Proposed solution reduces systemic and operational risks by providing a bulk account transfer facility to move customer assets between broker/dealers in a compressed time frame.
New York, NY, 9 September, 2015 – The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, released a concept paper today outlining steps the securities industry should take in order to implement a new expedited process for transferring client brokerage accounts. This enhanced capability is critical when a firm is in distress and liquidating its business in a compressed time frame.
Currently, there is no standardized process for the bulk transfer of brokerage accounts, and it often requires highly technical remapping of data, which can cause delays and increase the chance of errors. The lack of a standardized process for quickly transferring client account information between broker/dealers creates risk for both the clients of broker/dealers as well as the industry at large. If a broker/dealer is liquidating its business, clients may not be able to access their investments, including lifelong savings. Any delays or obstacles to the transfer of accounts could also impair the resolution of the broker/dealer under liquidation or bankruptcy proceedings.
“The Bulk Customer Account Transfer Initiative will increase the speed and accuracy in which client assets can be moved between firms, which is of critical importance when navigating the stressful market conditions of a default,” stated Tom Sakaris, Managing Director and General Manager of Equity Clearing Services at DTCC. “Lessons learned from the financial crisis of 2008 taught us all to prepare for the unexpected. When you have situations such as potential firm insolvencies, efficiently moving accounts becomes critical to market stability.”
DTCC has been working with a group of industry participants and Securities and Exchange Commission (SEC) staff to develop procedures that will standardize, facilitate, and expedite the account transfer process. The industry working group proposed a two-phased approach for this initiative. First, phase 1 of the initiative will focus on standardizing the transfer of account information between broker/dealers. In phase 1, all broker/dealers that carry client accounts would be expected to implement a standardized name and address file and enroll in the Account Information Transmission (AIT) service, an existing NSCC service currently used to transmit account conversions between broker/dealers. The target date for implementation of phase 1 requirements by broker/dealer firms is September 2016, subject to appropriate approvals. Phase 2 of this effort will focus on the requirements for the conversion of assets, and procedures for setting up securities reference data, along with the specific positions and balance information for each customer account. The target date for phase 2 is yet to be determined, however, analysis for implementation of this phase will begin in the fourth quarter of 2015.
DTCC will be hosting industry calls beginning in late September to review the initiative in more detail.
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With over 40 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 16 countries, DTCC, through its subsidiaries, automates, centralizes, and standardizes the post-trade processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers worldwide. User owned and industry governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management and information services across asset classes, bringing increased security and soundness to the financial markets. In 2014, DTCC’s subsidiaries processed securities transactions valued at approximately US$1.6 quadrillion. Its depository provides custody and asset servicing for securities issues from over 130 countries and territories valued at US$64 trillion. DTCC’s global trade repository maintains approximately 40 million open OTC positions and processes roughly 280 million messages a week. To learn more, please visit www.dtcc.com or follow us on Twitter @The_DTCC.
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