The DTCC is expanding the NSCC’s capabilities to advance post-trade Ops for ETFs.
Post-trade infrastructure provider the Depository Trust & Clearing Corp. (DTCC) reports that it is expanding its central clearing capabilities “to support options-based exchange traded funds (ETFs),” a move that will advance post-trade operations for ETFs.
“The new capability enables DTCC subsidiaries National Securities Clearing Corp. (NSCC) and Depository Trust Corp. (DTC) to centrally clear ETF shares that include listed options as underlying components via connectivity to The Options Clearing Corp. (OCC), further enhancing risk management, operational efficiency, and transparency in the rapidly growing ETF market,” officials say.
With the new framework, “ETF shares and DTC eligible components will be centrally cleared through NSCC and settled at DTC. Listed options components will be cleared by OCC, and NSCC will transmit instructions to facilitate the transfer of options positions between counterparties,” according to DTCC officials. The NSCC does not clear the underlying options themselves, but in partnership with the OCC, offers an integrated clearing workflow that aligns ETF share processing with options settlement.
“Options-based ETFs, including covered call and FLEX options strategies, have experienced significant growth in recent years, driven by strong investor demand and expanding product innovation,” officials say. The DTCC has enhanced its clearing model “to support this growth by extending central clearing to ETF structures that include listed options.”
In addition to expanding its clearing coverage, DTCC has also enhanced its liquidity and risk management capabilities for ETFs, officials say. “As part of this initiative, DTCC is introducing earlier access to preliminary ETF transaction data to support more timely liquidity estimation.”
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