Michael Bodson is the chief operating officer, as well as the president and COO of the three Depository Trust & Clearing Corp. (DTCC) operating subsidiaries: The Depository Trust Company, National Securities Clearing Corporation and Fixed Income Clearing Corporation. On Apr. 23, it was announced that Bodson would succeed the retiring Donald F. Donahue as CEO of DTCC, effective July 1, 2012. Bodson will also become CEO of the three operating subsidiaries. Bodson talked this week with Douglas Ashburn, editor-at-large of John Lothian News and lead project manager for MarketsReformWiki and JLN managing editor Christine Nielsen.

Q: The business and regulatory climate has changed considerably in the few years you have been with DTCC. Could you talk about what has happened?

A: The re-regulation of the industry has had far-reaching impact and plays to the strengths of the asset the industry has created in DTCC. It really leverages our capabilities in terms of processing, risk management, in data, and our network globally. The most obvious example is the global trade repository for swaps, which built on the warehouse we had done for credit default swaps. That acted as a backbone for the mandate to create the GTR system globally.

As the regulations continue to be rolled out and as the industry continues to analyze the impact, there will be more opportunities to leverage what we have in place. We are working closely with the industry in terms of understanding where we can add value and leverage the investments we have made. Lastly, being a central counterparty and risk manager, the appreciation for – not only ourselves, but all the CCPs in the world – how we help mitigate risk and how we bring stability to the financial market has gone up in appreciation tremendously. That also puts pressure on us in terms of how regulators and market participants will expect us to perform at a high level. That is the most important thing we do. Failure of a CCP would really cause a ripple effect in the entire financial infrastructure. They have raised the bar on our performance, and we have to act accordingly, and that is a challenge we are up to meeting.

Q: And that challenge will be your main focus going forward with DTCC?

A: In anything we do, we can’t lose sight of what we handle on a day-to-day basis. We handle 100 million transactions. If we go down, the markets don’t function, and we understand that is a major obligation and responsibility. So, we can’t fall in love with any new opportunity and lose sight that what we do on a day-to-day basis is critical to the functioning of the world’s largest market.

For the rest of the interview, visit MarketsWiki at http://jlne.ws/I7fA2y

CFTC Charges Royal Bank of Canada with Multi-Hundred Million Dollar Wash Sale Scheme

The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a complaint in federal district court in New York charging the Royal Bank of Canada (RBC), a Canadian bank and financial services firm doing business in New York, with conducting a multi-hundred million dollar wash sale scheme in connection with exchange-traded stock futures contracts.  The CFTC’s complaint also alleges that RBC willfully concealed, and made false statements concerning, material aspects of its wash sale scheme from OneChicago, LLC (OneChicago), an electronic futures exchange, and CME Group, Inc. (CME Group), the entity that exercised the regulatory compliance function for OneChicago.

Euro Unemployment Hits 10.8 Percent
Yahoo! Finance
Unemployment in the 17 countries that use the euro hit the highest level since the currency was introduced in 1999, rising to 10.8 percent in February.U.S. CONTRAST: A bigger-than-anticipated downturn in the manufacturing sector added to the gloom. A purchasing managers’ index gauging business activity fell to a three-month low in March.
http://jlne.ws/HfHYkY

Senior citizens continue to bear burden of student loans
The Washington Post
The burden of paying for college is wreaking havoc on the finances of an unexpected demographic: senior citizens. New research from the Federal Reserve Bank of New York shows that Americans 60 and older still owe about $36 billion in student loans, providing a rare window into the dynamics of student debt. More than 10 percent of those loans are delinquent
http://jlne.ws/Hi2OMw

ECB meeting at a wobbly moment
FT.com
http://jlne.ws/H8WsQ8

Mortgage Write-Downs Get New Push
WSJ.com
The Obama administration’s offer to subsidize write-downs of mortgage-loan balances for some heavily indebted homeowners is putting the federal regulator who oversees Fannie Mae and Freddie Mac in a bind by forcing the agency to rethink its long-held opposition.
http://jlne.ws/HERJYu

MF Global’s distribution plan draws trustee’s criticism
Futures
MF Global Inc.’s plan to distribute $685 million drew criticism from the trustee for its parent and objections from the defunct brokerage’s customers.
http://jlne.ws/Ha4fCE

