Comparison sheet · 5 November 2026
NetWrap’s balance-sheet impact
NetWrap preserves original counterparty identity and reduces settlement funding amounts. It matches the principal reductions in these examples while retaining the original pairwise default-loss allocations.
M = $1 million; T = one unit of the same Treasury CUSIP. Principal is measured per aggregate balance-sheet side. Ordinary operating costs and service fees are assumed zero.
01 · Central clearing
NetWrap and FICC
Website central clearing overview example: seven repos, $47 million of gross principal per side. Eligible repo offsetting is assumed.
| Measure | FICC | NetWrap model |
|---|---|---|
| Net repo principal | $21 million | $21 million |
| Reduction from gross | $26 million 55.3% | $26 million 55.3% |
| Default fund and margin deposits | Required deposits; current total is not calibrated. | $0 for reference CCP risk in the exact model; bilateral margin and added risks are separate. |
| Counterparty exposure: identity | CCP and its loss waterfall | Original pairs retain reference default losses |
| Counterparty exposure: amount | Normal settlement: 21 M and 5 T, plus mutualized exposure to unrelated party defaults | Normal settlement: 21 M and 5 T |
| Added contract values | Apply repo and collateral accounting. | Added fair values remain recognized; final package not calibrated. |
Funding illustration under the proposed rules
The paper’s prospective FICC case assumes six standalone direct members and a $6 million fund floor. Add initial margin I and above-floor fund Γ, both unmeasured and in millions. Annual opportunity cost at 5%: $300,000 + $50,000 × (I + Γ).
Subject to approval; not a current charge or an incremental existing-member cost. NetWrap’s modeled structural carry is $0. Added implementation resources J cost $50,000 a year per $1 million at 5%. Actual J and agreed bilateral margin require measurement.
What changes: The exact model eliminates default-fund and CCP margin deposits for reference risk. Netting reduces settlement funding and can ease liquidity pressure without mutualizing reference losses. Released deposits free cash; they do not reduce total assets.
Central clearing method, assumptions and annex →02 · Trade compression
NetWrap and the OSTTRA benchmark
Website trade compression overview example: three $4 million repos, $12 million per side. The assumed direct B-E conversion is not a measured OSTTRA result.
| Measure | OSTTRA benchmark | NetWrap model |
|---|---|---|
| Funded principal | $4 million | $4 million |
| Reduction from gross | $8 million 66.7% | $8 million 66.7% |
| Base added margin, fund and exit reserve | $0 in the unmargined case | $0 in the unmargined case |
| Counterparty exposure: identity | New B-E pair | Original B-D, D-C and C-E pairs retained |
| Counterparty exposure: amount | Normal settlement: 4 M and 4 T | Normal settlement: 4 M and 4 T |
Added fair values and optional reserves
Low-scenario gross fair values are $4.006 million per side for NetWrap and $3.998 million for the benchmark: $8,000 extra per side, or 0.20% of $4 million. Extra amounts are $40,000 at the threshold, $400,000 under stress and $3,600 in joint default. These are sensitivities, not market quotes.
An optional $4 million liquidity reserve each for D and C totals $8 million and costs $400,000 annually at 5%. It is outside the base case and must preserve default recovery. Failed locks can create new calls on surviving pairs.
What changes: Original counterparty identity is retained while settlement amounts are netted down. This lowers funding calls, not the preserved reference closeout losses. There is no extra principal reduction or base margin saving over this benchmark.
Trade compression method, assumptions and annex →Smaller funding calls can advance the SEC’s settlement-risk objective without mutualizing reference losses. Lower total system risk and mandate compliance remain unproven. SEC Treasury clearing release, pp. 15–16 and 288–289.