DTCC sluit succesvol faillissement Lehman Brothers af
NEW YORK--(BUSINESS WIRE)--30 okt, 2008-- De Depository Trust & Clearing Corporation (DTCC), de toonaangevende post-trade clearance en settlement infrastructuur van de Amerikaanse kapitaalmarkten, meldt dat het succesvol meer dan 500 miljard dollar schuldpapier heeft afgesloten waaraan marktparticipanten door het faillissement van Lehman Brothers waren blootgesteld. Dit is de grootste close-out in de geschiedenis van DTCC. DTCC meldt dat het niet verwacht de 'closing-out' van de lopende obligaties geen impact zal hebben op zijn behouden inkomsten of op de clearing fund deposto's van marktparticipanten.
( BW)(NY-DTCC) DTCC Successfully Closes out Lehman Brothers Bankruptcy
NEW YORK--(BUSINESS WIRE)--Oct. 30, 2008--
Largest Closeout in DTCC History; Prevents Losses for Industry
The Depository Trust & Clearing Corporation (DTCC), the leading
post-trade clearance and settlement infrastructure for the U.S.
capital markets, announced today that it successfully closed out over
$500 billion in market participants' exposure from the Lehman
Brothers, Inc. (Lehman) bankruptcy which occurred the week of Sept.
22. This was the largest close-out in DTCC's history. DTCC reports it
does not expect there to be any impact to its retained earnings or to
market participants' clearing fund deposits as a result of closing out
these pending trade obligations.
"The liquidation of Lehman was complex, involved multiple asset
classes, and required a methodical approach to mitigate potential
losses from outstanding trading obligations," said Donald F. Donahue,
DTCC chairman and CEO. "Without question, our ability to manage risk
and see exposure from a central vantage point was instrumental in
helping us ensure that market risk - and systemic risk - was avoided.
"During the crisis, DTCC also seamlessly processed four
consecutive days of record high equity trading volume, which reached
209 million transactions in a single day on Oct. 10, thus providing
certainty and stability for the financial system at a time of extreme
Lehman was a leading participant in DTCC's depository, clearing
corporations and OTC derivatives business. It ranked as a top three
user of DTCC's Mortgage Backed Securities Division (MBSD); in the top
five largest users of the Government Securities Division (GSD) and
Deriv/SERV and in the top 10 participants of National Securities
Clearing Corporation (NSCC) and The Depository Trust Company (DTC).
Lehman Brothers International (Europe) was a participant of DTCC's
European Central Counterparty Ltd. (EuroCCP) subsidiary.
DTCC subsidiaries, NSCC, the Fixed Income Clearing Corporation's
(FICC) GSD and EuroCCP, are central counterparties (CCPs) guaranteeing
that most trades outstanding at the time of a bankruptcy of a member
firm such as Lehman will be settled on the original terms. By acting
as CCPs, the clearing corporations step in between the seller and
buyer of each trade to assume the counterparty risk and the
responsibility to deliver the securities to the buyer and payment to
Mortgage-backed and Government Securities
FICC's MBSD handled the liquidation of a gross position of $329
billion in par value of Lehman's book of "to be announced"
mortgage-backed securities trades that were outstanding at the time of
its bankruptcy. Working with all the dealers, banks and other firms
with which Lehman had conducted trades, and acting as a "CCP for a
day," FICC MBSD was able to net down and resolve almost 90% of the
forward trades. Over the following few weeks, FICC gradually sold the
remaining net obligations into the market with no losses assessed
against MBSD members' clearing deposits and with no observed market
Lehman's pending U.S. Government securities trades ran to $190
billion (gross positions) at the time of the bankruptcy. FICC's GSD
guarantees the settlement of these trades once it accepts them for
clearing. In order to make good on its guarantee, FICC had to close
out the various positions, which ranged from repos to government
bonds. FICC successfully closed out these positions without impact on
Equities, Municipal and Corporate Bonds
NSCC, which is responsible for clearing and settlement of
virtually all broker-to-broker trades in the U.S. in equities and
corporate and municipal debt securities, faced total exposure of
approximately $5.85 billion from Lehman Brothers at the time its
accounts were closed.
NSCC's goal at this stage was to mitigate risk for its members and
avoid significant disruption in the marketplace. This included
processing and guaranteeing $3.8 billion in options exercises and
assignments from The Options Clearing Corporation for the quarterly
expiration on Friday, Sept. 19. The close out of these Lehman
positions at NSCC is substantially complete. Most of these positions
have been liquidated, and there are not expected to be any losses in
excess of the Lehman clearing fund held, resulting in no losses to be
allocated to other NSCC members.
