Fixed Income Clearing Corporation (FICC)

FICC,FICC is a subsidiary of the Depository Trust and Clearing Corporation, a holding company that also includes the National Securities Clearing Corporation and the Depository Trust Company. In January 2003, the Mortgage-Backed Securities Clearing Corporation merged with the Government Securities Clearing Corporation to form the FICC. For further information about the Government Securities Division and the Mortgage-Backed Securities Division, seeĀ www.ficc.com. composed of the Government Securities Division (GSD) and the Mortgage-Backed Securities Division (MBSD), compares and nets trades of U.S. Treasury securities, agency debt securities, and mortgage-backed securities. As the name implies, GSD clears and nets U.S. government securities and agency debt securities. MBSD provides automated post-trade comparison, netting, risk-management, and pool notification services to the mortgage-backed securities market. Securities eligible for MBSD clearing are mortgage-backed securities issued by the Government National Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and the Federal National Mortgage Association (FNMA).

FICC uses real time trade matching; trade details are compared and matched as soon as trade information is submitted. Successfully compared trades result in binding and enforceable obligations for settlement. Unmatched trades may be revised to achieve a trade match.

Successfully matched trades of eligible securities, for FICC netting service participants, are netted against offsetting net-receive or net-deliver obligation of the same security. Once the government securities net positions are determined GSD interposes itself between the original trading parties and becomes the legal counter-party to FICC members for settlement purposes. Therefore, GSD members' net settlement obligations are delivered to or received from GSD. MBSD, however, engages in multilateral position netting and does not stand in the middle of transactions. Final net settlement obligations of GSD and MBSD participants are settled through the Fedwire Securities Service via participants' settlement bank.

 

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