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Central Counterparty Opportunities ACSDA, November 2002 Keith C. Kanaga DTCC

Central Counterparty Opportunities ACSDA, November 2002 Keith C. Kanaga DTCC. Some Trends Which May Influence CCPs. Increasing market growth Straight Through Processing (STP) needs Technology investment Increasing cross-border flows Multiple listings by issuers Internalization

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Central Counterparty Opportunities ACSDA, November 2002 Keith C. Kanaga DTCC

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  1. Central Counterparty Opportunities ACSDA, November 2002 Keith C. Kanaga DTCC

  2. Some Trends Which May Influence CCPs • Increasing market growth • Straight Through Processing (STP) needs • Technology investment • Increasing cross-border flows • Multiple listings by issuers • Internalization • Real-time trade guaranty • Product expansion, integration • Integration of CCPs, CSDs

  3. Focus • Demand for STP • Real-time trade guaranty • Continuing technology investment

  4. Demand for STP • High labor cost • Growth in business volumes • Reduced settlement time periods • Declining cost of IT hardware • Error cost • Operational risks

  5. Real-Time Trade Guaranty • Increased volume  increased risk • Volatility and market exposure • Regulatory concerns re systemic risk • Technology as an enabler

  6. Continuing Investment in Technology • Technology enables new solutions, e.g. handhelds, real time trade matching (RTTM), real time risk management • New product development • Demand for integration of new with existing products

  7. Continuing Investment in Tech (cont’d) • Increasing volumes • STP • Rapid implementation requirements • Competition from third parties

  8. Some Opportunities • The good news – all these play directly to CCP strengths • Limitations on achieving success – the cost, finite resources, and effort required to meet these requirements • What can we do to improve our chances of success?

  9. Improving Our Chances of Success • Integration • Already done – CCPs, CSDs, settlement systems, e.g. DTC, NSCC, others • Alliances • To do – others within same national boundaries, e.g. OCC • To do – others across national boundaries; links are a good start

  10. Improving our chances (cont’d) • Systems development • Jointly with other CCPs • Jointly through third-party providers, such as OM • Jointly operated systems – nationally, regionally

  11. Improving our chances (cont’d) • Opportunities for jointly operated systems • Applications Service Provider (ASP) • Business Service Provider (BSP) • Remote processing, or • On-site processing

  12. Benefits of Jointly Operated Systems • Cost reduction • Development • Operation • More rapid implementation • Broader range of products supported • Business continuity

  13. Benefits (cont’d) • Brand name retained (private label) • Low volume products can be supported cost effectively

  14. DTCC’s Plans • Committed to work with other CCPs • In U.S. • Cross-border • Both outsource and provide • Partnering with other firms with proven expertise in financial processing

  15. Central Counterparty Opportunities ACSDA, November 2002 Keith C. Kanaga DTCC

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