F.A.Q.
The Depository Trust & Clearing Corporation

SPONSORED SERVICE
Frequently Asked Questions

Q. WHO IS FICC/GSD?
A. Fixed Income Clearing Corporation (FICC), a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation (DTCC),
is a central counterparty (CCP) and the leading provider of tradecomparison, netting and settlement for the U.S. Government
securities marketplace. FICC’s Government Securities Division(GSD) was established in 1986 to provide automated comparisonand settlement services, risk-management benefits and operational efficiencies to the Government securities industry.

Q. WHAT IS THE SPONSORED DVP SERVICE?
A. The Sponsored DVP Service allows eligible GSD Members to sponsor their clients into GSD membership. Eligible
transactions include two-directional (i.e., cash borrowing andcash lending) overnight and term DVP repo in U.S. Treasuryand Agency securities and outright purchases and sales ofsuch securities. Eligible securities types include:■■

US Treasury Bills, Bonds and Notes■■

US Treasury Inflation Protected Securities TIPS■■

US Treasury STRIPS				■■Non Mortgage-Backed Agency Securities■■

Floating Rate Notes FRNs

Q. WHAT ARE THE BENEFITS OF REPO CLEARING AT FICC?
A. The benefits of repo clearing at FICC include:■■

Reduction of counterparty risk through CCP guarantee ofthe completion of settlement in a member default
scenario.

■■

Balance sheet and capital relief opportunities. Centrally
clearing these transactions at FICC could alleviate
constraints on Members by enabling them to reduce
capital usage via netting and lower risk weights in theirrisk-based capital ratios.

■■

Potential for growth of institutional investors’ on-loanbalances and income as borrowers shift their demand toCCP channels.

Q. HOW ARE SPONSORED MEMBER TRADES EXECUTED ANDSUBMITTED FOR NOVATION?
A. Sponsored Member trades are executed on a CUSIP-byCUSIP basis and submitted for novation into FICC’s Real-Time
Trade Matching (RTTM) System by the Sponsoring Member.

Q. WHAT IS THE TERM IN WHICH A SPONSORED DVP REPOTRADE CAN BE TRADED?
A. A Sponsored DVP repo term can be overnight or up to twoyears in duration.

Q. WHO CAN BE A SPONSOR?
A. Through the expanded Sponsored Service, a broader
category of market participants can participate in the service
as sponsors, including Dealers, non-US Banks and PrimeBrokers (all referred to as Category 2 Sponsoring Members).
The expansion also changed how the service can be used,with sponsors now able to let their clients trade withcounterparties other than themselves, providing sponsoredmembers with the same execution flexibility they have in thebi-lateral market today.

Q. WHAT ARE THE RESPONSIBILITIES OF A SPONSORINGMEMBER TO FICC?
A. A Sponsoring Member’s primary function is to guaranty
their Sponsored Member clients’ performance to the CCP.
Sponsoring Members also facilitate their Sponsored Member
clients’ trading activity and act as processing agents on theirbehalf for all operational functions, including trade submission and settlement with the CCP. In addition, Sponsoring
Members cover the costs of clearing on behalf of their Sponsored Member clients, such as margin, liquidity facilities,
loss mutualization and clearance fees.

Q. WHAT ARE THE QUALIFICATIONS FOR BECOMING ASPONSORED MEMBER?
A. Any legal entity that satisfies the Qualified Institutional
Buyer standard and has at least one Sponsoring Memberwilling to sponsor it into FICC/GSD membership is eligible toparticipate in the service as a Sponsored Member.

Q. WHAT ARE THE RESPONSIBILITIES OF A SPONSOREDMEMBER TO FICC?
A. Sponsored Members are principally liable to FICC for theirown securities and funds-only settlement obligations. Every
Sponsored Member must also have at least one Sponsoring
Member that is willing to sponsor it into GSD membershipand to satisfy the responsibilities of being a Sponsoring Member with respect to such Sponsored Member’s cleared activity,
including providing FICC with a back-stop guaranty of all of
the Sponsored Member’s obligations to FICC.

Q. DOES A SPONSORED MEMBER APPLICANT HAVE TO APPLYAT THE FUND LEVEL?

Q. DOES FICC REQUIRE A SPONSORING MEMBER TO HAVEANY KIND OF LIQUIDITY FACILITY FOR SPONSOREDMEMBER ACTIVITY?
A. Liquidity needs created by Sponsored Member tradeactivity will be considered in the aggregate when calculating
the Sponsoring Member’s Capped Contingent Liquidity
Facility (CCLF) requirement.

Q. DOES FICC HAVE A RULEBOOK THAT EXPLAINS THE
SPONSORED DVP SERVICE?
A. Yes, the GSD Rulebook is located on the DTCC.com website under the Legal/Regulatory section. Rule 3A specificallycovers this service.

A. Yes, all individual funds must go through the SponsoredMembership process.

Q. ARE SPONSORED MEMBERS SUBJECT TO DEFAULT LOSS
ALLOCATION OR MUTUALIZATION?
A. No, Sponsored Members are not subject to default loss
allocation or mutualization.

FOR MORE INFORMATION
If you would like further information, please contact Client Support at 1-212-855-7600, or by email at rmsupport@dtcc.com.
Or visit us on the web at www.dtcc.com

Copyright © 2019 The Depository Trust & Clearing Corporation. All rights reserved.
FICC is a clearing agency registered with and under the supervision of the Securities and Exchange Commission (SEC). In light of its designation as a Systemically ImportantFinancial Market Utility (SIFMU), FICC is also subject to oversight by the Federal Reserve. 14554-TC042019