The Fixed Income Clearing Corporation’s (FICC) Automated Funds-Only Settlement (FOS) Service provides a standardized, automated method for settling non-trade, funds-only obligations each day between FICC and its customers’ settling banks for the GCF Repo® Service.
Funds-Only Settlement eliminates manual processing and reduces costs by aggregating payments due to or from a customer and then automatically transferring the funds into or out of the customer’s settling bank.
For GCF Repo, Funds-Only Settlement is an aggregate cash obligation amount that is paid to, or collected from, participants each day. It is a daily process where the Cash Lender and Cash Borrower exchange mark-to-market and Interest on GCF Repo trades. It is composed of calculated values that are associated with each participant’s overall GCF Repo trading activity calculated at End of Day and collected or paid the next business day. A Netting Members’ activity that is limited to the GCF Repo Service will settle their Funds-Only Settlement cash obligation amount during the Start of Day Funds-Only Settlement Cycle only. If the Netting Member participates in both the GCF Repo Service and DVP Service, they will settle their Funds-Only Settlement cash obligation amount for both the Start of Day Funds-Only Settlement Cycle and the Intraday Funds-Only Settlement Cycle. The components and their calculated figures are published to the GCF Funds Settlement Report which is generated to the GCF section of RTTM® Report Center.
The service is automatic and mandatory for FICC members that have funds-only settlement obligations. This includes Government Securities Division (GSD) Netting Members’ who participate in the GCF Repo Service.
For the Start of Day cycle, settling banks need to acknowledge on Netting Members behalf by 9:30 AM and the settlement of obligations is completed by 10:00 AM. Netting Members’ Funds-Only Settlement obligation must be satisfied no later than 10:00 AM each business day. You may refer to the pdf FICC GSD Rules (891 KB) for more details.
The Start of Day Funds-Only Settlement Cycle for GCF Repo® is a daily process that includes the following components for Netting Members:
GCF Forward Mark – the sum calculated from two FOS components; the GCF Interest Rate Mark and Accrued Interest.
GCF Forward Mark Return – the return of the GCF Forward Mark amount collected or paid during the previous business day's Start of Day Funds-Only Settlement cycle
Interest Rate Mark Adjustment Payment – the sum calculated using the Overnight Investment Rate which is calculated as a blended rate on our overnight investments
Transaction Adjustment Payment (TAP) / Total Interest – the net Total Interest on GCF Repo trades at maturity (on settlement date).
Invoice Amount – on the 10th business day of the month, GSD will apply charges based on actual business activity of the prior month, fines imposed during any month and adjustments to prior bills as indicated on the Invoice Report
*All times herein are EST.
To learn more, check out the GCF FOS FAQs here or check out the below examples showing how GCF Funds-Only Settlement is calculated based on trade type.