Net Debit Caps for a Participant are calculated daily as follows:
1. The system records the Participant’s collateral group's three highest intraday net debit peaks over a rolling 70-business-day period, using net debit peaks. If the Participant has elected to group its accounts into separate families (see Grouping Accounts into Collateral Families) , the system first calculates the average net debit peak of each family, and adds together the average net debit peaks of all of the Participant’s families to obtain the Participant’s overall average net debit peak.
2. The system multiplies the Participant’s average net debit peak by a factor to determine the Participant’s Net Debit Cap, which cannot exceed DTC's established maximum of $1.8 billion. (Factors are based on a sliding scale, between 1 and 2, where smaller average peaks are multiplied by larger factors and larger average peaks are multiplied by smaller factors.)
The established minimum Net Debit Cap is equal to twice the sum of all Participants' minimum deposits to the Fund.
Note: Your Settling Bank can set your maximum Net Debit Cap. However, the maximum amount set by a Settling Bank cannot exceed the Net Debit Cap calculated by DTC's system. DTC may also limit your Net Debit Cap to any amount regardless of your intraday net debit peaks.
Although most transactions are subject to Risk Management Controls, the following activities override collateralization and Net Debit Cap controls:
- Mutual funds purchases through DTC's Fund/SERV system
- DTC-generated activity (such as monthly billing charges)
- Deposit or settlement adjustments
- Short position charges
- Principal and income charges
- Participants Fund charges.
To view your Net Debit Cap and net settlement balance, use the Risk Management Controls Inquiry function.
As an added measure DTC has also established limits on the maximum settlement obligation that a financial family of affiliated DTC Participants can incur. An Affiliated Family means each Participant that controls or is controlled by another Participant and each Participant that is under the common control of any Person. For purposes of this definition, “control” means the direct or indirect ownership of more than 50% of the voting securities or other voting interests of any Person. The maximum “Aggregate Affiliated Family Net Debit Cap” for the Participants comprising an Affiliated Family is currently set at $2.85 billion.
So that DTC will be able to complete settlement each day in the event of a Participant’s inability to settle, DTC currently maintains liquidity resources of $3.05 billion, including $1.15 billion cash in the Participants Fund and a committed line of credit in the amount of $1.9 billion with a consortium of banks.