Page 51 - PRIAA Glossary

DERIVATIVES CLEARING ORGANISATION (DCO)
A clearing house that enables parties to a transaction
to substitute, through novation or otherwise, the credit
of the clearing organisation for the credit of the parties. The term Derivatives Clearing Organisation was defined under the Commodity Futures Modernization Act of 2000 (CFMA). The DCO must register with the Commodity Futures Trading Commission (CFTC) before it can begin providing such services. The CFTC has issued several rule proposals related to DCOs, including: i) Financial resource requirements for derivatives clearing organisations and “systemically important” derivatives clearing organisations (SIDCOs) ii) Governance, conflict of interest mitigation and risk management requirements.
DESIGNATED CONTRACT MARKETS (DCM)
A board of trade or exchange historically designated/ regulated by the CFTC to trade futures, options, commodity futures, and commodity options. DCMs have been expanded to allow swap activity as a result of the Dodd-Frank Act.
DESIGNATED MATURITY
The time period for which the floating rate in a derivative transaction is quoted. For example, six month USD LIBOR, five year CDS, etc.
DETACHMENT POINT
The trigger point above the attachment point, at which losses- due-to-default in the underlying portfolio completely wipe out the tranche. For example, a 3-7% tranche has a 7% detachment point. After the losses-due-to-default hit 7% of portfolio notional, the 3-7% tranche is completely written down.
DETECTIVE CONTROL
A control that is put in place just after an event. Detective controls monitor activities to identify instances where procedures have not been followed.
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