As part of DTCC’s continuing effort to reduce risk and expand services for clients, the Automated Tender Option Program (ATOP) service was recently expanded to allow consent solicitation events for Book Entry Only (BEO) securities in the depository’s FAST program (see sidebar) for Corporate Reorganization events.
A consent solicitation is the process by which a security’s issuer proposes changes to the material terms of the security agreement. These changes are for investors who hold a stake in the security. The consent solicitation is a request for permission to make a change on behalf of the stakeholder.
“The industry had become concerned with the growing risk of over-consenting investors, due to the arduous manual paper processing for consents,” said Chris Scotto, DTCC Senior Director, Asset Services. “The introduction of this new service for consent solicitation is designed to eliminate many of these risks.”
The new ATOP functionality eliminates the manual process of collection and reconciliation of hard-copy instructions, which sharply reduces processing errors from lost documents, misallocations to multiple payees and the miscounting of hard-copy consent instructions. With no need to mail physical documents, the risk of missed expirations caused by mailing delays is removed entirely.
What is the FAST Program?
The Fast Automated Securities Transfer Program (FAST) is a contract between DTC and transfer agents that eliminates the movement of physical securities by allowing agents to act as custodians for DTC. The FAST program facilitates the industry’s dematerialization efforts and plays a significant role in reducing the costs associated with shipping certificates to and from agents as well as those related to printing and processing certificates.
Click here to more about DTC’s FAST program
In one example, utilizing the enhanced ATOP service allowed agents to send just one wire payment to The Depository Trust Company (DTC) -- as opposed to at least 179 separate wires that would have been handled outside of DTC previously.
Simplifying this process is a welcomed scenario for clients.
“With the current state of voluntary corporate actions becoming more complex, the industry is in dire need of support for efficiency,” said Henry Napier, Vice President, Global Corporate Actions, Industrial and Commercial Bank of China. “DTCC has helped the industry by improving the Consent Service and enabling firms to reduce risk, increase efficiency and increase opportunity for firms to offer more products to their client base.“
Additional benefits of the ATOP expansion include facilitating the allocation of Consent Consideration by allowing Agents to centralize payment through DTC. This gives agents the ability to handle multiple elections for a single event while eliminating consents that could potentially exceed a participant’s total outstanding position.
“We’re always looking for opportunities to improve our services,” said Ann Marie Bria, DTCC Executive Director, Asset Services. “Implementing the ATOP service in this manner will allow DTC to act as a centralized payment center for agents and improve the speed and accuracy of consent solicitation events.”