development agenda - DTCC.com

DEVELOPMENT AGENDA NEW AND ONGOING BUSINESS INITIATIVES FOR DTCC’S SIFMU BUSINESSES DECEMBER 2015

DTCC’s Development Agenda is intended to provide clients with a summary of key ongoing and new initiatives. Please contact your DTCC Relationship Manager with inquiries.

DEVELOPMENT AGENDA New and Ongoing Business Initiatives

DTCC’s Development Agenda is intended to provide clients with a summary of key ongoing and new initiatives. Please contact your DTCC Relationship Manager with inquiries. This Development Agenda describes initiatives that are in varying stages of development. Therefore, initiatives and their milestone targets are subject to change, particularly where regulatory approval is required.

FIXED INCOME CLEARING CORPORATION (FICC)

Key FICC Initiatives

GSD Centrally Cleared Institutional Tri-party Repo ServiceTM (CCITTM) Impact: Government Securities (New, Optional Service for Registered Investment Companies) The Government Securities Division (GSD) of the Fixed Income Clearing Corporation (FICC) intends to submit a rule filing with the U.S. Securities and Exchange Commission (SEC) and an advance notice filing to both the SEC and the Federal Reserve Board, which would allow for the clearing of Institutional Tri-Party Repo transactions between ‘40 Act Registered Investment Companies (RICs) and existing GSD clients. As a part of the proposed rule change, FICC plans to create a new limited-service membership category for the RICs for Tri-Party Repo Transactions where the fund is the cash lender. This new membership category would be separate and apart from the existing GSD full service Membership for the RICs for Delivery versus Payment (DVP) transactions. The RICs could elect to enroll in either or both of these types of Memberships.

DTCC Controlled Non-Confidential (Green)

Status & Working Groups Implementation Pending Regulatory Approval In Discussion with Several RICs and the SEC

Milestone Targets* 2015 • Resolve regulatory issues regarding RIC participation in FICC, Q4 • Implementation, pending regulatory approval

Contacts & Links Sean Delap Vice President FICC Product Management [email protected] 212-855-7627

Page 1 of 17


GSD Settlement Optimization Initiative Impact: Mandatory for all GSD Netting Members

Status & Working Groups Client Testing (near Completion)

This initiative will change the logic for determining which of the two clearing banks a netting member must deliver its obligations to and receive its obligations from. This change will increase settlement efficiency.

GSD Risk Sensitivities VaR

Milestone Targets* 2015 • Development Completed, Q3 • Complete Client Testing, Q4 2016 • Implementation, January

Feasibility Study Initiated

FICC will introduce a new Value-at-Risk (VaR) model: • The new model will be based on a portfolio’s risk sensitivities (i.e., the impact of changes in interest rates and other key risk factors on the market value of the portfolio).

2015 • Complete Feasibility Study 2016 • Implementation

Contacts & Links Boris Solovey Director FICC Product Management [email protected] 212-855-5226

Marc Golin Vice President Enterprise Risk Management [email protected] 212-855-7640

• The Margin Requirement Differential (MRD) and Coverage Component (CC) components will be eliminated.

Capped Contingency Liquidity Facility® (CCLF®) for GSD DTCC considers liquidity risk management to be an integral component of timely settlement and reducing potential systemic risk. Throughout 2015, Enterprise Risk Management has outlined its liquidity initiatives aimed at maintaining sufficient financial resources to withstand, at a minimum, a default by the member-family to which it has the largest exposure in extreme but plausible market conditions as promulgated under the SEC’s Clearing Agency Standards (“Cover 1 Requirement”). This includes pursuing a Capped Contingent Liquidity Facility (“CCLF”) to cover liquidity demands if the repo market is not available.


Phase I Client Engagement Completed - Impact Analysis Shared with Clients In Discussion with Regulators about Rule Filing Requirements

2015 • Planned 3 to 5-year phasein period, subject to regulatory discussions

Tom Granelli Vice President Enterprise Risk Management [email protected] 212-855-5075

Page 2 of 17


MBS Novation

Status & Working Groups Development

Impact: Mortgage-Backed Securities (Mandatory for Clients of the MBS Clearing Service)

Milestone Targets* 2015 • Begin Development, Q3 2016 • Complete Development, Q2 • DTCC Internal Testing, Q2-Q3 • Begin Client Testing, Q3 • Submit Rule Filing/Advance Notice, Q3

The MBS Novation initiative is a conversion to operational novation and a simplification of the netting and settlement process that will enable MBSD to retire inefficient processing such as NOS (Notification of Settlement). Trades will be novated upon comparison and members will face FICC as both an allocation and settlement counterparty. This change is intended to reduce the number of allocation and settlement events, easing the operational burden on clients.

