One of The Depository Trust Company (DTC)’s primary liquidity risk controls for settlement, the Net Debit Cap (NDC), has recently been increased for individual legal entities to $2.15 billion from $1.80 billion, while keeping the affiliated family limit at $2.85 billion. This increase to the DTC NDC will create operational and liquidity benefits for participants by reducing their DTC intraday funding requirement.
DTC calculates the Settlement NDC for each participant based on their settlement activity, and the maximum NDC is set at an amount that is at or below the value of DTC’s liquidity resources. The NDC is one of the safeguards designed to protect DTC’s ability to complete settlement by ensuring there is sufficient liquidity in the event a participant is unable to satisfy its end of day net settlement obligation.
The proposal for this increase came about late in December 2023, when DTCC filed to modify the Settlement Service Guide with the U.S. Securities and Exchange commission (SEC), and requested to increase the maximum NDC by $350 MM for individual participants. DTC’s proposed increase is supported by DTC’s existing available liquidity resources. On Feb 1, 2024, the SEC approved DTC’s proposal. DTC went live with the increase to the Net Debit Cap on March 8, increasing the industry’s overall operational capabilities.
“We believe the maximum NDC for an individual participant is now better aligned with DTC’s available liquidity resources,” said Michele Hillery, General Manager of NSCC's Equity Clearing, DTC's Settlement Service and Product Modernization at DTCC. “We expect the increased cap will benefit participants by improving transaction processing throughput, enabling more transactions to process without the need for participants to provide intraday funding. Delivering participants will also benefit from an overall reduction in pending transactions making credits from transactions available to them earlier in the processing day.”
“We are pleased that the NDC has been increased to meet our clients’ needs,” said John Abel, Executive Director, Product Management, Equity Clearance and Settlement Services. “Thirteen client firms are already taking advantage of this new cap increase and we expect other participants to realize the benefits over time.”
Clients utilizing DTC’s Settlement services are encouraged to closely monitor and efficiently utilize intraday funding and DVP transactions that generate credits in their settlement accounts. Any questions clients have can be directed to DTCC’s Equity Risk team at (212) 855-2260.