The Collateral Loan Program allows you to pledge securities from your general free account as collateral for a loan or for other purposes (such as Letters of Credit) to a pledgee participating in the program. You can also request the pledgee to release pledge securities back to your general free account. These pledges and releases can be free (when money proceeds are handled outside DTC) or valued (when money proceeds are applied as debits and credits to the pledgee's and pledgor's money settlement accounts). A Pledgee may, but need not be, a Participant. Only a Pledgee which is a Participant may receive valued pledges.
How the Product Works
The guidelines for using the Collateral Loan Program are as follows:
- You can use the Collateral Loan Service function, the Computer-to-Computer Facility (CCF), or Message Queuing (MQ) to submit collateral loan pledges and release requests to DTC. Release returns are also available through CCF and MQ. However, release approval is available only through the Settlement User Interface.
- You must ensure that the securities you are pledging are available in your general free account.
- When a stock distribution requiring due bills is declared on securities pledged as collateral, the distribution automatically becomes additional collateral.
- In the instance of a substantial cash distribution, for which an exchange or similar securities organization would require due bills to accompany stock certificates, for the amount of cash accruing on pledged shares, the Pledgee may direct DTC to pay such funds directly to it as partial repayment of the loan. Otherwise, such funds will be paid by DTC to the Participant.
- At any time, the pledgee can direct DTC to deliver pledged securities (demand of collateral).
- Voting rights are assigned to you for pledged securities.