2017 • Complete Client Testing, Q2 • Implementation, Q3

MBSD Risk Sensitivities VaR FICC will introduce a new Value-at-Risk (VaR) model:

Contacts & Links Nick Botta Vice President FICC Product Management [email protected] 212-855-7636 Vance Howard Director FICC Product Management [email protected] 212-855-7605

In Final Stages of Testing, Implementation Subject to Regulatory Review

2015 • In Final Stages of Testing • Implementation, subject to regulatory review


2016 Feasibility Study and Client Engagement

2016 • Complete Impact Analysis


• The new model will be based on a portfolio’s risk sensitivities (i.e., the impact of changes in interest rates and other key risk factors on the market value of the portfolio). • The Margin Requirement Differential (MRD) and Coverage Component (CC) components will be eliminated.

MBSD Intraday Risk Sensitivities VaR MBSD will seek to expand the new sensitivity-based model to perform risk analysis on an intra-day basis.


Page 3 of 17

NATIONAL SECURITIES CLEARING CORPORATION (NSCC)

Key NSCC Initiatives

Bulk Customer Transfer Initiative Impact: (Mandatory for Clients of Equities Clearing) This initiative will address industry concerns related to customer account transfers when a broker may be in distress and is liquidating its business in a compressed timeframe. The project will create a standard format for the customer name and address file that brokers exchange before transferring customer accounts in bulk through the AIT (Account Information Transmission) service.

Status & Working Groups Proposal

Milestone Targets* 2015 • Published File Layout, Q3

Published Concept Paper ACATS Reversals Steering Committee

2016 • Client Testing, Q2 • Implementation, Q3

Impact: New, Optional Service for both ACATS and non-ACATS Clients This initiative will create a service to securely transfer document images related to the transfer of customer assets from one financial institution to another (e.g., from one broker to another broker, from a broker to a bank or from a broker to a trust company).

Real-time Clearance Submissions Impact: Equities Clearing (Mandatory for Clients of Equities Clearing) In Q3, 2014, NSCC and the industry drafted a Trade Clearance Input Concept Paper that focused on real-time processing and risk reduction. A primary outcome of the paper and subsequent outreach is a plan to require real-time submission of correspondent clearing transactions. As part of this initiative, NSCC will also modify market submission validation rules and enhance the Trading Relationship Management System.


Proposal SIFMA Customer Account Transfer Section

Proposal UTC Best Practices Committee

Craig Gurien Director NSCC Product Management [email protected] 212-855-5649 Bulk Customer Account Transfer Initiative Concept Paper

SIFMA Customer Account Transfer Section

Document Transfer Service Initiative

Contacts & Links

2016 • Define Industry Requirements, Q3 • Development, Q4

Craig Gurien Director NSCC Product Management [email protected] 212-855-5649

2015 • Rule Filing Approved, November 17 • Effective Date, December 2

Tim Garrett Director NSCC Product Management [email protected] 212-855-2262

Page 4 of 17


Institutional Delivery (ID) Clearing

Status & Working Groups

Milestone Targets*

Proposal

2016 • Define Industry Requirements, Q1

Michele Hillery Vice President NSCC Product Management [email protected] 212-855-7475

Requirements Definition

2015 • Customer Requirements Defined, Q1 • File Formats Published, Q3 • Canned data available for Client Testing, Q4

Janice DiTore Director NSCC Product Management [email protected] 212-855-7659

Impact: Equities Clearing, ID Net Users (Mandatory for Clients of the ID Net Service) ID Clearing will standardize the settlement of RVP/DVP transactions through an NSCC omnibus account and provide the buy-side with certainty of settlement in the event of an executing broker default. A new ID Clearing fund, contributed to by NSCC clients, will be established to cover the risks presented by these trades and NSCC clients will receive the benefits of offset in their daily margin requirements. NSCC will be able to view client portfolios as a whole (a consolidated view of both street-side and buy-side trading activity).

