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Executive Summary

One of the core asset services provided by The Depository Trust Company (“DTC”), a subsidiary of The Depository Trust & Clearing Corporation (“DTCC”), is the daily collection and allocation of cash entitlements due on DTC-eligible securities. Commonly referred to as Principal and Income payments (“P&I”), these entitlements include dividend, interest, periodic principal, redemption and maturity payments arising from the servicing of 3.5 million securities eligible at the depository.

To facilitate this service, each business day DTC operations staff communicate with agents and issuers regarding entitlements due that day, collect expected payments and allocate entitlements to participants for further credit to beneficial owners. DTC collects and allocates virtually all payments on their scheduled payable date – including those that may be paid to DTC after established intraday cut-off times or received without the detail needed to allow a payment to be paired with its specific CUSIP number.

There are inherent risks associated with allocating late and unidentified payments. After internal review and examination and in-depth discussion with regulators, DTC has determined that, given today’s market conditions, these risks must be substantially eliminated. In response, DTC intends to sunset its current practice and transition to a methodology for allocating only those entitlements paid and identified at a CUSIP level and received by the prescribed cut-off time of 3:00 p.m. (Note: all times cited herein are Eastern Time.) The new methodology will become effective in January 2011. The transition will have an impact on participants and beneficial owners.

Download the White Paper: P+I Payment Refinement: A Move to Further Reduce Payment Risk