Smooth T+1 transition cuts market default buffer by $3.1bn

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Reduces counterparty risk.

The transition to one-day settlement across US capital markets is going smoothly, reducing the size of a cash buffer against counterparty defaults by about a quarter. The National Securities Clearing Corporation’s Clearing Fund — where market players post collateral to cover losses should one side to a trade fail to meet its obligations — has fallen to $9.1 billion, according to the Depository Trust & Clearing Corp. That frees up $3.

We are pleased to report a continued, smooth implementation,” said Brian Steele, President of Clearing & Securities Services at DTCC, in a response to emailed questions. “The industry is already seeing its benefits.” The switch to one-day settlement was intended to reduce risk in the financial system and is being watched closely by market participants for technical glitches or market turbulence amid the change-over.

 

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