Consolidated Trade Summary (CTS) Rewrite Impact: Equities Clearing (Mandatory for Clients of Equities Clearing) This initiative will rewrite the legacy CTS in order to expand certain fields and introduce new fields and codes. New file formats and AutoRoute Products will replace legacy output. The print image version of the CTS will be discontinued. A new web front end will be introduced to allow for query and download capabilities for all CTS data.

Contacts & Links

CTS Working Group SIFMA Security Operations Section of the Regulations and Clearance Committee Financial Information Forum Back Office Committee

Equities Clearance Learning Center

2016 • Determine if Filing is Required, Q3 • Complete Development, Q4 2017 • Client Testing, Q1-Q2 • Implementation, Q3


Page 5 of 17


Cost Basis Reporting Service (CBRS) Phase 6

Milestone

Status & Working Groups Requirements Definition

Impact: DTCC Solutions (Mandatory for Clients of the CBRS Service) The Internal Revenue Service (IRS) has mandated complex debt instruments to be covered by IRS transfer of cost basis information regulations, starting January 1, 2017.

Targets* 2015 • Define Business Requirements with the Industry to add fields to the CBRS file formats that will support Fixed Income reporting, Q4

Contacts & Links Janice DiTore Director NSCC Product Management [email protected] 212-855-7659 Equities Clearance Learning Center

2016 • Define Business Requirements for Complex Debt Reporting, Q2 • Complete Development, Q3 • Client Testing, Q4 • Implementation, Q4

DTCC Limit Monitoring Phase 3

Proposal

Impact: Equities Clearing (Mandatory for Clients of Equities Clearing) The purpose of this initiative is to enhance the current functionality of the Limit Monitoring tool, based upon input from clients in order to upgrade the alerting mechanism, expand search and export capability and offer additional MRO reporting.

DTCC Limit Monitoring Industry Working Group

2015 • Develop list of proposed new functionalities, Q4

ETF Near Real-time Supplemental Portfolio Composition File (PCF) System Integration Testing 2015 Impact: ETF PCF (New, Optional Service for ETF PCF Subscribers) Upon implementation, ETF PCF subscribers will have the option to receive a new Near Real-time AutoRoute data file output of Supplemental PCF updates. The new data file output will be available in the existing Enhanced PCF format. Supplemental updates to the PCF will continue to be distributed in-batch within the existing AutoRoute output at Noon on Trade Date and will continue to be available within the ETF Browser.


DTCC ETF Industry Working Group

Pawel Pieczara Director NSCC Product Management [email protected] 212-855-5697

• DTCC Internal Testing, Q4 • Publication of File Formats, Q4

Kelly Kilroy Product Manager NSCC Product Management [email protected] 813-470-1033

2016 • Optional Client Testing for Subscribers, Q1 • Implementation, Q1

Equities Clearance Learning Center

Page 6 of 17


ETF Near Real-time Create/Redeem Enhancements & Controls Impact: Equities Clearing (Mandatory for Clients of the ETF Service) This initiative will introduce near real-time input and processing capabilities for ETF Create/Redeem primary market transactions received from ETF Agents intraday on trade date. Upon receipt of as-of transactions or corrections, the ETF Application will process and feed Create/Redeem orders to UTC for clearance.


Milestone


2015 • Define Business Requirements, Q4

DTCC ETF Industry Working Group

Targets*

2016 • Determine if Filing is Required, TBD • Development, TBD • Client Testing, TBD

Contacts & Links Kelly Kilroy Product Manager NSCC Product Management [email protected] 813-470-1033 Equities Clearance Learning Center

WEALTH MANAGEMENT SERVICES Status & Working Groups

Milestone

AIP Web Platform – Phase I

System Integration Testing

Impact: Wealth Management Services Alternative Investment Products (New, Optional Service for AIP Manufacturers)

AIP Roundtable

2015/2016 • Functional Specifications, Completed, Q3 2015 • Development Completed, Q3 2015 • Client Testing Q4 2015 – Q1 2016 • Implementation, Q1 2016

Michelle Mclean Director - AIP Product Management [email protected] 212-855-2443

2016 • Determine if Filing is Required, Q1 • Implementation, Q2


Key Alternative Investment Products Initiatives

This initiative will provide a web-based transaction and reporting tool for AIP Members, which will allow AIP Manufacturers (i.e. generally the Funds) to submit Security General Profile, Security Announcement, Security Contact and Valuation records via AIP. This service will gradually phase out the cumbersome excel-based process, which is currently used by some of these AIP Members to upload transactions.

