More Information

P&I Cash Processing
P&I Refinement Information Webcast (runtime 25 minutes)

The daily collection and allocation of cash entitlements due on eligible securities at The Depository Trust Company (DTC) remain DTC core services. Commonly referred to as principal and income payment (P&I), these entitlements include dividend, interest, periodic principal, redemption and maturity payments arising from the servicing of 3.5 million securities eligible at the depository.

Mitigating Exposure

DTC currently collects and allocates virtually all securities’ payments on their scheduled payment date. This includes payments made by DTC after established industry cut-off times, or those received without detail that allows a payment to be identified or matched to a specific CUSIP. This practice provided a great deal of certainty for DTC participants and their customers, but the exposure to credit risk in an increasingly complex financial and regulatory environment has grown to unacceptable levels. The potential failure of an issuer or agent between the time a payment is allocated and receipt can be confirmed, or the failure of a DTC participant between the time a P&I payment is allocated and reconciled, are inherent risks under the current practice.

New Methodology

After internal and regulatory review, DTC has decided to sunset the current practice and move to a methodology that allocates only those entitlements paid and identified at a CUSIP level and received by the cut-off time of 3:00 p.m. ET. The P&I White Paper "P&I Payment Refinement: A Move to Further Reduce Payment Risk," released in November 2009, alerted the industry of this upcoming change. This page brings together information and resources to help the industry control the risk and anticipate the impact of this change in allocation methodology, expected to take place in early 2011.