10/8/2008 Security Holder Tracking Service DTCC

Transcription

1 U S E R G U I D E Security Holder Tracking Service 10/08/2008

2 The primary purpose of this product guide is to familiarize members with the Security Holder Tracking Service offered by DTCC. This guide is not intended to serve as a legal document. No statement in this guide should be construed as a legally binding rule or regulation, or as creating an obligation on the part of DTCC or any person. In addition, any time schedules or time requirements set forth herein are subject to change without notice.

3 Contents Welcome to the Security Holder Tracking Service...2 Overview... 2 Making a Tracked Security Eligible at DTC...3 Security Holder Tracking For Participants and Administrators...4 Participants... 4 Administrators... 4 Business Rules Settlement Processing...5 Administrator Approval and IMS States...6 Administrator Approval Cutoffs...7 Approved Transactions... 7 Disapproved Transactions... 7 Changing Approved to Disapproved... 7 Reclaimed or Dropped Transactions... 7 Security Holder Tracking Process Flow...8 Movement of Tracked Transactions Between Designated Sub - Accounts...9 Security Holder Transaction Processing...10 Steps to Settle Tracked Deliveries in PBS About Inventory Management System Profiles...11 IMS Profiles For Tracked Deliveries Security Holder Tracking Service Reclaims...12 Activity Code 42 and Valid Reason Codes...14 PBS Step-By-Step Procedures...15 Participant Procedures Participant Deliver Order Input Participant Inquiry Administrator Procedures i

4 Welcome to the Security Holder Tracking Service The Security Holder Tracking Service allows issuers, either themselves or through an issuer-designated administrator, to track and limit the number of beneficial owners for an individual CUSIP. The service supports the book-entry settlement and asset servicing of these tracked-securities within DTC, without exceeding the issuer s limit of beneficial owners. Although the Security Holder Tracking Service was developed to address the specific concerns of closely held Rule 144A issues, in practice it can be used for other types of securities for which the number or character of the beneficial owners requires some level of control by a third party administrator. OVVEERRVVIIEEW In order to use the service, issuers will need to make their securities eligible for tracking at DTC and indicate the name of their designated administrator. When these steps have been completed, DTC will make the CUSIP DTC-eligible and will activate the tracking indicator on its security master file. The administrator appointed by the issuer will control movements of the particular CUSIP for which it has been appointed. Once approved by the administrator, DTC may perform centralized book-entry settlement. No transfer of the securities can take place in the tracked security without the approval of the administrator through the Inventory Management System (IMS). The administrator, based on requirements of the issuer, is responsible for determining whether a transaction should be effected in DTC. Note: Tracked securities will not be held as part of a participant s general free account nor will they be considered eligible collateral in DTC s settlement system. SECURITY HOLDER TRACKING SERVICE > 2

5 Making a Tracked Security Eligible at DTC In order to use the service, DTC must be notified during the underwriting eligibility process that the issue requires third-party tracking. Upon receipt of all required documentation, DTC will activate the tracking indicator on its security master file and provide IMS access to the assigned administrator, but only to allow for the viewing, approval and disapproval of transactions assigned to the administrator. During the underwriting closing process, the position will move from the DTC internal account to a designated sub-account of the lead underwriter. Once the shares are moved into the designated subaccount, all share movement from that point on will require the approval of the designated administrator through IMS. For more information on Security Holder Tracking Service issue eligibility, call DTC's Customer Support Center at (888) For detailed information about Underwriting products and services, refer to the Underwriting Service Guide at: SECURITY HOLDER TRACKING SERVICE > 3

6 Security Holder Tracking For Participants and Administrators Participants and Administrators can do the following in the Security Holder Tracking Service. PAARRTTIICCIIPPAANNTTSS Participants may submit tracked security trades through Omgeo s TradeSuite/ID system or with a DTC Deliver Order. Participants may submit deliver orders for tracked securities by means of the following: PBS (Participant Browser Services) Security Holder Tracking - Deliver Order Input The DO 24x6 Service which is based on ICM/MQ and ICM/CF2 ISO messages ADDMMIINNIISSTTRRAATTOORRSS Third party administrators, generally an agent designated by the issuer, may approve or disapprove deliver orders for tracked securities by means of the following: PBS (Participant Browser Services) Security Holder Tracking - Third Party Authorization ISO command messages SECURITY HOLDER TRACKING SERVICE > 4