AIP Web Platform – Phase II

Conceptual

Impact: Wealth Management Services Alternative Investment Products (New, Optional Service for AIP Distributors)

AIP Roundtable

Phase II of the AIP Web Platform initiative will allow AIP Distributers (i.e. generally broker-dealers and custodians) to submit purchase orders with support for hedge fund processing. Transactions submitted will have real-time validation and input processing. This service will assist in accelerating AIP Implementations and allow clients to use AIP without a fully integrated IT build.


Targets*

Contacts & Links

Page 7 of 17

Key Alternative Investment Products Initiatives


AIP Document Transfer

Conceptual

Impact: Wealth Management Services Alternative Investment Products (New, Optional Service for Clients of the AIP Service)

AIP Roundtable

This initiative will allow the transmission of documents, such as subscription documentation, in conjunction with order transactions, to replace the need to mail, fax or e-mail documents. The service is expected to support direct mainframe connections and be available on the AIP Web Platform.

AIP Enhancements 2016

Conceptual

Impact: Wealth Management Services Alternative Investment Products (Mandatory for Clients of the AIP Service)

AIP Roundtable

Several industry leaders have requested enhancements to AIP to support the standardization and streamlining of their business processes. This initiative will provide operational efficiencies and enhance the growth of AIP, while increasing the ROI of client investment. Enhancements are expected to include changes to support redemption and holdback processing and other miscellaneous updates.

AIP Sub-Committees

AIP Client Support Portal – Phase II

Conceptual

Impact: Wealth Management Services Alternative Investment Products (New, Optional Service for Clients of the AIP Service)

CAPS & Product Management Teams

This initiative will implement usability enhancements requested by the CAPS (Connectivity, Activation and Production Support) Team. Direct client access will also be enabled, allowing AIP clients to complete inquiry transactions online.

AIP Roundtable


Milestone Targets*

Contacts & Links

2016 • Define Business Requirements, Q2 • Determine if Filing is Required, Q2 • Implementation, Q3






Page 8 of 17

Key Mutual Fund Services Initiatives

Maintenance of Mutual Funds Core Products & Services: 2015 Release II Impact: Wealth Management Services Mutual Funds (Mandatory for Clients of the Services Impacted by the Enhancements Listed Below) This initiative will provide the Mutual Fund market with new functionalities to existing services. New Fund/SERV-ACATS Position Transfer Fund (PTF) reject codes. New reject codes will be created to explicitly communicate the reason a transfer between a fund and firm rejected and reduce manual processes when a Fund/SERV-ACATS PTF transfer is rejected. Implement Phase II of the initiative to eliminate Networking Alpha Codes. On July 28, 2014 Phase I of the initiative to discontinue issuance and support of Networking Alpha Codes was implemented and records were updated accordingly. Clients were informed a grace period would be provided before the record modifications were enforced. Phase II will enforce the record modifications.

Status & Working Groups Development Broker Dealer Advisory Committee (BDAC) Bank and Trust Advisory Committee (BTRAC)

Milestone Targets* 2015 • Draft Concept Paper and Review with Industry Committees, Completed August • Defined Business Requirements, September • Published Important Notice A#8107, October

Contacts & Links Therese Leahy Director WMS MF Product Management [email protected] (212)855-2770

2016 • Implementation, February 29

Eliminate the reminder on T+2 for closed ACATS-Fund/SERV transfers. An ACATS‐Fund/SERV transfer is systematically closed on T+2 if the fund does not acknowledge the transfer by 11:00 am EST. The reminder notification informing the fund a transfer was closed on T+2 is not sent until approximately 8:00 pm EST. Based on industry feedback, the reminder is unnecessary and will be eliminated. Require the "Dividend Ex-Date" and “Capital Gain Ex-Date" on the MFPS II Distribution Declaration Dividend (042) and Capital Gain (041) records for projected and actual non-daily dividend distributions and capital gain distributions. The "Dividend Ex-Date" and "Capital Gain Ex-Date" are currently optional fields. Firms require the Ex-Date to process declarations, which in some cases is being provided manually by funds.


