DTCC Launches Risk Monitoring System


National Securities Clearing Corporation (NSCC), a subsidiary of The Depository Trust & Clearing Corporation (DTCC) has launched DTCC Limit Monitoring, an early warning system that alerts firms to trading activity that is nearing defined trading limits.

Subject to regulatory approval of the filing, the tool will enable firms to effectively manage potential risk exposure for both their own accounts and their clients’ accounts for the trading in equities, corporate and municipal bonds, and unit investment trust instruments.

DTCC Limit Monitoring offers a holistic view of broker-to-broker trading cleared from exchanges and SROs. “It is a post-trade tool we are offering member firms that will alert them as it relates to transactions that have come into NSCC that have either reached early warning levels or breached established trading limits,” said Bill Kapogiannis, vice president at DTCC Equities Clearing. “It will provide a holistic view of all broker to broker transaction cleared across all exchanges and trading platforms. We understand that SROs are working on tools to offer their members, and this tool works collectively across these platforms.”

“DTCC continues to work in collaboration with the industry to identify ways to help strengthen critical market infrastructure by developing tools to better manage trading activity across the equity markets,” said Andrew Gray, DTCC managing director, core business management.

Andrew Gray, DTCC

Andrew Gray, DTCC

DTCC Limit Monitoring tool red-flags unusual or unexpected trading activity which may indicate a trading error or that a customer is trading outside the limits set by its clearing firm.

NSCC’s Universal Trade Capture (UTC) platform – a service that streamlines the way U.S. equity trade data is captured and distributed throughout the clearance process – will feed DTCC Limit Monitoring all broker-to-broker trading cleared from exchanges, Electronic Trading Systems, and dark pools and other liquidity destinations in the U.S., including Real-Time Trade Matching (RTTM) trades.

NSCC members that are either required to use the service under NSCC’s rules or who elect to use the service will input trading alert criteria, specifically identifying trading limits based on the net-notional value for trading activity of their clients and for their own trading desks.

If trading activity exceeds the pre-set early warning levels or established trading limits, DTCC Limit Monitoring will generate and deliver a warning or breach message. While NSCC members will be responsible for ensuring that the trading limits are appropriate, NSCC, at its discretion, may review those limits and discuss concerns with its members if the limits set are not aligned with recent trading activity.

In September 2012, the financial services industry formed a working committee comprised of exchanges, self-regulatory organizations (SROs), broker-dealers, buy-side firms and clearing organizations to discuss what actions the industry can take to improve the stability of the markets and how to better protect the system from unprecedented and unexpected future events. DTCC was an active participant in this working group.

The DTCC Limit Monitoring tool was introduced, which monitors all broker-to-broker trading cleared from exchanges and SROs. While other market participants may be developing additional risk management tools in connection with these recent industry-wide efforts, the proposed DTCC Limit Monitoring would be separate from and would operate completely independently from any such tools.

“This tool isn’t intended to replace other tools that exist for pre-trade risk management,” said Kapogiannis. “We understand that SROs are working on tools to offer their members, and this tool works collectively across these platforms.”

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