DTCC Processes Waves of Surging Equity Volume
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Capping one of the most volatile trading weeks in the history of Wall Street, DTCC seamlessly processed a record 209 million sides on Friday, October 10, 2008, a 15% increase over the previous record of 182 million achieved September 18.
“Despite the extreme volatility that continues to grip the markets, DTCC is bringing much-needed stability and soundness to the industry by processing record volumes of transactions without disruption,” said Donald F. Donahue, DTCC chairman and CEO, on October 14. “In the United States, what’s significant is that we have a unique vantage point because of our centralized risk management oversight of trading activity across more than 50 exchanges and ECNs, including the New York Stock Exchange, Nasdaq and American Stock Exchange. We can pinpoint exposure and modify margining requirements quickly, which is especially critical during periods of market volatility.”
More than 19 billion shares changed hands on October 10 in trading on the major markets. (The number of transactions is different from shares; a single NSCC transaction, also called a side, can be for any amount of shares – for instance, 100 shares or 1,000 shares – and can be for the buyside or sellside of a trade.)
DTCC’s extensive risk management system includes rigorous standards for membership, capital adequacy standards, financial disclosure and financial surveillance of participants, which are essential in protecting the soundness of the capital markets.
Another significant value that DTCC brings in managing risk is “netting down” or reducing the number of trade obligations requiring financial settlement, which also minimizes securities movement and reduces systemic risk for the industry.
The 209 million sides processed on October 10 represent the fifth volume record achieved since the financial turmoil began on September 15. During that week, DTCC processed record volumes on four consecutive days, including 182 million sides on September 18, 155 million sides on September 17, 154 million sides on September 16 and 128 million on September 15. The 209 million sides processed October 10 is 112.5% higher than the 2007 peak day of August 16, 2007.
Capacity and backup
DTCC is able to handle extreme market spikes because it has invested over the years in its technology infrastructure, which can handle 450 million sides per day. As a result, investors and financial firms can be confident that DTCC remains a steady force ensuring that their transactions will be processed.
In addition to managing risk, DTCC has to ensure adequate systems backup to support the markets. In its 30+ year history, DTCC’s family of companies has never experienced a system outage or service interruption that prevented clearance and settlement.
Lowest fees in the world
“DTCC members pay the lowest equity clearance fees in the world – just about a third of a penny per side,” Donahue said. “Baked into that one-third of a penny are enormous processing capacity and the most comprehensive risk management and business continuity programs in the world. These programs are designed to protect our members and guarantee that trades will be completed under both ordinary and extraordinary circumstances, which has the potential to save financial firms millions of dollars, especially when the markets are in turmoil. @