7 Business Rules Settlement Processing Security Holder Tracking Service DOs are generally subject to regular DO settlement processing. The requirement for 3 rd Party Administrator approvals is the most important difference between regular and tracked deliveries. The table below highlights more similarities and differences. For a detailed explanation of deliver order processing, refer to the Settlement Service Guide at: Key Similarities/Differences Regular Deliver Order Tracked Deliver Order Transactions received from Omgeo s TradeSuite/ID system are authorized in IMS. Note: For tracked deliveries, this authorization occurs in addition to administrator approval. Participants may submit tracked DOs in the PBS Security Holder Tracking Deliver Order Input option. Third Party administrators approve or disapprove tracked deliveries. This includes all activities, such as stock loans and reclaims. If submitted from Omgeo, trades bypass Receiver Authorized Delivery functionality; if submitted as a deliver order, regular RAD rules apply. Participants can pend-hold and pend-cancel deliveries in the PTS PEND or PBS Pending Activity function. Participants can reclaim transactions in PTS ART or the PBS Activity Research Tool. Dropped transactions can be reintroduced in IMS for processing. SECURITY HOLDER TRACKING SERVICE > 5

8 Administrator Approval and IMS States Tracked deliveries are in Pending Approval status until the administrator approves or disapproves them. Administrators can approve or disapprove tracked deliveries either before or after they are authorized in IMS. When the IMS State is... Then the Administrator State is.. Unprocessed Authorized Pending Approval Approved, or Disapproved Submitted to ATP Approved Made Approved SECURITY HOLDER TRACKING SERVICE > 6

9 Administrator Approval Cutoffs Administrators can approve and disapprove tracked deliveries for settlement at DTC. APPPPRROOVVEEDD TTRRAANNSSAACCTTIIOONNSS Once approved by an administrator and authorized by the delivering party, tracked deliveries are sent to ATP for settlement. Non-ID transactions are subject to RAD rules. DIISSAAPPPPRROOVVEEDD TTRRAANNSSAACCTTIIOONNSS If an administrator disapproves a tracked delivery, the transaction will not be sent to ATP until it is Approved. If the Settlement Recycle Cutoff occurs and the tracked delivery is in Disapproved status, then the transaction drops at the end of day. CHHAANNGGIINNGG APPPPRROOVVEEDD TTOO DIISSAAPPPPRROOVVEEDD Administrators may change a status of Approved to Disapproved up until the delivery is submitted to ATP. Administrators can check whether a delivery is submitted to ATP by receiving transaction state change messages from DTC or by inquiring in the PBS Third-Party Authorization option. (State is an IMS term meaning status.) To see the state in PBS, click the State field from within a column of search results. The state displays as Submitted to ATP or SUBA. REECCLLAAIIMMEEDD OORR DRROOPPPPEEDD TTRRAANNSSAACCTTIIOONNSS If a delivery is reclaimed or dropped after it has been approved by an administrator, the administrator can be notified through receipt of state change messages from DTC. The administrator may also see a state history via the PBS Third-Party Authorization option. As a best practice, administrators should only update their records for transactions that have Made. SECURITY HOLDER TRACKING SERVICE > 7

10 Security Holder Tracking Process Flow 1. Tracked transactions are sent to IMS. 2. IMS checks that the security is valid for the service in the DTC Masterfile. 3. The administrator approves or disapproves its transactions in IMS (also subject to IMS Authorization processing as applicable). 4. Tracked deliveries are sent to ATP for settlement. 5. The delivering firm s shares are moved from its designated sub-account into the receiving firm s designated sub-account. SECURITY HOLDER TRACKING SERVICE > 8

11 Movement of Tracked Transactions Between Designated Sub - Accounts Once transaction approval has been received, and all other settlement risk controls have been met, Security Holder Tracking Service shares will move from the delivering participant s designated sub-account to the receiving participant s designated sub-account, either free or versus payment. To identify this movement, tracked transactions will use Account Transaction Processor (ATP) activity code 42. Normally, deliver orders move position from one participant s general free account to another participant s general free account. Because Security Holder Tracking Service issues will be delivered between protected sub-accounts, the tracked shares will be designated as having zero collateral value for DTC risk management purposes. Note: Activity 42 tracked deliveries can recycle for shares. Also, these deliveries will be subject to the DTC Net Debit Cap and will be recyclable for Net Debit Cap. They will also be subject to the Settlement Valued Recycle Cutoff. SECURITY HOLDER TRACKING SERVICE > 9

