Depository Trust & Clearing Corporation

 

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Products & Services

Equities Clearance and Settlement

Continuous Net Settlement

a service offering of National Securities Clearing Corporation (NSCC)
The Continuous Net Settlement (CNS) System is NSCC’s core netting, allotting and fail-control engine. Within CNS, each security is netted to one position per participant, with NSCC as its central counter-party (novation).

Overview

The Continuous Net Settlement (CNS) System is NSCC’s core netting, allotting and fail-control engine. Within CNS, each security is netted to one position per participant, with NSCC as its central counter-party (novation). Typically, CNS transactions that reach midnight of T+1 become guaranteed by NSCC.

CNS processes include an automated book-entry accounting system that centralizes settlement and maintains an orderly flow of security and money balances.

Throughout the CNS processing cycle, which begins on the night of T+1, the system generates reports that provide participants with a complete record of security and money positions and related information.

CNS provides clearance for equities, corporate bonds, Unit Investment Trusts and municipal bonds that are eligible at The Depository Trust Company (DTC).

Who Can Use the Service

All NSCC full-service settling members.

Benefits

CNS offers users the following efficiencies and risk protections:

  • Regardless of volume, CNS nets participants’ security obligations on a daily basis to one net long and short position in each issue, minimizing security movements and associated costs.
  • Through CNS, NSCC becomes the contra-party to each trade and guarantees each transaction that has reached the point of trade guarantee under NSCC’s Rules.
  • Closing fail positions are marked-to-market daily and re-netted with new transactions, which reduces risk.
  • While CNS deliveries are made automatically using participants’ depository positions, participants can exempt certain short positions to avoid segregation violations and effectively meet other delivery needs.
  • CNS minimizes the need to deliver securities on a trade-by-trade basis to participants’ contra parties.
  • Cash dividends, stock dividends, bond interest and mandatory corporate actions are automatically debited or credited to participants' CNS accounts with open fail positions.

How the Service Works

On T+3, all trades due to settle are netted by issue to a net long (buy) or a net short (sell) position, and then are further netted with any new miscellaneous activities, including ACATS and ID Net transactions, and open positions from the previous day. NSCC takes the role of central counter party to these transactions.

The CNS automatic delivery process occurs in two cycles: the “night cycle,” which begins the night before settlement, and the “day cycle” on settlement day.

CNS short positions, which represent securities owed by participants to NSCC, are compared against their DTC accounts to determine availability. If shares are available, they are delivered from the member's account at DTC to NSCC's account at DTC to cover participants' short obligations to CNS. Participants can use CNS exemptions to control the automatic delivery of securities from their DTC accounts (partial settlements are permissible).

CNS long positions, which represent securities NSCC owes participants, are processed in an order determined by an algorithm. Securities are automatically allocated to users' long positions as they are received by NSCC. Participants can request priority for some or all issues on a standing or override basis. Buy-in submission notices also will affect the priority of a member's long position.

Daily money settlement is based on the value of all settled trades plus or minus mark-to-the-market calculations for all open CNS positions.

CNS System provides the following four ancillary services:

  1. The Stock Borrow Program allows participants to lend excess securities in their DTC accounts to CNS so that NSCC can satisfy CNS delivery obligations not filled via normal deliveries.
  2. The Fully-Paid-for-Account provides an SEC-approved "good control location" for participants' fully-paid-for customer securities in the event of a deficit that results from deliveries made outside CNS in anticipation of CNS receives.
  3. Reorganization sub-accounts allow participants to take part in voluntary tender and exchange offers in an automated environment.
  4. Participants may issue buy-in intents to CNS once a security has failed. After CNS receives a buy-in, the issuing participant will be placed on high priority to receive the securities. Participants who owe shares to CNS will be passed liability for the shares of the buy-in. Shares must be received by the time specified in NSCC’s rules or the buy-in is no longer valid.

For More Information

Please call Relationship Management at 888-328-2721.

Last updated December 22, 2009


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.

What's New

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Who to Call

Customer Service
1.888.382.2721

Membership
1.888.382.2721

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1.212.855.4825

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