DTCC unveils public-facing VaR calculator ahead of US Treasury Clearing rule
10 July 2024 US
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The Depository Trust and Clearing Corporation (DTCC) has launched a public-facing Value at Risk (VaR) calculator.
The new tool will enable market participants to evaluate potential margin and clearing fund obligations related to the membership of the Government Securities Division (GSD) of DTCC’s Fixed Income Clearing Corporation (FICC).
According to the DTCC, the VaR calculator will play a crucial role for firms, as the post-trade market infrastructure expects US Treasury Clearing activity processed through FICC to rise by US$4 trillion daily, following the expansion of the US Securities and Exchange Commission’s (SEC) clearing mandate.
Tim Hulse, managing director of financial risk and governance at DTCC, says: “VaR is a widely used risk management concept in the financial services industry and is the primary component of GSD’s clearing fund requirements.
“The calculator considers factors such as historical data, volatility, and confidence levels to estimate VaR, increasing market transparency.”
The new calculator will provide market participants with the opportunity to calculate potential margin obligations on a simulated portfolio, for given positions and market value, using FICC’s VaR methodology.
Hulse adds: “FICC understands the urgency and importance of evaluating firms’ risk exposure associated with the expansion of US Treasury Clearing. The VaR calculator provides market participants with increased transparency into these obligations.”
As part of its commitment to the industry, DTCC continues to assess calculators, tools, and access methods to support the expansion of US Treasury clearing activity.
The new tool will enable market participants to evaluate potential margin and clearing fund obligations related to the membership of the Government Securities Division (GSD) of DTCC’s Fixed Income Clearing Corporation (FICC).
According to the DTCC, the VaR calculator will play a crucial role for firms, as the post-trade market infrastructure expects US Treasury Clearing activity processed through FICC to rise by US$4 trillion daily, following the expansion of the US Securities and Exchange Commission’s (SEC) clearing mandate.
Tim Hulse, managing director of financial risk and governance at DTCC, says: “VaR is a widely used risk management concept in the financial services industry and is the primary component of GSD’s clearing fund requirements.
“The calculator considers factors such as historical data, volatility, and confidence levels to estimate VaR, increasing market transparency.”
The new calculator will provide market participants with the opportunity to calculate potential margin obligations on a simulated portfolio, for given positions and market value, using FICC’s VaR methodology.
Hulse adds: “FICC understands the urgency and importance of evaluating firms’ risk exposure associated with the expansion of US Treasury Clearing. The VaR calculator provides market participants with increased transparency into these obligations.”
As part of its commitment to the industry, DTCC continues to assess calculators, tools, and access methods to support the expansion of US Treasury clearing activity.
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