12 Security Holder Transaction Processing STTEEPPSS TTOO SEETTTTLLEE TTRRAACCKKEEDD DEELLIIVVEERRIIEESS IINN PBS The following are the overall steps to settle tracked deliveries in the Participant Browser Services. 1. The delivering participant submits a tracked delivery, as shown here: 2. The administrator approves the tracked delivery, as shown here: Note: The Security Holder Tracking Service uses the logic and technology of DTC s IMS. Participants who use IMS should note that the Security Holder Tracking screens are conveniently located on the Settlement Services home page. SECURITY HOLDER TRACKING SERVICE > 10

13 About Inventory Management System Profiles The Inventory Management System provides participants with the ability to manage when, and in what order, deliveries from their inventory should be attempted. IMS handles a variety of processing flows for the different transaction types that enter DTC s settlement system. IMS allows participants to set up rules called profiles to determine the way in which transactions are processed, particularly the timing and sequence. IIMS PRROOFFIILLEESS FFOORR TTRRAACCKKEEDD DEELLIIVVEERRIIEESS Working in IMS, participants using in the Security Holder Tracking Service are able to: Re-introduce dropped transactions in IMS Require a secondary authorization for participant-entered transactions, and Receive messages that show transaction state changes submission through the final state. To activate one of the options described above, participants may set up the following profiles in IMS: IMS Profile Function Description Can Be Defined By Example User Defined Authorization Authorization Require a secondary authorization for participant - entered transactions (PETS). Input source Free/valued Delivery or reclaim reason codes Require secondary authorization for stock loan DOs. Drop Reintroduction of drops Identifies by reason code which dropped or unapproved Receiver Authorized Delivery (RAD) transactions should be re-introduced in IMS. Asset class Reason code Free/Valued Require that dropped Security Holder Tracking Service deliveries (activity code 42) are reintroduced for settlement. Notification Notification of IMS state changes Sends notifications of state changes for receives or deliveries. Can receive full length or short output messages. Asset Class Transaction Type Activity Code Deliverer and Receiver Receive notifications of Security Holder Tracking Service transactions that are pending for shares, pending for receiver s debit cap, made, etc. Note: Administrators can also receive transaction state change messages. After setting up a new CDTS subscription, administrators will receive a copy of state change messages related to the list of CUSIPs for which they are responsible. SECURITY HOLDER TRACKING SERVICE > 11

14 Security Holder Tracking Service Reclaims PBS From the PBS Settlement Services home page, participants can reclaim Security Holder deliveries in any of the Activity Research Tool s summary pages (CUSIP, Activity Code, Collateral Group). Note: For step-by-step instructions about how to reclaim a transaction in PBS, refer to the PBS Settlement Help. Click Help on the PBS Settlement toolbar, on the left select Activity by Activity Code, select Procedures, then select Reclaiming a Transaction. SECURITY HOLDER TRACKING SERVICE > 12

15 PTS From the PTS ART function, participants can reclaim Security Holder deliveries in any of the ART summary screens such as: Option 1. CUSIP, Option 2. Activity Code, and Option 3. Collateral Group. Note: For step-by-step instruction, under ART refer to Reclaiming a Made Transaction in the PTS Function Guide available at: DO 24x6 Participants may also reclaim Security Holder Tracking transactions by means of the automated DO 24x6 Service, Deliver Order Input (DOI). Documentation is available at the link below and is listed under CCF Settlement: SECURITY HOLDER TRACKING SERVICE > 13

16 Activity Code 42 and Valid Reason Codes Activity codes are used in IMS and ATP to define a broad range of activities, such as Security Holder Tracking transactions, which use activity code 42. Activity codes may be combined with reason codes that indicate specifically what type of activity. For example, a stock loan tracked deliver order could be activity code 42 (for tracked securities) and reason code 10 (for stock loans). The following is a list of valid reason codes for Security Holder tracked transactions. Reason Code Description 10 Stock Loan 19 Stock Loan Recall 20 Stock Loan Return 30 Delivery Versus Payment 40 Transfer of Customer Account 49 ID Syndicate Trade 50 New Issue 60 Net Balance Order 70 DVP-Due Bill, Use SPO for (D/B) 71 Fail to Deliver 77 ID/NIDS 83 CP Early Maturity 86 Muni-comparison Trade Settlement 87 DVP-Due Bill, (D/B)/Check Sent 88 ACATS DO 90 DTC Input Underwriting Department 92 Delivery on Warrant Exercise 94 DTC Settlement Adjustment-Participant PTS Problem 98 Transfer of Account without Memo Set 99 Bulk Transfer of Account 570 Syndicate Takedown Delivery 620 Balance Order SECURITY HOLDER TRACKING SERVICE > 14

