Collateral in a Participant's account associated with the Participant (such as the Participant's own commercial paper) increases risk to DTC if that Participant failed to pay DTC and its obligation is supported partly or fully by the failing Participant's associated securities. To eliminate this risk, DTC's system monitors collateral received in a Participant's account related to that Participant.
IPN will link to a Participant's account securities related to it and withhold from the Participant any collateral value associated with the security. In effect, transactions processed to a Participant account will remain essentially the same, except that no increase will be applied to the Participant’s collateral monitor for the collateral value of securities received that are associated with the Participant. IPN is based on a Participant's legal entity; therefore, this control will apply to every account of a Participant. For example:
When a Participant has an IPA account that issues MMI securities on its own behalf and has a custody account in the same or a separate collateral group, and the IPA account processes an MMI issuance delivery to its own custody account in its own MMI securities, the custody account will receive no collateral increase for the collateral value of that issuance.
IPN control will not affect a Participant's net debit calculation. Because IPN control affects the collateral value of an associated account, IPAs may wish to monitor their accounts more closely intraday for insufficient collateral, especially if presentments exceed issuances in an Acronym for which they act as IPA on a particular day.