Page 9 of 17

Key Mutual Fund Services Initiatives


Mutual Fund Profile Service II - Security Enhancements

Conceptual

Impact: Wealth Management Services Mutual Funds (Mandatory for Clients of Mutual Fund Profile Service II – Security Database)

Broker Dealer Advisory Committee (BDAC)

This initiative will provide the Mutual Fund market with enhancements to the Mutual Fund Profile Service II - Security database. Enhancements include new data fields, values, and record types to provide additional clarity on prospectus and operational rules, further facilitating efficient processing by firms. Enhanced scorecard reporting and Web usability improvements will also be included.

Bank and Trust Advisory Committee (BTRAC)

Money Market Fund Reform


Impact: Wealth Management Services Mutual Funds (Mandatory for Clients of Services Impacted by Money Market Fund Reform Regulations)

Broker Dealer Advisory Committee (BDAC)

This initiative will provide the Mutual Fund market with enhancements to existing services to support amendments to Money Market Fund Reform regulations that become effective October 14, 2016.

Bank and Trust Advisory Committee (BTRAC)

Milestone Targets*

Contacts & Links

2015/2016 • Draft Concept Paper and review with Industry Committees, Q4 2015 • Define Requirements; Determine if Filing is Required, Q4 2015/Q1 2016 • Issue Important Notice with a 90 day notice to the industry, Q1/Q2 2016 • Implementation,Q2/Q3 2016

Rita Gribben Director WMS MF Product Management [email protected] (212)855-5677

2015 • Draft Concept Paper and Review with Industry Committees, Q4 • Define Requirements; Determine if Filing is Required, Q4

Yana Granovskiy Director WMS MF Product Management [email protected] (212)855-1684

2016 • Issue an Important Notice with a 90 day notice to the industry, Q1 • Implementation, Q2/Q3


Page 10 of 17

Key Insurance & Retirement Services (I&RS) Initiatives

In-Force Transactions Expansion – Non Financials Impact: Insurance & Retirement Services (Optional for I&RS Clients) The project objective is to enhance the In-Force Transaction (IFT) product suite to better support clients. This enhancement will allow clients to communicate web services IFT messages to the NSCC product platform for business validation and processing. The additional transactions will support the processing of non-financial transactions such as policy administration changes, including owner, beneficiary, name, address, etc. In addition, the expansion will include the ability to notify the insurance carrier of a death of an annuity party.

Status & Working Groups In Production DTCC IFT – Non Financial Transactions Working Group

I&RS Enhancement Releases

System Integration Testing

Impact: Insurance & Retirement Services (Includes Mandatory and Optional Enhancements for Clients of I&RS)

I&RS Review Board

I&RS supports twice annual enhancement releases that address multiple enhancements requests mandated by the I&RS Review Board and the sub-committees they represent to upgrade the Insurance & Retirement Services suite of products. The enhancements include additional informational fields and codes to support clients in reporting new product features for insurance and annuity products.


Milestone Targets*

Contacts & Links

2015 • Implemented, November 5 • NSCC fees applicable to new messaging transactions subject to Rule Filing, Q4

Jeanann Smith Director Insurance and Retirement Services [email protected] 212-855-3346

2015 • Define Requirements, Q4

Jon Volpe Product Manager Insurance and Retirement Services [email protected] 212-855-7687

2016 • Client Testing, Q1 and Q3 • Implementation, Q1 and Q3

Record Layouts

I&RS Release Documentation

Page 11 of 17

THE DEPOSITORY TRUST COMPANY (DTC)

Key DTC Initiatives

Corporate Actions Transformation: ISO 20022 Messaging – Announcements and Lifecycle

Production Parallel Testing

Impact: Corporate Actions (Mandatory for Clients of Corporate Actions Processing) This initiative will modernize Corporate Actions announcement and processing messaging by utilizing the industry standard ISO 20022 framework and making the following messages available in production: Announcements for Distributions, Redemptions and Reorganizations • Lifecycle (allocation/entitlement messages) for Distributions and Redemptions • Elective Dividend Service (EDS) Instruction messages for Distributions

Engaged with: • ISITC CAWG (Corporate Actions Working Group) • SIFMA CAS (Corporate Actions Section) • BDUG (Bank Depository User Group) • ASAB (Asset Services Advisory Board)

Corporate Actions Transformation: CA Web

Development

Impact: Corporate Actions (Mandatory for Clients of Corporate Actions Processing) This initiative will modernize the customer interface for Corporate Actions announcements and processing by replacing legacy functionality within PTS and PBS with a web-based browser. In 2014-2015 PTS/PBS functions: ADJI, BOOK, DAWN, DIVA, DPAL, DUEB, EDS, PIAR, SDAR (Dept D) and TAXI were retired. DTC will continue to build out and enhance the CA Web.


