Cash on Transfer provides the global syndicated loan market with its first deliveryversus- payment platform for secondary loan trades.

Overview

Historically, secondary loan trading provided no assurance that cash settled simultaneously with the change of loan ownership recorded by agent banks at the time of trade settlement. This left the seller on each trade at risk of losing legal title to the loan at the agent bank without having received the cash payment.

The introduction of Loan/SERV Cash on Transfer addresses this risk. This new service links the buyer, seller, agent bank, trade processing platform and counterparty accounts to allow for cash and legal ownership of the loan to move simultaneously on the agreed trade settlement date. Cash on Transfer also simplifies funding requirements by allowing counterparties to fund all buys and sells with a single payment.

Who Can Use the Service

Any counterparty in the secondary loan market using Markit’s ClearPar trade settlement platform can use the Loan/SERV Cash on Transfer Service.

Benefits

Cash on Transfer helps mitigate risk on settlement date with trade counterparties and the agent bank. It:

• Helps ensure certainty of legal ownership and cash receipt for secondary loan trades
• Allows for net funding by currency of all trade related payments, reducing the total amount of cash moved by all counterparties
• Automates the collection of agent assignment / transfer fees paid to agent banks through the services of a Third Party Cash Settlement Provider
• Supports USD trades and will expand in 2011/2012 to support cash settlement in 50 currencies.
• Provides tight integration with trade processing platforms, including the global market leader, ClearPar, via real-time, two-way data feeds
• Allows for seamless trade funding management for the settlement of secondary trades.

How the Service Works

Trade processing platforms feed Loan/ SERV Cash on Transfer on a realtime basis with all eligible trades for settlement. Trade funding requirements are calculated on a net basis and each net buyer funds Cash on Transfer accordingly. When cash is received and a trade is ready to settle, a message is sent to the trade processing platform triggering the formal signing of the assignment agreement. Cash is simultaneously moved from the buyers’ Loan/SERV account to the sellers’ account. Trades can be prioritized for settlement and the funding status of each trade is known to both parties and to the trade settlement platform for effective trade order management.

BNY Mellon acts as the paying agent for Cash on Transfer.

System security provides that market participants only have access to relevant trade and cash related information.

Changes in cu rrent loan trade settlement practices:

Loan/SERV Cash on Transfer introduces a number of changes to the settlement of loan trades, across the workflows of each participant.

Agents no longer assign positions in their internal books and records based purely on the assignment agreement date. Agents can now tie the movement of the position directly to confirmation from Cash on Transfer that funds have been received by the seller. This means the agent’s signature on assignment agreements is held back until funds receipt has been confirmed. Agent assignment fees are now aggregated across all daily trade volume and paid as a single amount from a Loan/SERV account to the agent bank. A report details the fees paid for each trade.

Buyers no longer fund trades directly with counterparties. Buyers now remit funds to Cash on Transfer with the inclusion of their Markit Entity Identifier (MEI ). Buyers now have the ability to fund their total daily trading (buys and sells) on a net basis, better utilising cash and reducing the amount changing hands across the market.

Sellers no longer receive funds from individual trade counterparties. Sellers now receive a single cash amount from Cash on Transfer. A report details the funds received for each trade with confirmation of settlement.

Loan/SERV Cash on Transfer service is the outcome of DTCC’s commitment to reduce settlement risk, streamline processes and bring major new efficiencies to the syndicated loan settlement processing.

For More Information

Product Management, North Americabr /> Dave Perry
212.855.2345
dperry1@dtcc.com

Eugene Kotlyarevskiy
212.855.5689
ekotlyarevskiy@dtcc.com

Pr oduct Management, Europe, Middle East,
Africa and Asia Pacific
Charlene Huxham
+44 (0) 207.650.1487
chuxham@dtcc.com

About Markit Entity Identifiers (MEIS)

Markit has developed a comprehensive set of entity identifiers to unify disparate data, processing and communications platforms in the loan market. The primary objective of Markit Entity Identifiers (MEIs) is to provide global coverage of entities in the loan market and their relationships. MEIs are issued using an ISO standard format to increase transparency and standardization.

Loan/SERV Cash on Transfer is a service offering of DTCC Loan/SERV LLC, a fully-owned subsidiary of DTCC. This description is for informational purposes only. This Service is governed by applicable Rules, Procedures, and Service Guides for each DTCC subsidiary, which contain the full terms, conditions, and limitations applicable to this Service.