The Money Market Instrument (MMI) Program allows Issuing and Paying Agents (IPAs) to submit requests to make new Money Market Instrument issues eligible for settlement at DTC. IPAs have an obligation under the DTC MMI Program to fully self-service securities from issuance through maturity. This page is being enhanced to provide information and resources to:
- assist IPAs in determining eligibility for DTC's MMI Platform, and
- explain how to use the MMI Platform for MMI Settlement.
This guide will help IPAs determine if DTC securities are self-service eligible for the MMI Program or if they should be submitted via DTC’s Underwriting Service.
Be sure to visit this page as more content and training resources become available!
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PAYING AGENT MONEY MARKET (PAMM) APPLICATION
DTCC, through its depository, The Depository Trust Company (DTC), plans to enhance its current settlement model to eliminate risks associated with intraday reversals of transactions in DTC’s MMI system that are the result of issuer failure. The proposed MMI settlement model will require changes to DTC’s “refusal to pay” procedures and to current market practices by investors, issuers, custodians, placement agents dealers and Issuing Paying Agents (IPAs). These changes will allow MMI transactions to be processed intraday without the risk of transaction reversal prior to end-of-day settlement.
Phased-in implementation is planned for Q4 2016/Q1 2017.
For more information see MMI Finalitiy Through Optimiztion which includes links at the bottom to this MMI Service description as well as batch and ISO message format documentation.
MMIs are subject to, and are processed in accordance with, Rule 9(A), Rule 9(B), Rule 9(C) of DTC and the Procedures set forth in this Settlement Service Guide.
MMI Funding Acknowledgment by the IPA
Subject to DTC risk controls, DTC processes maturing Presentments for delivery versus payment to the applicable IPA with respect to an Acronym in the Rules and these Procedures only after an acknowledgment (“MMI Funding Acknowledgment”) is made by the IPA to DTC whereby either: (i) the value of issuances approved by receivers via Receiver Authorized Delivery (RAD) alone1 or a combination of receiver-approved issuances plus an amount the IPA(s) has been funded by the issuer exceed the Acronym’s Presentments, or (ii) the IPA acknowledges it will fund the entire amount for the gross value of an Acronym, regardless of issuances.2 An IPA must make an MMI Funding Acknowledgment using the Decision Making Application (DMA). When an MMI Funding Acknowledgement has occurred, it constitutes the IPA’s instruction to DTC to attempt to process transactions in the Acronym.
Testing for Position and Risk Management Controls
After an IPA has acknowledged that it will fully fund the Acronym, then the transactions are sent to the processing system and attempted against position and Risk Management Controls. If the IPA provides an MMI Funding Acknowledgement for only partial funding of the entire amount of Presentments for an Acronym, DTC tests Risk Management Controls of deliverers and receivers with respect to that Acronym to determine whether Risk Management Controls would be satisfied by all deliverers and receivers of the Acronym and all parties maintain adequate position to complete the applicable transactions, i.e., “MMI Optimization”. In the case that the aggregate amount of RAD approved Issuances of an Acronym exceeds the aggregate amount of Presentments, Risk Management Controls for all deliverers and receivers are tested using MMI Optimization as well.
As indicated above, when partial funding from the IPA is necessary, transactions are routed to MMI Optimization. In MMI Optimization, it is generally required that all deliverers and receivers of the Acronym must satisfy risk management controls and delivering Participants hold sufficient position, in order for the transactions in that Acronym be processed. However, as long as the Issuances that can satisfy Deliverer and Receiver risk controls for that Acronym are equal to or greater than the Maturing Presentments of that Acronym, the applicable transactions (i.e., those that pass risk controls) are processed.
Note: If there are multiple IPAs for an Acronym, DTC determines funding based on the satisfaction of conditions for all deliverers and receivers with respect to all Presentments, Issuances and applicable DOs in the Acronym and MMI Funding Acknowledgements for all IPAs with Issuances and Presentments in the Acronym. No instruction of an IPA to DTC to process the subject MMI transactions shall be effective until MMI Optimization is satisfied with respect to all transactions in the Acronym.