Milestone


Targets*

Contacts & Links

2016 • Client parallel testing of ISO 20022 announcements for all event groups, and lifecycle messages for distributions and redemptions

[email protected]

2016

[email protected]

DTCC's Corporate Actions Transformation Project

• CA Web enhancements Engaged with: • ISITC CAWG (Corporate Actions Working Group) • SIFMA CAS (Corporate Actions Section) • BDUG (Bank Depository User Group) • ASAB (Asset Services Advisory Board)

• Deploy CA Web browser for client testing of redemptions functionality


Page 12 of 17

Key DTC Initiatives

Corporate Actions Transformation: Reorganization Events – Lifecycle & Instructions


Impact: Corporate Actions (Mandatory for Clients of Corporate Actions Processing)

Engaged with:

This initiative will enhance CA Web and ISO 20022 messages for Reorganization events and will result in: Added functionality in CA Web • Lifecycle messages for Reorganization events • Instruction messages for Reorganization events (PTOP, PSOP) •

Milestone


• ISITC CAWG (Corporate Actions Working Group)

Targets*

Contacts & Links

2016

[email protected]

• Form Reorg (Phase 5) Industry Working Group, Q1


• SIFMA CAS (Corporate Actions Section) • BDUG (Bank Depository User Group) • ASAB (Asset Services Advisory Board)

Increase Client Memo Segregation Position on Corporate Action Activity in Real-time Impact: Corporate Actions (Enhancement to Existing Corporate Actions Processing to Address a Client Pain Point; No Client Development is Required) This project will enable DTC to update a client’s Memo Seg positions in real-time, when positions increase/decrease as the result of a Corporate Action. This will protect shares which were fully-paid-for from being utilized to fill deliver orders and keep DTC’s clients free of trading violations.

Finalizing Internal Business Requirements

2016 • Implementation, Q4

Engaged with: • SIFMA CAS SubCommittee: Memo Seg • BDUG (Bank Depository User Group) • ASAB (Asset Services Advisory Board)

ISO 20022 Messaging Scheduled Standards Release (SR 2016)


2016

Impact: Corporate Actions (Mandatory for all Clients Adopted to ISO 20022 Messaging)

Engaged with:

• Implementation, November

DTC will implement changes to the ISO 20022 message standard, based on change requests submitted and approved by the US industry and global maintenance group for 2016.

Christopher Scotto Director DTC Product Management [email protected] 813-470-1233

• ISITC CAWG (Corporate Actions Working Group)

[email protected]


• Securities Evaluation Group (SEG) • SWIFT Global Maintenance Working Group (MWG) • Securities Market Practice Group (SMPG)


Page 13 of 17

Key DTC Initiatives


Milestone Targets*

MMI Finality Through Optimization

Development

Impact: Money Market Instruments (Mandatory for Clients of Money Market Instrument Transaction Processing )

Engaged with: • SIFMA Money Market Committee 2016 • SIFMA MMI Blue Sky • Client Testing, Q3 Taskforce • Begin Phased-In • Commercial Paper Implementation, Q4 Issuers Working Group (CPIWG) 2017 • DTC Settlement Advisory • Complete Phased-In Board Implementation, Q2

DTC plans to implement structural changes to settlement processing at DTC for MMIs (Money Market Instruments). The proposed MMI Settlement model will effect changes to DTC’s RTP (Refusal to Pay) procedures and to the current market practices for investors, issuers, custodians, placement agent dealers and IPAs (Issuing and Paying Agents). These changes will allow transactions to be processed intraday for end-of-day net funds settlement, without the risk of reversal prior to settlement. The model will require achieving certainty of funding by the issuer to the IPA and by the IPA to DTC and/or the IPA prior to DTC processing transactions for that acronym.

