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by Craig Donner

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  • Fact Sheet: CBRS

  • New Cost Basis Mandate: Helping the Industry Comply

  • DTCC Solutions has begun user testing of its enhanced Cost Basis Reporting Service (CBRS) to assist customers in complying with a January 1, 2011, federal mandate requiring financial intermediaries to pass cost basis information among one another when assets move among firms. The service is scheduled to go live December 10, 2010.

    Enhanced CBRS solves the technology and reporting challenges the industry faced in meeting a key element of The Emergency Economic Stabilization Act of 2008, which calls for financial firms to report cost basis information to investors.

    How to Sign On For Enhanced CBRS

    The first step for firms, including existing users of the Cost Basis Reporting Service (CBRS), to participate in the testing environment is to submit new account forms with DTCC. Firms can review and download new account instructions and forms by going to and following the links to Enhanced CBRS.

    DTC participants can expect to receive their new CBRS account in approximately three to five business days while other firms will gain eligibility following additional compliance screening.

    After eligibility is established, firms have the flexibility to begin testing via either a computer-to-computer connection or WebDirect, or both. DTCC Solutions plans to host webinars in late October/early November on the use of DTCC WebDirect as part of its continued outreach to the industry.

    See the September 2010 article "LENS Offers a Tool of Choice for Compliance," on LENS, a service that allows customers to disseminate cost basis information.

    "CBRS exemplifies DTCC's commitment to help the industry comply with new regulatory mandates in the most efficient, cost-effective manner possible," said Susan Cosgrove, DTCC managing director, Clearance and Settlement/Equities. "We enhanced our existing CBRS platform to promote standardization and centralization while also mitigating operational risk for our customers, reducing the cost of compliance and improving overall processing efficiencies – all within a fraction of the time than if we had begun from scratch."

    Customer-friendly solution

    DTCC Solutions leveraged the existing CBRS technology to build a central communications hub to transmit cost basis information among broker/dealers, transfer agents, issuers, mutual funds and custodian banks in a secure electronic environment. The service will not calculate or store cost basis information for firms.

    "Our service has eliminated the need for market participants to undertake the expensive and time-consuming task of establishing potentially hundreds of new connections to transmit this information," said Cosgrove. "We've worked closely with the industry for more than a year to ensure the enhanced CBRS will meet the unique needs of the different financial inter-mediaries that hold cost basis information. Now firms have begun user testing to familiarize themselves with the new functionality and how it works, starting the countdown for the service's launch."

    The start of user testing in September follows the release earlier this year of the new record layouts for enhanced CBRS, which allowed firms to begin making their own system changes to accommodate new fields in the record layout, such as increasing the number of asset record types from one to four including request functionality.

    Testing scenarios

    In the testing environment, customers will have access to multiple resources to test data input to CBRS, including the option of using up to three different counterparties. This will allow firms to test the contents of a broad range of data elements to ensure that their systems are correctly interacting with the enhanced CBRS service.

    DTCC Solutions is making available three versions of canned transaction output files, or static data, in the testing environment to demonstrate what CBRS output data will look like.

    The three versions of output correspond to the kind of firm receiving the file – with one file for a broker/dealer, one for a transfer agent and one for a bank. The contents of the different versions vary based on the kind of receiver. Much like with the input files, the output files allow firms to confirm that their systems can accept and process the data they receive.

    "We want to give our customers sufficient time to test various scenarios and resolve any potential issues they may experience well in advance of the new regulations taking effect," said Thomas Sakaris, DTCC vice president, Clearance and Settlement/Equities. "Because the enhanced CBRS service will connect all financial intermediaries in the market, some of which are new to DTCC, we're encouraging firms to begin testing as quickly as possible so they can become acquainted with the service and experience a seamless transition."

    Further enhancements to follow

    The enhanced CBRS service is expected to launch about three weeks before the new federal law takes effect. Once the service goes live in December, DTCC Solutions will no longer support the existing service.

    Over the next two years, DTCC Solutions will enhance CBRS to allow firms to comply with other parts of the law, including the requirement to transfer cost basis information on mutual funds by January 1, 2012, and debt, options and other securities by January 1, 2013. @

    [To learn more about user testing for the enhanced CBRS, NSCC and DTC, participants can contact the Relationship Management Group at Transfer Agents can contact the TA Liaisons at]