A portion of Lehman's obligations at NSCC was successfully
resolved when DTCC's subsidiary, The Depository Trust Company (DTC),
took the lead in working with Lehman's pledgee bank to arrange for the
release of $1.9 billion in securities, which were used to satisfy open
trades at NSCC. As a result, NSCC did not need to go to the
marketplace to purchase securities to complete these trades. In
addition, DTC managed the net debit cap controls on Lehman's accounts
throughout this period to limit any potential loss to the depository
and its participants.
FICC and NSCC retained a third party adviser to assist in
liquidating positions held by the clearing corporations. The third
party adviser provided advice and helped determine the best strategy
to hedge the portfolios, minimize risk and conduct an orderly
liquidation without disrupting the markets.
EuroCCP, a U.K.-based subsidiary of DTCC which is providing
pan-European clearing and settlement services for multilateral trading
facilities, also had to deal with closing out trading positions for
Lehman Brothers International (Europe) just one month after its start
of business and even before EuroCCP officially went into full
production on Sept. 22.
EuroCCP suspended Lehman from new trade input on Sept. 15, but
continued to settle as many of the open positions as possible with
Lehman's agent banks so it could deliver the securities to other
participants on the same day. Lehman had open trades in 12 markets and
six currencies, totaling almost EUR 21 million. About EUR 5 million in
trades were settled by Lehman's agents on Sept. 15.
The next day, EuroCCP ceased to act for Lehman once it became
clear that Lehman's agent banks would no longer be settling the
remaining positions. EuroCCP engaged a broker to close out the EUR 16
million in remaining positions. EuroCCP settled with the broker on
T+1, instead of the usual T+3 cycle, which accelerated the fulfillment
of its obligations to participants who were awaiting delivery of
securities. EuroCCP successfully completed its closeout of Lehman's
open positions without the need to use EuroCCP's Guarantee Fund.
OTC Derivatives Trade Information Warehouse
DTCC also acted to minimize risk for its OTC derivatives customers
from the Lehman bankruptcy. The actions included stopping the
automated central settlement of credit default swap (CDS) payment
obligations on Sept. 15 that were maintained in DTCC's Trade
Information Warehouse (Warehouse) for counterparties of Lehman
Brothers International (Europe) and Lehman Brothers Special Financing,
Inc. DTCC also assisted counterparties in removing from the Warehouse
more than 300,000 CDS contract positions that market participants held
On Oct. 21, DTCC also completed, without incident, the automated
credit event processing of Lehman Brothers Holdings Inc. (LBHI)
involving $72 billion of credit default swaps. DTCC calculated and
bilaterally netted all amounts due on credit default swaps written on
LBHI. This resulted in approximately US$5.2 billion owed from net
sellers of protection on LBHI to net buyers of protection. The portion
of this net funds settlement allocable to trades between major dealers
was handled through the normal settlement procedures of CLS Bank
International, DTCC's settlement partner for the Warehouse and the
world's central settlement bank for foreign exchange.
DTCC's Comprehensive Risk Management and Strategy
With a 35-plus year history in clearance and settlement, DTCC was
able to draw upon its proven experience in effectively managing and
controlling risk associated with a financial firm failure. As part of
its comprehensive risk process, DTCC regularly puts its risk and
operating systems, as well as staff, through intensive testing that
simulate the possibility of a crisis. These exercises involve
simulating the steps DTCC would have to take to respond to a major
financial firm failure. Even though it seemed like a far-fetched
scenario at the time, on two occasions over the past 12 months, DTCC
actually conducted tabletop exercises simulating the failure of a
major investment bank. Members of DTCC's Board and representatives of
various regulatory authorities participated in the second of these
exercises as observers.
"Although we didn't really expect to have to put the experience we
gained from those exercises to work any time soon, events proved
otherwise," said Donahue. "They both provided highly useful practice
runs for what DTCC and our market participants have been dealing with
in recent months."
DTCC, through its subsidiaries, provides clearance, settlement and
information services for equities, corporate and municipal bonds,
government and mortgage-backed securities, money market instruments
and over-the-counter derivatives. In addition, DTCC is a leading
processor of mutual funds and insurance transactions, linking funds
and carriers with their distribution networks. DTCC's depository
provides custody and asset servicing for more than 3.5 million
securities issues from the United States and 110 other countries and
territories, valued at US$40 trillion. In 2007, DTCC settled more than
US$1.86 quadrillion in securities transactions. DTCC has operating
facilities in multiple locations in the United States and overseas.
Judy Inosanto, 212-855-5424
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