ACATS Settlement Process
The ACATS settlement process sends ACATS transactions for both CNS-eligible securities and non-CNS DTC-eligible assets into the same settlement process.
The process uses two CNS sub-accounts, and a dedicated NSCC CNS ACATS account at DTC. In this design, ACATS sends obligations in CNS-eligible assets, and non-CNS DTC-eligible assets obligations, into a new non-guaranteed ACATS process on ACATS settlement date. Under the new process, eligible ACATS transactions are aggregated into one net long position and one net short position per security per firm. This aggregation allows NSCC to track obligations at the underlying customer level. Therefore, NSCC could identify and reverse only incomplete obligations if one or more members default on ACATS settlement date (multilateral netting of ACATS obligations under the new process would prevent NSCC from tracking them at the underlying customer level).
In this process, neither DTC nor NSCC has a lien on shares delivered as a result of ACATS transfers. As this process allocates shares to the long broker, DTC will credit the shares to the broker’s Minimum Amount (MA) or non-lien/non-collateral account at DTC.
If a transaction fails at the end of the day, NSCC applies a debit to the delivering broker and a credit to the receiving broker. The money amount is 100% of the CNS market value of the fail for each CNS-eligible item, or 100% of the ACATS market value for each non-CNS DTC-eligible item. When a broker final money settlement, failed ACATS obligations that are eligible for this new process take one of two paths depending on whether they involve CNS-eligible or non-CNS DTC-eligible securities.
- For fails in CNS-eligible ACATS obligations: A failed ACATS obligation in a CNS-eligible security enters the CNS net. Because the broker has paid final settlement, NSCC has collected the incentive charge for the failed ACATS obligation. Further, because the member has paid NSCC for the obligation, NSCC can guarantee the position, and it is netted with regular CNS processing.
- For fails in non-CNS DTC ACATS obligations: ACATS provides instructions for a non-CNS DTC-eligible ACATS obligation to both the receiver and deliverer to settle the failed obligation directly with each other. A failed non-CNS DTC-eligible ACATS obligation is automatically entered into NSCC’s Obligation Warehouse service, when eligible.
If one or more brokers do not pay final money settlement, the tracking and reversal feature included in the ACATS settlement process allows NSCC to reverse incomplete ACATS obligations, as necessary.
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