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The following terms are important to understanding the Settlement Service:


This term

 Refers to

Aggregate Affiliated Family Net Debit Cap A limit to the settlement debit an Affiliated Family can incur at any point during the processing day.
chill A systemic way DTC can prohibit a Participant from processing certain activities (for example, valued delivery chill will prevent the Participant from making valued deliveries from its account).
Collateral Monitor (CM) DTC's process for measuring the sufficiency of the collateral in a Participant’s account to cover its net settlement obligation.
collateral value The market value of a security less the applicable DTC haircut.
Computer-to-Computer Facility (CCF/CCF II) A batch transmission system for input/output based on various protocols between a Participant’s mainframe and DTC's mainframe.
Continuous Net Settlement (CNS) The system employed by NSCC to settle NYSE, AMEX, NASDAQ, and over-the-counter trades.
deliver order (DO) The term used to define a book-entry movement of shares of a particular security between two DTC Participants.
drop A transaction that does not complete because of insufficient position, Risk Management Controls, and so forth.
haircut The percentage decrease of a security's market value in determining the collateral value of the security.
initial distribution The delivery of shares of a new issue from the lead manager and syndicate members to their customers. Shares are considered initial distribution shares until they are sold on the secondary market.
long allocations Deliveries from NSCC's Omnibus Account 888 to a Participant’s DTC account as a result of Continuous Net Settlement processing.
market value The prior day's closing price of a security for security valuation purposes.
memo segregation An inventory control mechanism that allows a Participant to protect fully-paid-for securities in its general free or IPO control account.
Message Queuing (MQ) A system for messaging across multiple platforms. Developed as part of IBM’s WebSphere family, it is also referred to as "WebSphere MQ" or "MQ Series."
Minimum Amount (MA) DTC's classification for securities in a Participant’s account that are not considered collateral.
Money Market Instrument (MMI) Debt securities such as commercial paper or medium-term notes that are eligible for DTC's MMI Program.
Net Additions (NA) DTC's classification for securities in a Participant’s account that are considered collateral.
net debit cap A limit to the settlement net debit a Participant can incur at any point during the processing day.
Night Batch Process A process that operates to control the order of processing of transactions in the night cycle.
night deliver order (NDO) A DO input on the day prior to settlement. A reduced rate is charged for NDO transactions.
payment order (PO) A transaction in which a Participant charges another Participant for changes in value for outstanding stock loans or option contract premiums.
Receiver Authorized Delivery (RAD) A control mechanism that allows a Participant to review transactions prior to completion of processing. It limits the Participant’s exposure from misdirected or erroneously entered DOs, POs, institutional delivery transactions, MMI transactions, reclaims, pledges and releases of pledged securities.
reclamation or reclaim The return of a DO, PO, institutional delivery transaction or MMI transaction received by a Participant. All reclaims are considered original transactions for purposes of DTC processing and are subject to Risk Management Controls and RAD.
Risk Management Controls The controls, primarily net debit cap and CM, that are used to provide protection to all DTC Participants against the inability of one or more Participants to settle net settlement obligations.
Settlement progress payments (SPP) An intraday funds transfer sent via Fedwire to a Participant’s DTC Participant account.
Settlement User Interface Any system or combination of systems that allows for input/inquiry into the DTC Settlement System.
short covers Deliveries to NSCC's Omnibus Account 888 as a result of CNS.
syndicate A group of broker-dealers that agree to purchase a new issue of securities from the issuer for resale to the investment public.
Unknown Rate For variable rate MMI Securities, the interest rate that the IPA will pay for the income portion of a presentment.
unvalued additions Unvalued additions to a Participant’s security account that do not carry a related payment obligation with the receipt of securities. They include:
  • Deposits
  • Free release of pledged securities
  • Receipt of a free DO
  • Releases of segregated securities

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