Social Security Revenue Unexpectedly Jumps Past Pre-Recession Levels
Business Insider
Social Security (SS) has released estimates for both payroll tax revenues and benefits paid for April. The results are adjusted for the 2% payroll tax reduction.  (The Treasury pays SS monthly for the shortfall.) The numbers tell an interesting story.
http://jlne.ws/HDXO4A

Fed Policy and Inflation Risk” by Martin Feldstein
Project Syndicate
During the past four years, the United States Federal Reserve has added enormous liquidity to the US commercial banking system, and thus to the American economy. Many observers worry that this liquidity will lead in the future to a rapid increase in the volume of bank credit, causing a brisk rise in the money supply – and of the subsequent rate of inflation.
http://jlne.ws/H9UqBh

February construction spending falls 1.1%
MarketWatch
Construction spending fell 1.1% in February to a seasonally adjusted annual rate of $809 billion, the Commerce Department said Monday. Economists polled by MarketWatch had expected a 0.7% gain.
http://jlne.ws/Hfat1W

U.S. swaps pushout rule to kick in July 2013
Reuters
Banking regulators said on Friday that the controversial rule requiring banks to spin off some of their swap trading into affiliates will not take effect until July 16, 2013.
http://jlne.ws/HOkZv9

NYPC Names Sandy Broderick as Chief Executive Officer
The Sacramento Bee/PR Newswire
New York Portfolio Clearing (NYPC) today announced the appointment of Alexander “Sandy” Broderick as Chief Executive Officer.  His appointment comes at an important time for the company as volumes grow and it expands its portfolio of products through its “one-pot” model.
http://jlne.ws/HOjddt

Bond King’s Trade Pays Off
WSJ.com
The bond king might be making a comeback. After suffering one of his worst performances ever in 2011, over the past three months, Bill Gross, manager of Pacific Investment Management Co.’s Total Return Fund, rode an aggressive bet on mortgage bonds to beat most of the fund’s rivals and the index against which bond-fund managers measure themselves.
http://jlne.ws/HPj9dr

NYSE Plans To Cut $250M In Expenses By End Of 2014
WSJ.com
NYSE Euronext (NYX) unveiled a plan to save $250 million in annual expenses by the end of 2014 as the exchange company refocuses on its independent strategy after the European Union blocked its planned merger with Deutsche Boerse AG.
http://jlne.ws/HaPTyu

Joins at a time of growth and great opportunity for NYPC –Experienced industry professional with over 20 years in Global Derivatives Trading

LONDON and NEW YORK, April 2, 2012 /PRNewswire via COMTEX/ — New York Portfolio Clearing (NYPC) today announced the appointment of Alexander “Sandy” Broderick as Chief Executive Officer. His appointment comes at an important time for the company as volumes grow and it expands its portfolio of products through its “one-pot” model.

“We are delighted to have secured Sandy’s wealth of experience to take NYPC forward,” said Thomas Callahan, NYPC Chairman and CEO, NYSE Liffe U.S. “He brings a unique blend of expertise in risk management, technology and clearing for OTC and listed futures products, so is ideally placed to lead NYPC during the transition from innovative start-up to a central player in the new market structure for multi-asset class derivatives clearing.”

A joint venture of The Depository Trust & Clearing Corporation (DTCC) and NYSE Euronext (NYX), NYPC was created to deliver capital and operational efficiencies to the U.S. futures market by evaluating and cross margining a clearing member’s risk on a portfolio basis across related cash fixed income and derivative positions. Having added 12 members in only one year of operation and surpassing 900,000 contracts in total open interest, NYPC also recently announced an agreement to explore the expansion of the existing “one-pot” to include interest rate swaps cleared by LCH.Clearnet’s SwapClear U.S. platform.

NYSE Liffe U.S. recently released a video touting its products and mapping out expectations for the next year. JLN Managing Editor Christine Nielsen talked with NYSE Liffe U.S. Chief Executive Tom Callahan about main points of focus, the competitive landscape and the soon-to-be-launched DTCC GCF Repo Index.