1 An affirmative MMI Funding Acknowledgement by the IPA is not required in the case that the aggregate amount of RAD approved Issuances of an Acronym exceeds the aggregate amount of Presentments. In this instance, the IPA is deemed to provide a standing instruction to process transactions in the Acronym, subject to Risk Management Controls. Any such instruction or deemed instruction by the IPA is irrevocable once given.
2 In the case where an affirmative MMI Funding Acknowledgment by the IPA is required for Presentments to be processed, the MMI Funding Acknowledgement must be a notification provided by an IPA to DTC with respect to an Acronym, that the IPA acknowledges and affirms its funding obligation for a maturing Acronym either (i) in the entire amount of the Acronym or (ii) for an amount at least equal to the difference between the value of Issuances and the value of the Presentments. In the case of (ii) above, the IPA may (later that day) increase the funding amount it acknowledges, but in no event may the IPA reduce the amount of its obligation previously acknowledged that day.
ISSUER FAILURE PROCESS
MMI Acronym Payment Failure processing is designed to protect DTC and notify Participants if there is no timely MMI Funding Acknowledgment from the IPA(s) for an Acronym for which presentments are due on that day and/or DTC is aware that the issuer of an Acronym is insolvent and therefore payments due to Participants relating to presentments for that Acronym will not be funded by IPA(s) through DTC settlement (“Acronym Payment Failure”). Using the IPA Decision Making Application or automated messaging, IPAs can notify DTC that they refuse to pay for Presentments for an MMI Acronym. An IPA must inform DTC of its refusal to pay in accordance with the timeframe set forth in the Settlement Processing Schedule above. After DTC verifies the default it begins MMI Issuer Failure procedures.
In the event that an IPA does not fund, then the rights of the IPA as a Participant and all Participants that are party to the subject MMI transactions shall be resolved outside of DTC.
How the Process Works
If there is an Acronym Payment Failure, DTC will initiate the following process, pursuant to which DTC:
- Prevents further issuance and maturity activity at DTC for that Acronym.
- All CUSIPs under the failed Acronym are blocked so that no Participant may instruct any delivery of such Acronym on that Business Day. The block will be lifted the following Business Day.
- Devalues all of the Issuer's MMIs for collateral monitor calculations.
- Notifies Participants of the event
Notwithstanding the occurrence of an Acronym Payment Failure, the IPA shall remain liable for funding pursuant to any MMI Funding Acknowledgment.
"Temporary Acronym Payment Failure" with respect to Income Presentments occurs when an IPA notifies DTC of issuer's temporary inability to fund Income Presentments (IPs) and therefore the IPA refuses to pay Income Presentments for the Acronym. This is a situation that DTC expects the issuer and/or IPA to resolve by the next Business Day. Using the IPA Decision Making Application (IPA DMA) or automated messaging, IPAs can notify DTC that they refuse to pay Income Presentments for an MMI acronym for which there is a Temporary Acronym Payment Failure. When DTC receives such a notification, it:
- Temporarily devalues to zero all of the Issuer's MMIs for Collateral Monitor purposes. (The value will be reinstated the following Business Day if the funding is paid.)
- Automatically submits these transactions for processing the next Business Day.
- Notifies Participants of the delayed payment.
- Blocks from DTC's systems all further issuances and maturities by that Issuer for the rest of the Business Day.
Note: An IPA cannot notify DTC of a Temporary Acronym Payment Failure for the same Acronym on consecutive days. If a Funding Acknowledgment of the Acronym is not made by the IPA on the Business Day following the day of a Temporary Acronym Failure, then DTC will follow the Acronym Payment Failure process with respect to the Acronym as described above.
Note: An IPA may notify DTC of a Temporary Payment Failure for Income Presentments only if the issuer's only obligations that day are IPs.