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DTCC Launches New ID Net Service to Streamline Clearance and Settlement of Affirmed Institutional Equity Trades
New York, August 11, 2008 – By combining and netting the broker side of affirmed institutional equity trades, ID Net, a new joint service offering of The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC), streamlines clearance and settlement, cuts customer costs and reduces fails associated with affirmed institutional equity trades. The U.S. Securities and Exchange Commission recently approved rule changes from DTC and NSCC allowing them to launch ID Net.
"Over the past couple years, we’ve seen marked growth in institutional trades, which has meant an increased number of steps, risks and costs in the overall clearance and settlement process," said Susan Cosgrove, DTCC managing director, Clearance and Settlement Group. "This service will benefit all parties involved in institutional trading by increasing the overall certainty of settlement for matched institutional trades, encouraging early affirmation and reducing risks. In addition, banks and broker/dealers will realize cost savings, with the DTC Institutional Delivery (ID) fee reduced in half for all eligible trades for those who participate."
Institutional Transactions and Eligible Trades
Unlike exchange trades and most prime broker trades, institutional delivery transactions do not currently flow through NSCC’s Continuous Net Settlement (CNS) automated book-entry accounting system; rather, these institutional transactions usually settle at DTC. The new ID Net service leverages the efficient netting and settlement capabilities of NSCC with the existing processing of DTC, allowing broker/dealer customers to net all eligible affirmed ID transactions against their other CNS transactions, if any, reducing the movements to and from a firm’s account.
With the new ID Net screens made available for customers in early June, the first trades eligible to settle via the service were on the settlement date of Monday, June 16.
Initially, only equity CUSIPs eligible for CNS — which have also been affirmed before 9 p.m. on T+1 — will be combined in the ID Net service. Corporate and municipal bonds and unit investment trust (UIT) issues will be excluded. Also excluded are transactions settling on the distribution day of a new issue, and transactions in issues undergoing a mandatory or voluntary reorganization, in CUSIPs with a CNS buy-in, and in securities appearing on one of the exchanges’ lists of “threshold” securities under Reg SHO. However, even leaving out these trades, it is estimated that more than 250,000 trades a day could be eligible for the ID Net service.
Collaborative Offering
A voluntary service, ID Net will be offered jointly by DTCC’s NSCC and DTC subsidiaries: broker/dealers must be participants of both NSCC and DTC, and banks must be DTC participants. All ID Net customers will be required to enter into separate "ID Net Subscriber" agreements with NSCC and/or DTC, as applicable, governing their use of the service.
The ID Net service was developed by DTCC in collaboration with its global joint venture company, Omgeo LLC, at the request of, and in consultation with, industry participants, including an active working group of broker/dealers and bank customers. Steve Matthews, managing director, product, at Omgeo commented: "Omgeo TradeSuite's enhanced interface with DTCC’s Settlement Services will further benefit our mutual clients to allow for the efficiencies offered by DTCC's ID Net implementation. This collaborative effort will streamline the way eligible affirmed institutional equity trades are cleared and settled at DTCC by providing industry participants with the benefit of netting transactions."
About DTCC
The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with financial firms and third parties who market these products. DTCC's depository provides custody and asset servicing for 3.5 million securities issues from the United States and 110 other countries and territories, valued at $40 trillion. Last year, DTCC settled more than $1.86 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC see www.dtcc.com.