This website sets cookies on your device. By continuing to use our site, you consent to our use of cookies in accordance with our Privacy Policy.

This topic is an Addendum to the End of Day Settlement article, Settlement Payment for Net-Net Debit Balances (refer to step 2.)

Any settling bank that settles for both participants of DTC and NSCC will have its net-net credit or debit balances at DTC and NSCC aggregated and netted to one consolidated debit amount or credit amount as applicable.

DTC shall provide NSCC with services with respect to NSCC’s money settlement operations as described in, and in accordance with, the following procedures* :

  1. For purposes of this procedure, the following terms have the meanings specified:
    1. “Common Settling Bank” means any entity that has qualified and acts as a Settling Bank for both DTC and NSCC in accordance with their respective rules and procedures.
    2. “DTC Credit Amount” or “NSCC Credit Amount” means, as applicable, any net-net credit settlement payment due from the relevant clearing agency to a Common Settling Bank, as determined in accordance with the Rules and Procedures of the relevant clearing agency.
    3. “DTC Debit Amount” or “NSCC Debit Amount” means, as applicable, any net-net debit Settlement payment due to the relevant clearing agency from a Common Settling Bank, as determined in accordance with the respective Rules and Procedures of the relevant clearing agency.
    4. “Consolidated Settlement Debit Amount” means on any Settlement day the net sum, if a negative number (i.e. debits being deemed negative numbers, and credits being deemed positive numbers) of a Common Settling Bank’s applicable DTC Debit or Credit Amount, plus its applicable NSCC Debit or Credit Amount.
  2. For each Common Settling Bank on each Settlement day, DTC, as Settlement Agent, shall aggregate and net the DTC Credit and/or Debit Amount of the Common Settling Bank with the applicable NSCC Credit or Debit Amount of such Common Settling Bank and:

    1. If the Common Settling Bank has both a DTC Debit Amount and an NSCC Debit Amount, then following the acknowledgement of those respective balances by such bank in accordance with DTC and NSCC’s procedures, DTC shall instruct the FED to debit the FED account of such Common Settling Bank by the aggregate sum of such debit balances. DTC, upon receipt of such monies, shall credit NSCC with the amount of the NSCC Debit Amount, and credit DTC with the amount of the DTC Debit Amount, from such Common Settling Bank.

    2. If the Common Settling Bank has both a DTC Credit Amount and an NSCC Credit Amount, then at the time established in DTC and NSCC’s procedures, DTC shall instruct the FED to credit payment to the FED account of the Common Settling Bank with the aggregate sum of such credit balances, and shall debit NSCC with the amount of the NSCC Credit Amount, and debit DTC with the amount of the DTC Credit Amount, for such Common Settling Bank.

    3. If the Common Settling Bank has a Debit Amount at one clearing agency and a Credit Amount at the other, then:

      --If the sum of such DTC Credit Amount and NSCC Debit Amount (or DTC Debit Amount and NSCC Credit Amount, as the case may be) is a positive number, that excess amount (i.e. equal to the positive number) shall be owed by the clearing agency with the Credit Amount to the Common Settling Bank, shall be paid to the Common Settling Bank in the manner provided in clause 3(b) above, and the clearing agency with the Credit Amount shall pay the other clearing agency an amount equal to the Common Settling Bank’s Debit Amount owed to the other clearing agency, in full satisfaction of the Settlement obligation of the Common Settling Bank to the other clearing agency.

      --If the sum of such DTC Credit Amount and NSCC Debit Amount (or DTC Debit Amount and NSCC Credit Amount, as the case may be) is a negative number,then the absolute value of that amount shall be owed by the Common Settling Bank to the clearing agency to which the Common Settling Bank has a Debit Amount, such amount shall be paid by the Common Settling Bank via NSS in the manner provided in clause 3(a) above in full satisfaction of the Settlement obligation of the Common Settling Bank to such clearing agency, and the clearing agency with the Credit Amount shall pay the other clearing agency an amount equal to the Common Settling Bank’s Credit Amount, in full satisfaction of the Settlement obligation of the clearing agency from whom such Credit Amount was owed to the Common Settling Bank.

      --If the sum of such amounts equals zero (i.e. the Credit Amount due from one clearing agency equals the Debit Amount owed to the other clearing agency), then the clearing agency that owes the Credit Amount to the Common Settling Bank shall pay the amount of such Credit Amount to the other clearing agency in full satisfaction of both the Settlement obligation of the Common Settling Bank to the clearing agency owed the Debit Amount and the Settlement obligation of the clearing agency that owes the Credit Amount to such Common Settling Bank. In that instance, no payment shall be due to or from such Common Settling Bank to or from either DTC or NSCC.

    1. Notwithstanding the foregoing, if any Common Settling Bank fails to pay its Consolidated Settlement Debit Amount by the time specified in DTC and NSCC’s procedures, then (i) if that bank has an NSCC Debit Amount, NSCC shall implement its failure to settle procedures, and (ii) if that bank has a DTC Debit Amount DTC shall implement its failure to settle procedures.

    2. Under FRB Operating Circular No. 12, DTC, as Settlement Agent, has certain responsibilities in allocating an indemnity claim made by a FRB as a result of NSS. In making such an allocation, NSCC and DTC will first apportion any such liability between them (and their respective participants) in proportion to the amount of the net-net debit due to each clearing agency by the Settling Bank to which the indemnity claim relates. If that Settling Bank owed a debit to one and had a credit due from the other clearing agency, then the entire indemnity amount will be allocated to the clearing agency to which the Settling Bank owed the debit amount (and for which, via NSS, its FRB account was debited) relating to the indemnity claim. NSCC and DTC will then further allocate the FRB claim among their participants for whom the Settling Bank was then acting. If for any reason such allocation is not sufficient to fully satisfy the FRB indemnity claim, then the remaining loss will be allocated pro rata among all the applicable clearing agency’s participants in the same manner as provided in NSCC’s and DTC’s Rules with respect to a general (i.e., non-system related) loss.



    * DTC will act as “Settlement Agent” (as that term is used in the Federal Reserve Board’s Operating Circular 12 and in NSCC’s Rule & Procedures) for NSCC and NSCC’s Settling Banks, for purposes of (i) receiving and paying, as NSCC’s settling bank and for the account of NSCC, end-of-day money Settlement payments from or to, as applicable, NSCC Settling Banks and participants, (ii) with respect to the FED’s National Settlement Service, as the means of effecting such money settlement for NSCC, and (iii) netting the amounts of those Settling Banks that act as such for both DTC and NSCC, and crediting the account of either NSCC, or DTC, as the appropriate clearing agency, with the settlement amounts determined in accordance with this procedure.

    Settler Agreements provided by the Settling Bank to DTC for delivery to the FRB are hereby deemed to include the Settling Bank’s NSCC Settlement obligations as well as their DTC Settlement obligations.

     

Recommended for You