NYSE Liffe U.S. announces the launch of DTCC GCF Repo Index Futures

NYSE Liffe U.S. announces the launch of DTCC GCF Repo Index Futures

04/01/2012

  • Innovative New Product Tracking the $400 Billion GCF Repo® Market
  • Exclusive Index License Agreement on DTCC GCF Repo Index
  • Will Enhance Liquidity and Efficiency in the U.S. Repo Markets
  • Tom Callahan of NYSE Liffe U.S. and Gary Chan of DTCC Discuss DTCC GCF Repo Futures:  http://youtu.be/YW--G2FBlD0

NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext (NYX), today announced it has secured an exclusive license to launch futures contracts based on The Depository Trust and Clearing Corporation’s proprietary DTCC GCF Repo IndexTM.   The DTCC GCF (General Collateral Finance) Repo IndexTM was created to enhance transparency and liquidity in the multi-billion-dollar GCF Repo® market.  It tracks the average interest rate paid each day for the most-traded general collateral repos involving U.S. Treasury securities, Agency securities and Agency Mortgage-Backed securities.  NYSE Liffe U.S. listed futures on the DTCC GCF Repo Index™ are expected to launch in early 2012 and will benefit from the powerful ‘one-pot’ margin efficiencies of New York Portfolio Clearing (NYPC).

“NYSE Liffe U.S. is excited to extend its successful partnership with DTCC to bring our customers another important tool to better manage risk,” said Thomas F. Callahan, CEO, NYSE Liffe U.S.   “Futures based on the DTCC GCF Repo IndexTM are an innovative new product designed to improve liquidity and efficiency in the U.S. financing markets. These products will allow financing desks to better hedge interest rate exposure using a liquid, transparent and centrally cleared futures instrument.  Initial feedback from customers indicates significant demand for these products and we expect them to quickly develop into a new short-term interest rate benchmark representing actual, fully-collateralized transactions in the underlying cash Treasury, Agency and Agency MBS markets.”

“Having a futures contract on NYSE Liffe U.S. directly linked to the DTCC GCF Repo IndexTM will give repo market participants a highly useful hedging tool, something they’ve been seeking for a long time,” said Murray Pozmanter, DTCC managing director and general manager, Clearing Services.  “In turn, the ability to hedge cash market repo contracts is likely to bring more participants and more liquidity into this market.  And finally, the ability to take advantage of the one-pot margining efficiencies offered by NYPC makes this an even more attractive contract and useful market tool.”

The DTCC GCF Repo IndexTM is the financial services industry’s first index to list average daily interest rates for General Collateral Finance repurchase agreements or the ‘GCF Repo®’ market, which clear at DTCC’s Fixed Income Clearing Corporation (FICC).  With index values published daily on the DTCC website at no charge, this index provides a highly transparent view of the repo trading activity netted each day and settled as part of the clearing process for all U.S. government securities trades.  Repos are typically a form of short-term secured loan that involves the sale of a security and the subsequent repurchase of the same security.  This data is utilized by a range of market participants around the world, including bank financing desks, interest rate swap traders, and industry regulators.

Futures on the DTCC GCF Repo IndexTM will enable traders to more effectively manage interest rate exposure via a new short term benchmark tied to actual, collateralized repo transactions.  These products will clear at NYPC, and therefore benefit from the features offered by this innovative clearing mechanism that combines the capital efficiencies achieved by calculating margin requirements based on the total risk within a portfolio of both FICC-cleared repos and futures. Trading on the LIFFE CONNECT®platform, these futures will be listed alongside the highly liquid NYSE Liffe U.S. Eurodollar and US Treasury Futures.