parties to enter and match payment data at any time after a trade is agreed upon. These services are offered by DTCC Deriv/SERV LLC, a wholly-owned subsidiary of DTCC.

About DTCC

The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities and over-the-counter credit derivatives. DTCC's depository also provides custody and asset servicing for more than two million securities issues from the United States and 100 other countries and territories. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com.