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Changes to Risk Management Control Updates for ID Net Firms

ID Net processes an ID Net Firm’s DTC debits and credits for its eligible ID trades through the NSCC ID Netting Subscriber accounts. These ID trades have offsetting debits and credits in the CNS system. As a result, NSCC may owe DTC on any given day for the net of all the ID Net trades processed for all ID Net Firms. In order to protect DTC from having a failure exported from NSCC for liquidity purposes, updates to Participants’ net debit caps and collateral monitors are necessary as described below:

An ID Net collateral monitor and net debit cap balance is recorded in the processing system. The ID Net collateral monitor records the net balance of collateral generated for all ID transactions processed through the ID Net service. If the balance of collateral generated by all ID Net receives and delivers is positive, the ID Net Firm’s collateral monitor will not be increased by that amount. However, if an ID Net transaction requires collateral, the system will use the ID Net collateral surplus for that ID Net Firm before attempting to use other collateral from that ID Net Firm. If there is insufficient ID Net collateral for that ID Net Firm, the system will look to the ID Net Firm’s excess collateral in its account.

Similar to collateral, the system creates an ID Net settlement balance. When this balance is a net credit from deliveries on the ID Net Firm’s behalf through the #919 account, it is only used to offset incoming ID Net receives to the #719 account. If there is an insufficient ID Net credit to absorb the debit of the ID Net delivery to the #719 account for that ID Net Firm, the system will create an ID Net debit that will effectively treat the ID Net debit as a reduction of the ID Net Firm’s net debit cap and will be displayed via the Risk Management Control Inquiry function. The ID Net debit is only used for net debit cap calculation purposes and does not represent a Participant’s actual settlement balance.

  • If the ID Net Firm has insufficient collateral or net debit cap, the transaction will pend until 11:30 a.m. eastern time on settlement date.

Risk Controls for the ID Netting Subscriber Deliver Account:

  • Authorized bank deliveries are checked for position and collateral. The original clearing firm, which is identified in the third party field, is responsible for collateralizing the ID Net securities being processed into the ID Netting Subscriber Deliver Account #719.
  • Receives into the ID Netting Subscriber Deliver Account #719 for the ID Net Firm are available for immediate delivery to CNS. The original clearing firm’s memo seg, if any, is not applicable.

Risk Controls for ID Netting Subscriber Receive Account:

  • Receives from CNS into the ID Netting Subscriber Receive Account #919 for the original clearing firm are available for immediate delivery to ID Net Banks. The original clearing ID Net Firm’s memo seg, if any, is not applicable.
  • An ID Net Firm can also cancel a pending ID Net delivery (referred to as a pend cancel) from the ID Netting Subscriber Receive Account #919 account through the Settlement User Interface.

Deliveries from the CNS account to the ID Netting Subscriber Receive Account # 919 will be on a higher priority basis except for buy-in receives, corporate actions and other delivery types as determined periodically by the clearing corporation. By placing the ID Netting Subscriber Receive Account #919 on a higher priority for long allocations, the number and value of ID Net fails is reduced.