The Depository Trust & Clearing Corporation (DTCC), the premier market infrastructure for the global financial services industry, and BNY (NYSE: BK), a global financial services company, today announced that DTCC’s Fixed Income Clearing Corporation (FICC) subsidiary has officially launched its Collateral-in-Lieu (CIL) service under its Sponsored General Collateral (GC) offering via BNY’s Global Collateral Platform, with BNY Securities Finance and Federated Hermes, Inc. (NYSE: FHI) successfully executing the first repo trade on the new solution.

The CIL service enhances FICC’s clearing model offerings by delivering significant margin and capital efficiencies and will accelerate the market’s transition to central clearing under the Securities and Exchange Commission’s (SEC’s) U.S. Treasury clearing mandate.

The service maintains the haircut typically posted by dealers to money market funds and other cash investors in triparty while implementing a CCP lien that is applied “in lieu” of both a Sponsor guaranty and margin posting to the CCP (in most circumstances). This approach eliminates double-margining for some Sponsored members and streamlines operational processes for market participants, leveraging the benefits of triparty.

Key Benefits of FICC’s Collateral-in-Lieu:

• Margin & Capital Efficiency: Reduces duplicative margin requirements for Sponsors and their clients.
• Operational Streamlining: Builds on FICC’s existing Sponsored Service processes and legal agreements.
• Central Clearing Access: Supports compliance with the SEC’s U.S. Treasury clearing rule while enhancing market liquidity.

The service leverages BNY’s triparty infrastructure for collateral management and settlement, supporting both “done-away” and “done-with” trade execution styles.

“We are pleased to officially launch our Collateral-in-Lieu service on BNY’s Global Collateral Platform and congratulate BNY Securities Finance and Federated Hermes on completing the first repo trade,” said Laura Klimpel, Managing Director, Head of DTCC’s Fixed Income and Financing Solutions. “This important milestone underscores our commitment to delivering innovative solutions that enhance margin and capital efficiency for all types of firms, to addressing issues within the industry and to supporting firms as they work towards regulatory compliance.”

“Collateral-in-Lieu represents a major step forward in the path to central clearing by introducing a margin and capital efficient means to clear repo transactions leveraging BNY’s Global Collateral Platform, the largest single liquidity pool for Treasury securities financing,” said Nate Wuerffel, BNY’s Head of Market Structure and Product Leader for the Global Collateral Platform. “This is the first of many trades that will help expand cleared repo activity ahead of the mandatory clearing deadline.”

“Federated Hermes is pleased to collaborate with BNY Securities Finance to be the first cash provider to execute a transaction on FICC’s Collateral-in-Lieu service,” said Susan Hill, CFA, senior portfolio manager and head of the Government Liquidity Group at Federated Hermes. “This solution expands our access to cleared repo, helping us to deliver value to clients while meeting evolving regulatory requirements. Collateral-in-Lieu reflects our commitment to ongoing innovation and the advancement of resilient market structure.”

“We’re proud to work with DTCC, BNY’s Global Collateral Platform and Federated Hermes to execute the first repo trade in Collateral-in-Lieu,” said Nehal Udeshi, BNY’s Head of Securities Finance. “This solution creates greater capacity for us to support client activity and is critical as the market scales toward mandatory clearing. It also reflects our BNY approach – bringing together capabilities across the company to deliver seamless, integrated solutions for our clients. We see Collateral-in-Lieu as an important enabler of broad participation, supporting client access and a more resilient cleared repo market.”

DTCC expects increased adoption of the Collateral-in-Lieu service in the coming months as the industry prepares for full implementation of the SEC’s clearing requirements at the end of 2026 and June 2027.