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ESS

Envelope Settlement Service (ESS) standardizes and controls participant-to-participant physical delivery of securities in the New York metropolitan area. Inter-city Envelope Settlement Service (IESS) standardizes and controls participant-to-participant physical delivery of securities between N.Y. and Toronto.

About

The ESS was originally established for Member-to-Member physical delivery of securities, and is now also used for the settlement of money-only transactions between NSCC Members that were previously processed in the Dividend Settlement Service (DSS) and Funds Only Settlement Service (FOSS).

Who Can Use the Service

All NSCC Members

Benefits

The service centralizes and standardizes the processing of certain transactions, offering the following industry-wide efficiencies:

  • NSCC serves as a central drop point, which reduces expenses related to bonded couriers and overnight courier services, including expenses of over-the-window checks and deliveries.
  • Tracks and confirms receipt of all processed deliveries.
  • IESS provides next day credit for deliveries made in Toronto, Canada.
  • Provides a standard, efficient vehicle for processing funds-only charges.
  • Allows Members to collect dividends and interest owed to them from other Members.
  • Conveniently nets money settlement of transactions into the Members’ NSCC end-of-day settlement obligation.

How the Service Works

For physical deliveries of securities between Members within the U.S., the ESS operates in accordance with a central clearing-house approach, described below:

  • The delivering Member must attach to the securities being delivered two copies of the delivery instructions to the receiving Member(s), and put the securities and those instructions in an ESS envelope.
  • Using the Envelope Control System for Participants (“ECSP”) function in the Participant Terminal System (PTS), the delivering Member must prepare a credit list by electronically entering credit list information for each batch of envelopes being delivered. This creates a unique credit list number. These credit lists itemize the receiving Members' clearing numbers and the value of each envelope received.
  • The delivering Member sends the envelopes containing securities and the instructions to NSCC’s facility. Once received, NSCC will debit and credit the respective Members’ settlement accounts for the securities to be delivered, based on the credit lists provided by the delivering Member. NSCC will sort the envelopes according to receiving Members’ clearing numbers for distribution to those receiving Members. The ESS compiles the credits and debits into detailed reports that are distributed later in the day to those Members. These reports help Members reconcile internal accounts and re-calculate settlement amounts with NSCC.
  • The ESS also includes a reclamation process, which allows the receiving Member to return deliveries by reversing the delivery process. Members using the reclamation process to return securities must include in the envelope new reclamation credit lists, entered via PTS function “ECSP”, and Uniform Reclamation Forms, which must detail the reason for the return.

For physical deliveries between Members in the U.S. and Toronto, Canada, the ESS operates in accordance with a central clearing-house approach, described below:

  • The delivering Member must attach to the securities being delivered two copies of the delivery instructions to the receiving Member(s), and put the securities and those instructions in an IESS envelope.
  • Using the PTS function “ECSP”, the delivering Member must prepare and print credit list by electronically entering credit list information for each batch of envelopes being delivered. This creates a unique credit list number. These credit lists itemize the receiving Members' clearing numbers and the value of each envelope received.
  • The delivering Member sends the envelopes containing securities and the instructions to NSCC's facility or to the Canadian Depository for Securities (CDS) in Toronto. The envelopes must be prepared to show the receiving Member(s) location code and clearing numbers. The IESS credit lists must be attached to the envelope itemizing clearing numbers and the value of securities in the envelope. NSCC will debit and credit the respective Members’ settlement accounts same day when processed in the U.S. for U.S. receivers, and are processed the next day for envelopes processed in the U.S. for Canadian receivers.

For the settlement of money-only related charges, including claims on dividends and interest between Members, the service operates as follows:

  • The delivering Member must enclose required documentation relating to the transaction in an ESS envelope. The clearing numbers of receiving Members must be marked on the envelopes, and credit lists (created and printed out using the PTS function “ECSP”) must be attached.
  • Members can prepare one credit list for up to 15 envelopes. Credit lists must indicate the clearing numbers of the Members to receive the envelopes, the value of the transaction detailed in each envelope, and the total value of the listed items.
  • ESS envelopes are sent to NSCC’s facility. Envelopes are sorted and are picked up by the receiving Member(s). NSCC uses the credit lists to incorporate debits and credits into Members’ daily net money settlements.

For More Information

Please contact Client Support at (212) 855-2475.

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