A previously eligible ID Net trade can be exited from the ID Net process for a number of reasons. If an ID Net trade is exited from the ID Net Service, it will revert back to an original ID trade from the ID Net Firm’s account, despite the fact that the ID Net Firm or IMS may have already performed the authorization or exemption process for ID trades from its account. Trades that are exited from ID Net before settlement processing begins on the night of SD-1 will be placed back into an unprocessed state in IMS and the ID Net Firm has to authorize these trades if it intends to deliver them. Applicable output messages are available for all exited ID Net trades.
If an ID Net trade is exempted or pend cancelled, the transaction will be exited from ID Net. For exempted transactions, the ID Net Firm can no longer act upon that delivery, i.e., authorize it at a later time.
Some of the reasons that a trade may be exited from ID Net are as follows:
Change of Eligibility
After a trade has been affirmed and deemed eligible for ID Net, the ID Net process will continue to check the transaction’s eligibility up until 8 p.m. on the night of SD-1. If a trade becomes ineligible, for example, a Reorganization is announced, the trade will be removed from the ID Net process regardless of whether it is in an authorized or an exempt state. The trade will be staged for trade-for-trade settlement between the ID Net Firm and the ID Net Bank and will maintain its current state, i.e., authorized trades will remain authorized and exempted trades will remain exempted.
Attempts to Cancel
After an ID trade is affirmed, ID Net Firms, on occasion, generate an attempt to cancel and exempt the ID trade because the trade may no longer be valid. If the trade is in the ID Net process and is being staged for delivery from the ID Net Subscriber Receive Account #919, ID Net Firms should continue to exempt transactions when an “attempt to cancel” message is generated. Automated exemptions on a trade-for-trade basis via the Institutional Delivery (ID) control number will still be accepted for ID Net trades from the ID Net Subscriber Receive Account #919.
Cut-off of 11:30 a.m. on Settlement Date
Trades that are eligible for ID Net but are still in an exempt or unprocessed state or are pending for position or risk management controls at 11:30 a.m. on settlement date will automatically revert to trade-for-trade settlement versus the original clearing firm. They will be exited from the ID Net process at NSCC through a new “Miscellaneous” adjustment to their CNS position. Any exits from ID Net after the start of the night cycle that create a short or increases an existing short in CNS, are subjected to the one-day settling trade exemption indicator (the default for this indicator is level 1, i.e., the position is exempted). The exit processing for ID Net Banks and ID Net Firms differs as follows: