On 11th January 2022, JSCC launched its new "Next JGB Clearing System", which covers clearing for Cash JGB and JGB Repo trades.
Together with the launch of this new system, JSCC introduced new functionality for "JGB Futures Pair-off Netting", to ease the settlement operations for clearing members, by facilitating the settlement netting in securities delivery between OTC JGB and JGB futures. This new framework should improve the settlement operations in a smooth, efficient, and safe manner.
While JGB repos are settled daily, JGB futures are settled quarterly, using a “Cheapest To Deliver” methodology.
JSCC provides different clearing services under separate “silos”, with each maintaining its own rulebooks, clearing member committees, and financial resources for default and operation losses. While this structure would contain any shock in one clearing silo from flowing into another, the settlement operations are more complicated for clearing members participating in JSCC’s multiple clearing services. Therefore, to ease the operational burden for clearing members using both clearing services, different settlements for long/short positions on the same day and the same JGB securities can now be netted using this new functionality.
Additionally, the new system has introduced a single sign-on (SSO) for member log in, which permits clearing members to use one ID to access multiple clearing systems. Also, the secondary site for this system is geographically distant from the primary site, to ensure that the clearing services can be provided continuously under a BCP scenario.
The average daily clearing volume of cash JGB and JGB Repo trades is 170 trillion yen (double-leg basis), with a settlement amount of 50 trillion yen, accounting for around 80% of total JGB DVP settlement. By using JSCC's clearing services, clearing members can enjoy an 80% netting efficiency with an approximate 80% reduction settlement. These efficiencies would not be available to them if their trades are uncleared and settled bilaterally.
Link to JSCC Statistics on OTC JGB Clearing: https://www.jpx.co.jp/jscc/en/statistics.html
Contact: Takao Sasaki, +81-50-3377-7351, ta-sasaki@jpx.co.jp