17 PBS Step-By-Step Procedures PAARRTTIICCIIPPAANNTT PRROOCCEEDDUURREESS Below are step-by-step instructions for participants on how to input a tracked DO and inquire on tracked transactions. PAARRTTIICCIIPPAANNTT DEELLIIVVEERR ORRDDEERR IINNPPUUTT Security Holder Tracking Deliver Order Input Submitting a Security Holder Tracking DO 1. From the Settlement Services home page, select Security Holder Tracking Service Deliver Order Input. The Security Holder Tracking Service Deliver Order Input page appears. 2. Select a Transaction Type to indicate whether this is a free or valued DO. 3. Type or select the minimum required information. Items marked with a red asterisk (*) are required. 4. Optional. Add additional information and select additional processing options. 5. Click Submit. A message displays, Update Successfully Applied. SECURITY HOLDER TRACKING SERVICE > 15

18 PAARRTTIICCIIPPAANNTT IINNQQUUIIRRYY Participants can see Security Holder Tracking trade summaries, transaction details, and transaction histories in the PBS Third-Party Authorization option. Security Holder Tracking Service Viewing Security Holder Tracking DOs 1. From the Settlement Services home page, select Security Holder Tracking Third-Party Authorization. 2. Indicate the status of the transactions you wish to display, by checking a Third Party Approval status box. Check one of the following: o o o o Pending Approval Approved Disapproved All. 3. Optional. Type or select any additional search criteria for the transactions you wish to display. 4. Click Search. The transactions matching the criteria you entered are displayed. 5. To see transaction details, click a Control Number. See an example on the next page. 6. To see a transaction history, click a State. See an example on the next page. SECURITY HOLDER TRACKING SERVICE > 16

19 Security Holder Tracking Transaction Detail The Transaction Detail page (excerpt shown below) is accessed from the Third-Party Authorization page. Security Holder Tracking Transaction History The Transaction History page is accessed from the Third-Party Authorization page. SECURITY HOLDER TRACKING SERVICE > 17

20 ParticipantInquiry in the Activity Research Tool Additionally, participants can see Security Holder Tracking transactions listed under activity code 42 in the Activity Research Tool (ART). Activity Ordered by Activity Code Note: Tracked transactions are viewable in the Activity Research Tool (ART) after they are approved by the administrator, authorized, and submitted to ATP. SECURITY HOLDER TRACKING SERVICE > 18

21 ADDMMIINNIISSTTRRAATTOORR PRROOCCEEDDUURREESS Administrators can see Security Holder Tracking trade summaries, transaction details, and transaction histories in the PBS Third-Party Authorization option. Below are step-by-step instructions for administrators on how to inquire, approve, and disapprove tracked transactions. Security Holder Tracking Service Third-Party Authorization Viewing and Approving Security Holder Tracking Transactions 1. From the Settlement Services home page, select Security Holder Tracking Third-Party Authorization. 2. Indicate the status of the transactions you wish to display, by checking a Third Party Approval status box. Administrators can approve or disapprove transactions that are in Pending Approval status. For more information, refer to Administrator Approval Cutoffs on page 7.Check one of the following: o o o Pending Approval Approved Disapproved 3. Type or select any additional search criteria for the transactions you wish to display or approve. 4. Click Search. The transactions matching the criteria you entered are displayed. 5. To see transaction details, click a transaction Control Number. See an example on the next page. 6. To see a transaction history, click or select a State. See an example on the next page. 7. To approve or disapprove transactions, select Approve or Disapprove next to the desired transactions and click Submit. SECURITY HOLDER TRACKING SERVICE > 19

22 Security Holder Tracking Transaction Detail The Transaction Detail page (excerpt shown below) is accessed from the Third-Party Authorization page. Security Holder Tracking Transaction History The Transaction History page is accessed from the Third-Party Authorization page. SECURITY HOLDER TRACKING SERVICE > 20