| A# |
5706 |
| P&S #: |
5276 |
| DATE: |
November 5, 2003 |
| TO: |
ALL SETTLING BANKS |
| ATTENTION: |
MANAGING PARTNER/OFFICER; OPERATIONS PARTNER/OFFICER; CASHIER; MANAGER DATA PROCESSING DEPARTMENT |
| FROM: |
SETTLEMENT PRODUCT MANAGEMENT |
| SUBJECT: | IMPLEMENTATION OF CONSOLIDATED SETTLEMENT SYSTEM |
On November 4, 2003, The Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC) received regulatory approval to implement the DTC/NSCC Consolidated Settlement System. (See Important Notice A# 5704 (P&S #5274).) Effective December 5, 2003, the Consolidated Settlement System will become the single source of DTC/NSCC settlement data. Settling banks will no longer be able to access the PTS/PBS FFSB function, or the settlement section of the NSCC function. Settling banks wishing to view DTC and/or NSCC settlement data on and after December 5, must access the new SETB functions. (See NSCC Important Notice A #5612 (P&S #5182) dated May 12, 2003, for more information.)
Acknowledgement Processing
Effective December 5, DTC and NSCC will no longer accept settling bank acknowledgements via the DTC FFSB or the NSCC functions. Instead, settling banks will be required to acknowledge their consolidated settlement obligations or “refuse to pay” for a specified participant’s DTC and/or NSCC balance via the “Bank Acknowledgment” option on the new SETB function.
The current DTC/NSCC acknowledgement cutoff time of either 4:30 p.m. ET, or 30 minutes after “final figures” (whichever is later) will remain unchanged. However, the acknowledgement process will change slightly. Effective December 5, all settling banks, must acknowledge their settlement obligation regardless of whether their obligation is a debit, a credit, or a zero balance. Banks that settle solely for their own accounts in DTC and/or NSCC may, at their option, elect to opt out of the acknowledgement process. Any “opt out” will apply to the bank’s DTC and NSCC balance. (Settling banks should refer to NSCC Important Notice A #5704, issued November 5, 2003, which explains the opt out option in more detail.)
As a reminder, settling banks must have “A sign-ons” to access the consolidated settlement system to view DTC and/or NSCC settlement data, or to acknowledge and/or refuse end of day settlement obligations.
National Settlement Service (NSS)
In September of 2003, DTC mandated the use of the Federal Reserve Bank’s (Fed’s) National Settlement Service to settle all DTC end of day net-net debit obligations. With the consolidation of the DTC and NSCC settlement systems, DTC (as NSCC settlement agent) will begin collecting each settling bank’s consolidated debit obligation via NSS. Dual settling banks that have already signed a Settler Agreement (see Fed Operating Circular 12) will not be required to sign an additional agreement. Settling banks that have not previously signed a Settler Agreement with DTC (e.g. NSCC-only settling banks) will be required to sign the agreement prior to December 5. The Settlement Operations department will contact these banks directly to discuss the NSS process and provide necessary documentation. (Please refer to NSCC Important Notice A #5704 (P&S #5274) for details on the NSS process.)
Funds Transfer Processing
Effective December 5, NSCC settling banks should no longer wire funds to the NSCC Fed account (ABA 021051274) instead, as noted above, your account will be automatically debited via NSS. In the event a settling bank experiences extenuating circumstances on a particular day which result in its need to wire funds directly to DTC to satisfy its end-of-day net debit obligation, the current DTC Fedwire Message Entry Instructions should be used. Any settling bank that needs to wire funds to DTC’s account to satisfy a net debit obligation must notify Settlement Operations prior to acknowledging its settlement balance. The DTC Fedwire Message Entry instructions are as follows:
Receiving Bank ABA number: 026002066
Receiving Bank Name: DTC SDFS
Reference for Beneficiary: SET
Type Code: 1600
DTC will use each settling bank’s current DTC “wire instructions” to transfer funds related to settling bank net-net credit balances. The fund transfers will represent each settling bank’s consolidated DTC/NSCC balance. For settling banks that do not have current DTC wire instructions (NSCC-only settling banks), DTC will use the current NSCC wire instructions to transfer funds related to net-net settling bank credits.
The instructions used to submit intraday Settlement Progress Payments (SPPs) will remain unchanged.
The cutoff time for settling banks to wire funds to DTC to satisfy their DTC/NSCC settlement obligation (assuming settlement is not be performed via NSS) will remain at either 5:00 p.m. ET, or 30 minutes after the acknowledge cutoff (whichever is later).
Settlement Cutoffs
There will be no changes to the DTC/NSCC settlement cutoff times.
Reports
Beginning December 5, the NSCC MSS Settling Bank file (AutoRoute # 02132661) and the DTC Bank by Legal Entity Report via CCF machine-readable files will no longer be produced. Instead, a new DTC/NSCC Consolidated Settling Bank machine-readable (MRO) file (FFSBST) has been developed and replaces the NSCC MRO file that will be eliminated. (See NSCC Important Notice A #5612 (P&S #5182), dated May 12, 2003 for more information). Settling banks that want to begin receiving the new DTC/NSCC Consolidated Settling Bank file should contact the DTC/NSCC Participant Interface Planning (PIP) group at (212) 855-2694.
Additional information regarding the Consolidated Settlement System can be found in NSCC Important Notices A #5612 (P&S #5182), dated May 12, 2003, NSCC Important Notice A #5622 (P&S 5192), dated May 29, 2003, and NSCC Important Notice A#5698 (P&S #5268), dated October 23, 2003. Copies of these notices, as well as this Important Notice can be found at NSCC’s Web site http://www.nscc.com in the Important Notice section or DTC’s Web site http://www.dtc.org.
If you have any questions regarding the new consolidated settlement system, please contact your Relationship Manager at (212) 855-4155, Patricia Ryan at (212) 855-8427, Vincent Mc Devitt at (212) 855-5694 or the undersigned at (212) 855-8434.
John Abel
Director
Product Marketing and Development