Launched on March 21, 2011 with 10 clearing member firms, New York Portfolio Clearing (NYPC) – a joint venture of The Depository Trust & Clearing Corporation (DTCC) and NYSE Euronext – clears U.S. interest rate futures and cross-margins such positions against fixed income cash instruments through DTCC’s subsidiary, the Fixed Income Clearing Corporation (FICC). Ira J. Krulik, chief operating officer of NYPC spoke this week with JLN Managing Editor Christine Nielsen. He shared what he believes are the advantages of NYPC’s risk management, “one-pot” cross-margining and clearance operations and its settlement efficiencies, in addition to his thoughts on where the NYPC may be headed from here.

Takeaways:

• Already, there are 11 approved clearing members, and several more in the pipeline.
• NYPC hopes to add options on futures by the end of this year.
• Locked-in delivery makes the process seamless.

 1) How did you come to be at the NYPC?

Ira Krulik: After over 30 years in the futures industry, I was approached at the 2010 annual Futures Industry Association (FIA) conference about my interest in the new venture. Once I understood who the parent organizations were and what they were planning to do, the concept became more intriguing. They were giving clients additional choice in the marketplace with a real value-add attached. Upon returning from the conference, I had the opportunity to meet with Walt Lukken, who had recently been named CEO of NYPC; but I spoke with my most important counsel, Mrs. Krulik, about the opportunity and she said, ‘Go for it!’

Press Release

New York, March 28, 2011 – NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext (NYX), today announced the immediate availability of 2-year, 5-year and 10-year U.S. Treasury futures along with U.S. Bond and Ultra Bond futures contracts.  These products complement the successful Eurodollar contract that debuted on March 21 with 189,484 contracts traded on NYSE Liffe U.S. in the first week.  By utilizing the revolutionary new clearing house, New York Portfolio Clearing (NYPC), customers trading any of these interest rate futures products will benefit from the combined value of trading on NYSE Liffe U.S. coupled with the “one-pot” margining power of NYPC.

“Today, we are extremely pleased to offer Treasury interest rate futures to customers of NYSE Liffe U.S.  Through the capital efficiency of the NYPC’s ‘one pot’ margin methodology and it’s unique automated delivery protocol, these Treasury futures represent a clear advancement in our customer’s ability to manage risk and optimize their use of capital,” said Thomas F. Callahan, CEO, NYSE Liffe U.S.  “We are grateful for the strong level of support we have received from our customers to date and we sincerely thank them for their partnership in building a competitive new choice in the U.S. futures market.”

Interest-rate futures traded on NYSE Liffe U.S. will benefit from the unique capital efficiencies of NYPC’s ‘one-pot’ margining which, for the first time ever, assesses margin across fixed income asset classes based on the actual risk of a clearing member’s portfolio.  Additionally, all U.S. Treasury futures traded on NYSE Liffe U.S. will benefit from an innovative, streamlined delivery process allowing for the seamless netting of futures and cash securities.  These innovations provide unique benefits to global futures market participants by reducing the cost, complexity and risk inherent in the traditional trading and clearing model.

NYSE Liffe U.S. is a global, multi-asset class futures exchange.  In addition to liquid mini-sized gold and silver futures, NYSE Liffe U.S. will become the sole U.S. exchange for MSCI-based index futures products on June 17, 2011.  On or before this date, futures on two of MSCI’s most widely tracked global benchmarks, MSCI Emerging Markets and MSCI EAFE, will cease trading on CME and migrate to NYSE Liffe U.S. 

About NYPC
NYPC is a joint venture of The Depository Trust and Clearing Corporation (DTCC) and NYSE

Euronext created to deliver unique capital efficiencies to the market by netting and reducing risks between a clearing member’s portfolio of cash bonds and derivatives.  It will also provide important operational efficiencies to its clearing members, including the “locked-in” trade delivery process that allows expiring futures to be seamlessly submitted to the Fixed Income Clearing Corporation (FICC) subsidiary of DTCC for physical delivery.  In 2010, FICC cleared and settled transactions valued at average of about $4.6 trillion daily.

About NYSE Liffe U.S.
In March 2010, the exchange sold a substantial minority ownership stake to six leading market participants, Citadel Securities, DRW Ventures LLC (an affiliate of DRW Trading Group), GETCO, Goldman Sachs, Morgan Stanley and UBS.  NYSE Liffe U.S. utilizes the proven LIFFE CONNECT® trading platform designed and maintained by NYSE Technologies that matched nearly 4.7 million contracts per day in 2010 on the NYSE Liffe European markets.  Offering a range of global connectivity options, NYSE Liffe U.S. enables its members to efficiently transact on the platform in a highly cost-effective manner while also utilizing other NYSE Euronext exchanges with unique pricing incentives and simplified access.

