What is the Fixed Income Clearing Corporation (FICC)?
The Fixed Income Clearing Corporation (FICC) is an agency that deals with the confirmation, settlement and delivery of fixed income assets in the United States. The agency ensures the systematic and efficient settlement of US government securities and mortgage-backed securities (MBS) transactions in the market.
The organization of the FICC must be distinguished from another acronym combining the same letters; in the latter case, FICC refers to “fixed income, currency and raw materials”, those instruments which generate “fixed” income.
Understanding the Fixed Income Clearing Corporation (FICC)
The Fixed Income Clearing Corporation (FICC) began operations in early 2003 and was created when the Government Securities Clearing Corporation (GSCC) and the Mortgage-Backed Security Clearing Corporation (MBSCC) merged. The clearing house is a subsidiary of the Depository Trust and Clearing Corporation (DTCC) and is divided into two sections: the State Securities Division (GSD) and the Mortgage-Backed Securities Division (MBSD).
Key points to remember
- The Fixed Income Clearing Corporation, or FICC, is an agency involved in the confirmation, settlement and delivery of fixed income assets in the United States.
- The FICC began operations in 2003 following the merger of the Government Securities Clearing Corporation and the Mortgage-Backed Security Clearing Corporation.
- The FICC can also refer to “fixed income securities, currencies and commodities”.
The role of the FICC
The GSD is responsible for processing new issues of fixed income securities and the resale of government securities. The division provides compensation for transactions in US government debt issues, including repurchase agreements or reverse repurchase transactions (pensions). Securities transactions handled by the State Securities Division of the FICC include treasury bills, bonds, notes, zero coupon securities, securities of government agencies and inflation-indexed securities. The GSD provides real-time transaction matching (RTTM) via an interactive platform that collects and combines securities transactions, allowing participants to monitor the status of their transactions in real time.
The mortgage-backed securities division of the FICC provides the mortgage-backed securities market with automated, real-time transaction reconciliation, transaction confirmation, risk management, clearing, and electronic notification of implementation. common (EPN). Thanks to the RTTM service, the MBDS immediately confirms the commercial executions which are legal and binding. A transaction is considered to be compared by the MBSD when the division makes available to members on both sides of a transaction output indicating that their business data has been compared. A transaction compared by the MBSD constitutes a valid and binding contract, and the transaction regulations are guaranteed by the Division of mortgage-backed securities at the point of comparison. The main players in the MBS market are mortgage originators, government-sponsored companies, registered brokers, institutional investors, investment managers, mutual funds, commercial banks, insurance companies and other financial institutions.
Through these two divisions, the Fixed Income Clearing Corporation helps to guarantee the systematic and efficient settlement of securities backed by the United States government and securities backed by mortgage loans. Treasury bills and bonds are settled on a T + 1 basis, while Treasury bills are settled on T + 0. To ensure consistent and efficient settlement of transactions, the FICC uses the services of its two banks. clearing, Bank of New York Mellon and JPMorgan Chase Bank. The FICC is registered with and regulated by the United States Securities and Exchange Commission (SEC).