The SEC approved NSCC's proposal to revise its ACATS system in connection with a concurrent rule change by DTC.  The changes are expected to:  (i) enhance protection for customer securities in ACATS transfers so that customer account transfers to new firms will be maximized in the event of a Member failure;  and, (ii) facilitate compliance by its Members with their securities possession and control requirements.  To that end, NSCC will modify its Rules to clarify that in no event does NSCC have a lien on securities that are carried by a Member for the account of its customers and that are delivered through the CNS ACATS service. 

    ACATS Transfers Through the CNS System.  To incentivize deliveries in the Continuous Net Settlement (CNS) system, ACATS items are marked-to-the-market on the morning of settlement date using their full CNS, value as of the prior day’s closing price.  For transactions processed through CNS, NSCC normally becomes the counter party to the transaction and guarantees settlement.   However, CNS ACATS transfers are not guaranteed - if a party fails to pay any portion of its money settlement obligation on settlement date, NSCC may reverse uncompleted ACATS items and any associated debits or credits calculated using the marking process described above would be eliminated. 

ACATS transfers settled through CNS are fungible with all other CNS activity. The CNS system does not distinguish between ACATS transactions and other transactions, which means that CNS ACATS receives and delivers are netted with guaranteed settling trades in the same securities.

NSCC now will begin tracking ACATS receive and deliver obligations in CNS, and CNS allocations will be applied to ACATS receive and deliver obligations for a Member in a security before satisfying another obligation in the same security.  At the end of each processing day, CNS ACATS fails will continue to be marked to the full- market value and netted with all other CNS obligations under NSCC’s Rules.

In the event of a Member failure, NSCC will use this automated tracking capability to differentiate between completed and uncompleted CNS ACATS transactions.  NSCC thus will be able to reverse uncompleted ACATS transfers of a failing Member while allowing assets associated with completed ACATS transfers to remain with the Receiving Member.  NSCC believes this will help maximize CNS-related transfers of customer accounts to new firms..  . 

    Possession and Control Requirements.  To facilitate the compliance of Members with their securities possession and control requirements of securities subject to ACATS transfers processed through CNS, NSCC will modifying its Rules to clarify that it does not maintain a lien over ACATS assets delivered to a Receiving Member through CNS. 

For further details, click onto:   [ Order Approving NSCC Rule Filing 10-5, 8/16 ]