For more information on NYSE Liffe U.S., please visit: www.nyse.com/nyseliffeus

By Christine Nielsen, JLN Interest Rates Editor

New York Portfolio Clearing (NYPC) will be open to pursuing strategic relationships – including partnerships – in the days ahead, according to Walt Lukken, chief executive officer of the NYPC.

Lukken commented on the plans of the NYPC – a new clearing joint venture with The Depository Trust & Clearing Corporation (DTCC) expected to begin operations on March 21st. – during a telephone press briefing held Wednesday.

On Wednesday, it was announced that NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext (NYX), would begin trading Eurodollar futures on March 21, and would launch 2-year, 5-year and 10-year U.S. Treasury futures along with U.S. Bond and Ultra Bond futures products on March 28,  subject to regulatory filings.  These products will be cleared through NYPC, which has received all the required approvals from the Commodity Futures Trading Commission (CFTC) and the Securities Exchange Commission (SEC).

Regulators have already granted a reciprocal approval to the Fixed Income Clearing Corporation (FICC) allowing for the “one-pot” cross-margining arrangement with NYPC. The regulatory approvals would allow NYPC and FICC to proceed with a plan to offer “one-pot” margining for fixed income cash and futures positions, with the aim of reducing risk and delivering capital efficiencies to the markets.

Lukken assumed his position as CEO of the NYPC on May 1, 2010.  His charge was to lead NYPC’s drive to be the first clearing organization to margin cash fixed income positions and their natural derivatives hedges together, in a way designed to substantially improve both operational and capital efficiency.

NEW YORK–(BUSINESS WIRE)–New York Portfolio Clearing, LLC (NYPC), the innovative derivatives clearing house that will deliver single-pot margin efficiency between fixed income securities and interest rate futures, announced today that the Commodity Futures Trading Commission (CFTC) has granted NYPC registration as a U.S. Derivatives Clearing Organization (DCO) pursuant to the Commodity Exchange Act. The CFTC’s approval represents a significant step towards bringing the unique capital and operational efficiencies of NYPC to global fixed income traders.

“NYPC’s DCO registration is an important milestone in the transformation of the U.S. derivatives market towards a more open and competitive structure,” said Walt Lukken, Chief Executive Officer of NYPC. “The innovative operational and capital efficiencies of NYPC’s cross-margining system will be a powerful catalyst for new competition in our industry while increasing transparency and mitigating systemic risk. We appreciate the significant time and consideration that the Commission has taken in granting this groundbreaking DCO registration.”

NYPC is a joint venture of The Depository Trust & Clearing Corporation (DTCC) and NYSE Euronext (NYX). This platform was created to deliver unique capital efficiencies to the market by netting and reducing risks between a clearing member’s portfolio of cash bonds and derivatives. It will also provide important operational efficiencies that reduce systemic risk and enhance market efficiency, such as the “locked-in” trade delivery process to allow expiring futures to be submitted to FICC for physical delivery.

NYPC intends to initially clear Eurodollar and U.S. Treasury Futures for NYSE Liffe U.S., the U.S. derivatives exchange of NYSE Euronext. NYPC’s cross-margining arrangement with DTCC’s Fixed Income Clearing Corporation is currently under review with the CFTC and the Securities and Exchange Commission. Pending regulatory approvals, NYPC expects to begin operations in late first quarter of 2011.

For more information, please visit: www.nypclear.com.

About NYPC

New York Portfolio Clearing, LLC (NYPC) is registered as a U.S. Derivatives Clearing Organization with the Commodity Futures Trading Commission. Pending regulatory approvals, NYPC will clear interest rate products and will support the cross-margining of fixed income cash products from Depository Trust & Clearing Corporation’s Fixed Income Clearing Corporation with their related, offsetting derivatives trades in a “single pot.” This innovative approach to margining will deliver significant capital and operational efficiencies for market participants, while reducing risk and enhancing transparency. For more information, please visit: www.nypclear.com.