DTCC and Cboe Clear Europe are collaborating to create a new clearing workflow for over-the-counter (OTC) cash equities. This initiative aims to integrate OTC cash equities trades into Cboe Clear Europe’s clearing environment, allowing these trades to be netted against on-exchange transactions for settlement.

The first phase involves linking DTCC’s Institutional Trade Processing (ITP) central matching service, CTM, with Cboe Clear Europe, explains DTCC in a press release. Pending regulatory approval, this connection is expected to be operational by the second quarter of next year. Cboe Clear Europe will be the first central counterparty (CCP) to connect to CTM.

“This joint solution enables us to bring greater efficiencies to our clients, helping to optimise their current post-trade workflows and operational processes as the global financial markets look to accelerate settlement cycles,” said Vikesh Patel, president of Cboe Clear Europe.

PostTrade 360 Nordic 2024

The project includes developing a proof of concept to link Cboe Clear Europe with DTCC’s tri-party trade matching workflow, CTM. This would allow prime brokers to receive a definitive copy of transaction details when a match is made between a hedge fund and executing broker via CTM. The matched trades could then be sent automatically to the CCP, offering netting and clearing advantages to clients of both organisations.

Reduce risks

DTCC and Cboe Clear Europe assert that this new workflow could reduce settlement and operational risks, lower capital requirements for OTC to CCP settlement, and decrease trade fails and defaults.