The Depository Trust Company (DTC) offers full lifecycle processing of redemptions that arise from the servicing of the approximately 1.3 million active securities eligible at the depository, including full and partial calls, final paydowns, maturities, full and partial pre-refundings, partial defeasances, terminations, and other events.
DTC’s Corporate Actions Processing Service for Redemptions provides full lifecycle processing, including announcing details of upcoming events, providing participants with information about their entitlements, and collecting, allocating, and reporting payments. The Redemptions service includes events such as full and partial calls, final paydowns, maturities, full and partial pre-refundings, partial defeasances, terminations, and other events that arise from the servicing of securities eligible at the depository.
Who Can Use the Service
All DTC participants are eligible to use the service.
By centralizing corporate actions processing, including the receipt and allocation of cash and stock entitlements, the Corporate Actions Processing Service leverages the economies of scale and experience of DTC to provide cost savings to issuers, agents and participants – and ultimately to securities’ beneficial owners. The service enables a single payment by an agent or issuer to be seamlessly translated into multiple allocations to participants, eliminating the need for separate payments to multiple firms across the financial industry, as applicable.
DTC’s Corporate Actions Processing Service for Redemptions provides participating organizations cost savings, efficiencies, and reduced risk for eligible securities by:
- Reducing the burden of securing timely payment directly from paying agents.
- Providing timely, accurate distributions of principal cash and accrued interest.
- Reducing manual processing.
- Reducing risk and exposure.
- Providing an array of information and processing services for which outside agencies were formerly used at a higher cost.
- Reducing the need for holders to submit bonds for presentation relating to redemptions while limiting the risks associated in shipment of bonds.
How the Service Works
For participating organizations, DTC’s Corporate Actions Processing Service for Redemptions works as follows:
- For maturities, DTC makes the maturity information available to participants and presents certificates/instructions to the redemption agent for payment.
- For all other redemption events, DTC receives notification of the event from the agent or the agent’s authorized vendor. The data is received and processed into DTC’s systems. In cases where a lottery is required (e.g., partial call, partial pre-refunding) DTC runs a systemic, impartial lottery to determine the amount that DTC participants will be called for, if any.
- On payment date of the redemption, DTC collects the proceeds from the agent, allocates to the participants and reduces the participants’ position on DTC’s records.
- For Redemption Cancellations and Revisions, upon written instruction from the agent, DTC may rescind or adjust a redemption. Participants’ positions and allocations will be adjusted in accordance with the instructions received from the agent.
As funds are paid to DTC to support cash entitlements, matched funding (i.e., funds received by 3:00 pm and identified at a CUSIP level) is allocated to participants in batches running approximately every 20 minutes from approximately 8:30 am to 3:30 pm. These allocation totals appear on the DTC Participant Settlement Statement. Participants can receive updates on their intraday allocations through several means including intraday cash settlement files, ISO 20022 messages, on-line inquiries and, if eligible, can also request intraday withdrawals of these funds. If not withdrawn intraday, these entitlements are settled through the combined DTCC Settlement process.
For More Information
To request additional information, please click here.
Corporate Actions Transformation Essentials
DTC’s Corporate Actions Processing Service is undergoing a multi-year transformation initiative. This initiative:
- Introduces a new “event-based” data model aligned with market practice standards; events are announced under single announcements rather than via multiple “function codes” or “envelopes”, as was the previous process.
- Introduced near real-time systemic communications of corporate actions information.
- Replaces the PTS/PBS client interfaces for corporate actions with an online client browser.
- Replaces the corporate actions CCF files with ISO 20022 messages.
- Allows customers to systemically submit instructions on all corporate actions Distributions events via ISO 20022 messages.
- Allows customers the option of receiving corporate actions information via SWIFT, in addition to the DTCC SMART Network.
Click here for additional information on the Corporate Actions Transformation initiative, including documentation for mapping and adopting ISO 20022 messages for corporate actions. DTC participants can also utilize the Corporate Actions Learning Center for additional information on the changes and benefits the project brings, instructions on connectivity to the browser and to receive ISO 20022 messages, ISO 20022 analysis and mapping, and browser functionality and training.