The SFT Clearing service introduces central clearing for equity securities financing transactions, including lending, borrowing and Repo to:
- Support central clearing of institutional clients’ equity SFTs intermediated by sponsoring members.
- Support central clearing of equity SFTs between full service NSCC members.
- Maximize capital efficiency and mitigates systemic risks by introducing more membership and cleared transaction opportunities for market participants.
The key parameters of the SFT Clearing service include:
- Requirement to submit SFTs to NSCC on a locked-in/matched basis by an approved submitter.
- All SFT activity has a term with overnight being supported on day 1. Settlements are allowed to pair off daily against new activity to minimize the operational burden of settling overnight obligations. NSCC calculates and processes price differences/mark-to-market that are created by the daily pair off.
- 100% in cash collateral is required to settle each cleared SFT. However, a member would be permitted, but not required, to post additional haircut above 100% (for example, 102%) to such clients.
- SFTs settle RVP/DVP at DTC.
- Upon the initial settlement of the SFT, NSCC novates and guarantees its final settlement.
- NSCC generally supports the activity in CNS eligible securities.
- NSCC processes certain mandatory corporate actions and cash dividends for novated SFTs.