Introduction to DTC’s Asset Servicing
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Transcript of Introduction to DTC’s Asset Servicing
Introduction to DTC’s Asset ServicingIntroduction to DTC’s Asset Servicing
Cheryl T Lambert
ACSDA 2007
Cheryl T Lambert
ACSDA 2007
2
DefinitionDefinition
•We take over after a trade is executed on an Exchange
•Sellers receive money and buyers receive securities
•Billions of dollars each day
•We take over after a trade is executed on an Exchange
•Sellers receive money and buyers receive securities
•Billions of dollars each day
Clearing and Settlement
3
Servicing ResponsibilitiesServicing Responsibilities
• Electronic ownership (book entry) of securities is the standard
• Physical certificates (physicals) may be held by an investor (beneficial owner). This presents more risk and is more expensive to process than book entry
• DTC services all securities
• Electronic ownership (book entry) of securities is the standard
• Physical certificates (physicals) may be held by an investor (beneficial owner). This presents more risk and is more expensive to process than book entry
• DTC services all securities
4
Asset Services SchematicAsset Services Schematic
Start
Set-up Receive
documents, enter preliminary data in UNDX, create ID
& folder
UnderwriterEligibility Questionnaire, prospectus & LOR
EligibilityReview and verify documentation and process issue.
Quality Assurance
Verify critical data fields
Closing
Close issue & confirm Fast Bal with agent
VerificationMaster file caparison vs. Bloomberg
Master File updated MFC & Position Capture
Dividend Announcements
Validate announcement is correct
Agents/Vendors/ Web/ Internal
areasReceive Announcements info MFC, vendor and agent feeds
Dividend Announcements
Announce income event. update ANNA
RedemptionsReceive
notification of upcoming
Redemption event
Agent/ Vendors/WebRedemption informationPartial Call Full CallCash Maturities
RedemptionsVerify information
is sufficient to accurately process
notice
RedemptionsPre-
Lottery - prepare and correct data
RedemptionsRun Lottery Redemption
amount assigned to Participant s
RedemptionsVerify results of
lottery corresponds to notification requirements
RedemptionsAnnouncement to
Participant
Stock Dividends
Identification & Notification
Stock Dividends
Announce the distribution
Stock Dividends
Allocate to Participant
Stock Dividends
Process entitlements
Agent/ Vendors/ Web/Newspapers
Corporate action information
Reorganization Announcements
CollectionValidation
Reorganization Announcements
Announce Reorganization event.
Cash ReceiptsConfirms created in DIRE (CUSIPS $ dollars agents will pay on payable date)
Cash ReceiptsSystemic match compares CUSIPS in DIRE to Agent Detail
Expectancy File created in DIRE
from MFC, Announcement &
ATP & DPAL
Agent Sends confirms to DTC with detail breakdow n CCF, DANO, Fax to Data & Hard copy
Agent Funds DTC's Account at Chase
Cash ReceiptsSystemic match dollars received equals dollars confirmed
Cash ReceiptsClose wire and receivable in DIRE
Cash ReceiptsCDM allocation to Participants via Chase
MandatoryIdentification & Notification
MandatoryEvent Settlement
MandatoryClose event
VoluntaryIdentification & Notification
VoluntaryEvent Settlement
VoluntaryClose event
VoluntaryElection Processing
Participant
Allocation via SDAR
Announcement via DIVA
Announcement
Announcement
ResearchOverpaymentsUnderpaymentsClaimsCollection
ŸŸŸŸ
UnderpaymentsOverpayments
ClaimsAdjustments
A J ourney Through Operations
"See where you fit and how you contribute"
Settlement Net settlement
Securities Processing
Participant customers Deposits, Withdrawals
& Custody
Election selected
Allocation
Allocation
Cash ReceiptsCUSIPS sent to Bookkeeping BKS
Underpayment OverpaymentNon-receipt
Announcement
CHCCustomer Inquiry
PINSPhone
ŸŸ
Inquiry
Transfer AgentIssue certificates Non-FASTFAST add to Balance
Securities Processing Packaging
Receive certificates from Agent (non-FAST) examine certificates
File in vault
Non-FAST
Securities Processing
Reorg Control pull certificates & send
to agent
Securities Processing
Redemption Control pull certificates Send to agent
Agent Funds DTCC
Account
WT Processing
Pull Certs from Vault (Non-FAST)Send to Agent to
transfer registration
Agent transfers
registration to CEDE add to
Balance
J uly 2007
Participants trade in market
Rejects
LOR TeamProcess LOR
Error Research/Lost Cert
Processing, adverse claims,
worthless securities, month
end confirms
Aging Transfer/FAST,
TA services
P&I Post ProcessingBank Rec,
Escheatments274 SCLs
DAM DepositsBranch
Branch/Legal
Restricted Deposits
Inner Vault Operations
Vault Storage
Receive Full Service & Merrill
LynchDeposits
Reorg Control match LTs/PMLs,
package
NY Window
Reorg Deposits
Custody
Deposit ProcessingCredit deposit
Image Sort , Match SCL
& Bag
Full Service Legal Deposits
Deposit ProcessingExamine & Credit
depositImage
Sort , Match SCL & Bag
Deposit ProcessingExamine & Credit
depositImage
Sort , Match SCL & Bag
Central Delivery Sends Deposits to
Agent
Transfer Ops/TroubleshootingReceives Transfer
Agent transfers change registration sends
to DTCC
FAST
Non-FAST
Transfer Opsstrip,image,data
enter & examine& Sort
TroubleshootingReject processing
Out-of Balance
Aged SCLs
In Balance
Proxy Service
Non-Fast
Receive transfer instructions
Negotiability Review
Send to Transfer Agent to transfer
