FICC to Develop New MBS Clearance System

The Fixed Income Clearing Corp., New York, has announced plans to develop central counterparty capabilities for the clearance and settlement of mortgage-backed securities, which it says will "significantly reduce risk, lower costs, and bring increased operational efficiencies to that marketplace."The MBS Division of FICC currently links security buyers and sellers for allocation, clearance, and settlement outside the clearing corporation, requiring settlement with multiple counterparties. The new system would incorporate all the clearing and settlement processes within FICC. The corporation said it would also provide members with a guaranty for eligible trades by interposing itself between the original trading parties and becoming the legal counterparty for settlement purposes. "This approach would break new ground for mortgage-backed securities customers," said Tom Costa, FICC's president and chief operating officer. ".... In fact, a basic objective of this initiative is to provide a seamless processing environment from TBA trade capture straight through to pool delivery and settlement." FICC is a subsidiary of The Depository Trust & Clearing Corp., which can be found online at http://www.dtcc.com.