Unlike exchange trades and most prime broker trades, institutional delivery transactions do not typically flow through NSCC’s CNS automated book-entry accounting system. Instead, they generally settle on a trade-for-trade basis at DTC. The ID Net service essentially separates an affirmed/matched institutional trade into two parts, allowing the broker to combine its institutional trades with its other trades in CNS, while the bank, acting as custodian for the investment manager’s client, continues to settle on a trade-for-trade basis.
As a result, ID Net streamlines clearance and settlement, cuts customer costs and reduces fails associated with affirmed institutional equity trades, benefiting all parties involved in institutional trading. Other benefits include:
- Encouraging early trade affirmation
- Facilitates prioritization of settlement for ID Net trades
- Reducing the aggregate value of settlements industry-wide through netting efficiencies.
Although not considered participants in the service, investment managers and their clients ultimately benefit from ID Net when participants – the settling broker/dealers and banks – subscribe to the service.