registration
Sold
Return to Participant
Custody Vault process
Pull transfer request
Negotiability Review
Receive OTC or Envelope Service
File
Unsold
Deliver OTC or Envelope Service
Deliver to Customer OTW or
ESS
Deposit processing wand match &
Image Funds received by
Agent
Custody Reorg Deposits
Deposit processing
wand match & Image
Funds received by Agent
Reorg Control Custody - Restricted
match LTs/PMLs, package
Allocate
Send to Agent
Returned portion received from
Agent
Send to Agent
Returned portion received from
AgentAllocation
SPR Reports
Stock Record Research
Bank Reconciliation
Bank Reconciliation
Bank Reconciliation
R/D & Interium adj
Store in Custody Vault if no Delivers
Agent/ Vendors/
DTCCorporate action information
GCAComposit Record
Created
GCAVerification of
data
GCAAuthorization of
data
GCAFinal
announcement
Announcement
Underwriting Announcements CashProcessing
•Assets Services represents a major part of Operations
•Launched an employee engagement activity
•Can be summarized in several logical process steps
•Assets Services represents a major part of Operations
•Launched an employee engagement activity
•Can be summarized in several logical process steps
5
Examples of Asset ServicesExamples of Asset Services
Cash dividend
Stock dividend
Stock split
Periodic cash payments
Cash dividend
Stock dividend
Stock split
Periodic cash payments
Spin-off
Acquisition
Bond call
Spin-off
Acquisition
Bond call
Name change
Redemption
Reverse split
Merger
Name change
Redemption
Reverse split
Merger
6
UnderwritingUnderwriting
• Allows for book-entry distribution and settlement
• Facilitates straight-through processing
• Provides all asset servicing for the life of securities and other financial instruments
• Allows for book-entry distribution and settlement
• Facilitates straight-through processing
• Provides all asset servicing for the life of securities and other financial instruments
The DTC Underwriting area is responsible for the eligibility and distribution of newly issued securities, including municipals, corporate, and money markets instruments
The DTC Underwriting area is responsible for the eligibility and distribution of newly issued securities, including municipals, corporate, and money markets instruments
7
Announcements – Start ProcessAnnouncements – Start ProcessCollection
• Collect corporate action event information
• Consolidate data and prepare for comparison
Collection
• Collect corporate action event information
• Consolidate data and prepare for comparison
Validation
• Normalize, reconcile and enrich data
• Validate for accuracy and completeness
• Produce “scrubbed” announcement record
Validation
• Normalize, reconcile and enrich data
• Validate for accuracy and completeness
• Produce “scrubbed” announcement record
8
’07 Volume Data - Announcements’07 Volume Data - Announcements
0
100,000
200,000
300,000
400,000
500,000
600,000
Jan Feb Mar Apr May Jun Jul
Dividends, Redemptions and Reorganizations
9
Announcements – End ProcessAnnouncements – End Process
Settlement
• Deliver securities, if necessary
• Receive securities and/or money payment
Settlement
• Deliver securities, if necessary
• Receive securities and/or money payment
Reconciliations
• Allocate entitlements to investors
• Notify investors of final transactions
• Close out the event
Reconciliations
• Allocate entitlements to investors
• Notify investors of final transactions
• Close out the event
Notification
• Determine investors impacted by event and calculate entitlements
• Notify investors of announcement information
Notification
• Determine investors impacted by event and calculate entitlements
• Notify investors of announcement information
10
Mandatory and Voluntary EventsMandatory and Voluntary Events
11
Average Monthly Fund AllocationAverage Monthly Fund Allocation
$255 Billion Allocated *99.9%
* Cash Receipts and Reorganizations
12
Leveraging Six Sigma ToolsLeveraging Six Sigma Tools
•15 Green Belts in Asset Services
•Monthly tracking and review
•Improvement projects
•Enterprise-Wide Scorecard reporting
•Asset Services Sigma Level IndexAsset Services Sigma Level Index Timeliness and Accuracy Metrics across 6 Timeliness and Accuracy Metrics across 6 Business UnitsBusiness Units
Steady improving trend to 4.12 Sigma (0.44% Steady improving trend to 4.12 Sigma (0.44% defectives) in Junedefectives) in June
•15 Green Belts in Asset Services
•Monthly tracking and review
•Improvement projects
•Enterprise-Wide Scorecard reporting
•Asset Services Sigma Level IndexAsset Services Sigma Level Index Timeliness and Accuracy Metrics across 6 Timeliness and Accuracy Metrics across 6 Business UnitsBusiness Units
Steady improving trend to 4.12 Sigma (0.44% Steady improving trend to 4.12 Sigma (0.44% defectives) in Junedefectives) in June
13
Tracking The Results (June 2007)Tracking The Results (June 2007)
Sigma Levels By Month
3.53.63.73.83.9
44.14.24.3
Jan Feb Mar Apr May Jun
Sigma Level
Accuracy Timeliness Average
Our focus is on “continuous improvement”Our focus is on “continuous improvement”
14
Upcoming TopicsUpcoming Topics
•Lori Trezza – Corporate Actions Reengineering
•Bill Salva – International Tax Services
•David Hands – Global Corporate Actions
•Lori Trezza – Corporate Actions Reengineering
•Bill Salva – International Tax Services
•David Hands – Global Corporate Actions