Rollout of the New Underwriting System Set for September

By  Edward C. Kelleher

The countdown has begun. The industry is just two months away from full implementation of DTCC's new underwriting platform, which will replace and consolidate the legacy systems that have been in place for decades, bringing major new efficiencies and straight-through processing benefits.

Called the Underwriting SOURCE (Securities Origination Under-writing & Reliable Corporate Actions Environment), the system is scheduled to go into production for customers in early September. During July and August, a group of 25 customer firms and several information vendors will participate in a coordinated test of the new system.

Real-time information
The system will fundamentally streamline the process by which underwriters submit new-issue eligibility requests to The Depository Trust Company (DTC), a DTCC subsidiary. It also will introduce the New Issue Information Dissemination Service (NIIDS), a service that will disseminate information on new issues in real time to the industry. NIIDS was developed by DTC to help broker/dealers meet regulatory requirements for the prompt reporting of bond trades.

"Current notification practices on bond issues are decentralized and involve a variety of formats and manual processes including phone calls, faxes and emails," said Denise Russo, DTCC director, Asset Services. "NIIDS will completely change this process, doing away with paper and moving the customer into real time."
With NIIDS, underwriters will send new-issue information electronically to DTC, as well as any follow-up adjusted information. Once DTC has all the required reporting information, it will send the data to information vendors, dealers and other market participants so they can match, confirm and report trades in a timely and accurate fashion. DTC will distribute updates in a real-time electronic format until settlement day.

Reporting requirement
On January 1, 2008, it's anticipated that the Municipal Securities Rulemaking Board (MSRB) will issue a rule change requiring that, in most cases, municipal securities dealers report transactions to the MSRB within 15 minutes of the time of trade, compared to the current three-hour window.

"The launch of the underwriting system in early September will give our customers plenty of time to familiarize themselves with NIIDS and the anticipated MSRB requirements," said Russo. "The NIIDS data requirements will be optional in September when the new system goes live and will remain optional until the MSRB mandates that its member firms submit this data to DTC. We urge all municipal underwriting firms to begin submitting NIIDS data in September so they're ready to meet the MSRB mandate."

Retiring old apps
All municipal underwriters must begin submitting new-issue eligibility requests through the new system in September. DTC will no longer accept hard-copy questionnaires or submission via the Participant Terminal System's PUND application or the Web application, WUN, said Russo.

All firms involved in the new-issue process - DTC customer underwriters, correspondent underwriters, clearing firms and custodian banks - must be registered with DTC for the new underwriting system in order to submit a new issue for DTC eligibility or, in the case of clearing firms and custodian banks, to approve a new issue submitted by a correspondent. @
[For more information on the new underwriting system, visit www.dtcc.com/reengineering or contact Denise Russo at drusso@dtcc.com or 212.855.3731.]

Corporate Underwriters Also Can Go Live in September

In addition to handling municipal bonds, the New Issue Information Dissemination Service (NIIDS) will be expanded to automate the collection and distribution of information on securities including corporate bonds, asset-backed securities and other fixed-income securities.

Like municipal underwriters, corporate underwriters can begin using the new underwriting system in September, but it is not immediately mandatory. Current functionality used by corporate underwriters - PUND, a PTS application, and WUN, a Web application - will be turned off for corporate issues on Oct. 1. At that time, corporate firms will have an option to begin using the new system or to continue submitting the paper eligibility form (the underwriting questionnaire). Firms will be able to use the paper questionnaire through Dec. 31, 2007. Beginning in January 2008, all requests for eligibility must be made in an automated format.

"Even though it is not anticipated that corporate underwriters will be required to use the new underwriting system until Jan. 1, 2008, they have the opportunity to acquaint themselves with the system and distribute information via NIIDS sooner if they choose to," said Denise Russo, DTCC director, Asset Services.