SMART/Track for Agency Lending Disclosure essentially acts as a 'post office' for agency lending disclosure, transmitting the agency lending data files to the designated broker/dealer, but will not edit or validate the data contained with the files.

Overview

SMART/Track for Agency Lending Disclosure essentially acts as a 'post office' for agency lending disclosure, transmitting the agency lending data files to the designated broker/dealer, but will not edit or validate the data contained with the files.

Basically, two types of files will be transmitted, including:

• Periodic data files that enable borrowers to do their own credit pre-qualification of principal lenders they choose to deal with;
• Daily open loan files that agent lenders will send to borrowing broker/dealers.

Agent lenders, as the name suggests, lend securities to borrowers - mainly broker/dealers - on behalf of other parties. For example, if a borrower requests 5,000 shares of XYZ stock from an agent lender, the lender will allocate the loan to various funds and institutions, say 1,000 from a pension fund, 2,000 from a mutual fund, and 2,000 shares from another fund. Then, in one transaction, the shares are delivered to the borrower. The agent lender, however, remains a go-between and is not a principal in the transaction, and the borrower doesn't know who the principal lenders are.

The push for greater transparency in agency securities lending transactions began back in 2003, when the Securities and Exchange Commission (SEC) expressed concerns about the level of information provided borrowers by agent lenders. The Securities Industry Association (SIA), the Risk Management Association and The Bond Market Association, working in conjunction with regulators, formed the Industry Agent Lending Task Force in January 2004 and asked DTC, a task force member, to develop a central communication hub for the transmission of agency lending data.

Who can use the service

The service is open to members and non-DTC members;  DTC will assign "unique identifiers" through SMART/Track to principal lenders who do not have a U.S. tax identification number.

Benefits

In addition to transmitting loan data, SMART/Track for Agency Lender Disclosure:

• Notifies the sender that it has received the file and that it has been sent to the receiver.
• Creates a receipt record for the sender or generates an error code if it cannot deliver the file.
• Provides a Web screen for agent lenders, borrowers and vendors to browse the status of files being processed and to request the creation of unique identifiers for principal lenders.

How the service works

Agent lenders and borrowers on the same technology platform - Loanet or EquiLend - can transmit information directly from one to another. But if lenders and borrowers are on different platforms, DTC will serve as their communication hub. All customers can also elect to sign on to DTC directly via SMART/Track.

For more information:

Please call Relationship Management at 1 888.382.2721.