The Depository Trust & Clearing Corp. is seeking industry comment on a new service designed to cap its own liquidity risk when it covers the default of a clearing member.The new service, called Continuous Net Settlement for Value, would allow DTCC to place "debit caps" on obligations of its National Securities Clearing Corp., in the event of a default that it has to cover. A debit cap would establish the maximum dollar amount that could be charged against the NSCC, in a default. NSCC would remain the central counterparty to a transaction but would not suffer a liquidity shortfall.Currently, the NSCC funds obligations of a defaulting member in the short term and may not always have immediate access to that firm's positions to complete its obligations. Therefore, NSCC must always have the correct amount of liquidity it needs on hand.
As part of the new system, NSCC would move from allowing CNS obligations and allocations to be processed as free of payment delivery of securities at the Depository Trust Company -- another DTCC subsidiary -- to a delivery versus payment system. NSCC clears transactions in U.S. equities. The DTC settles those transactions.