2015 • Submit Draft Rule Filing to the SEC, Q4

Contacts & Links Bob Cavallo Director DTC Product Management [email protected] 212-855-1483 Kimberly Oquindo Analyst DTC Product Management [email protected] 813-470-1017 Leon King DTC Relationship Management [email protected] 212-855-4166 Money Market Instrument Finality through Optimization

Settlement Web Reengineering

Production Parallel

Impact: Settlement (Mandatory for Clients of DTC Settlement)

DTC Settlement Advisory Board

This multi-year effort will create a re-engineered settlement framework to replace the Participant Terminal System (PTS) and the Participant Browser System (PBS) user interfaces.

2016 • Retire Participant Settlement Statements (SETP) in PTS, Q1 • Retire Participant Settlement Statements in PBS, Q2

Chris Nolan Director DTC Product Management [email protected] 212-855-2352

• Retire Activity Research Tool (ART) in PTS, Q3 • Retire Position Inquiry (POS) in PTS and Activity Research Tool in PBS, Q4


Page 14 of 17

Key DTC Initiatives

Milestone


Memo Seg for DWAC

In Production

Impact: Settlement and Securities Processing (Optional for Clients of Settlement and Securities Processing)

SIFMA Memo Seg Working Group

Targets* 2015 • Implemented, October 9

This Initiative will enhance the Deposit/Withdrawal at Custodian (DWAC) and Account Transaction Processor (ATP) applications to allow clients to request transactional Memo Seg updates via both on screen (tick box) and automated messaging upon settlement completion of DWAC deposit requests.

Industry Liquidity Requests (DTC End of Day Transactional File and DTC/NSCC Settlement Balance Report) Impact: DTC Settlement Transactions and DTC and NSCC Settlement Balances (Optional for Clients of Settlement) DTCC is working with its clients to provide two optional files, which contain DTC and NSCC transactional information. The first file will be a DTC end of day (EOD) detailed settlement transactional file. The second file is a DTC and NSCC intraday and EOD settlement balances file. Our clients requested this information to meet their regulators’ requirements (i.e., Basel III). DTC is committed to providing these requests to our clients to strengthen our relationship with the industry and provide further transparency into the transactions we process. File One: DTC End of Day (EOD) Transactional Report File Two: DTC/NSCC Settlement Balances Report

Contacts & Links Chris Nolan Director DTC Product Management [email protected] 212-855-2352 Jack Manuel Director DTC Product Management [email protected] 813-470-2627

In Production, Clients Can Subscribe to the Service

2015 • Implemented DTC EOD Transactional File, August • Implemented DTC/NSCC Settlement Balance Report, September

Bob Cavallo Director DTC Product Management [email protected] 212-855-1483 Jack Manuel Director DTC Product Management [email protected] 813-470-2627 Kimberly Oquindo Analyst DTC Product Management [email protected] 813-470-1017 Industry Liquidity Reporting


Page 15 of 17

Key DTC Initiatives

Milestone


Targets*

DWAC Enhancements

In Production

2015

Impact: Securities Processing (Mandatory for Clients of Securities Processing)

Engaged:

• Implemented, October 9

This is the first step towards including more transfer agents and issues in the Fast Automated Securities Transfer program (FAST). DTC is requiring clients to input registration information (the beneficial owner’s name) for all Deposit and Withdrawal at Custodian (DWAC) transactions involving securities valued at $0.99 or less. This will enable DTC to monitor transactions in accordance with its compliance requirements.

• Securities Processing Advisory Board

• DTC/Broker/Transfer Agent Working Group

2015

• Dematerialization Cross Stakeholder Forum

• Exchanges Submit Rule Filing to the SEC, Q4

• Securities Transfer Association (STA) Leadership Team

2016

Custody Eligibility Enhancement

Functional Design

2015

Impact: Underwriting and Securities Processing (Mandatory for Clients of Underwriting and Securities Processing)

Engaged with:

Impact: Securities Processing (Mandatory for Clients of Securities Processing) In conjunction with industry stakeholders, DTC continues to work with the NYSE, NASDAQ, and BATS to advance their rule filing for mandating participation in the Direct Registration System (DRS) Statement Only Form for newly listed issues. DTC also continues to work with the STA on a new FAST Balance Agreement, in support of expanding the FAST program to more agents and issues.

Replace the current legacy mainframe Underwriting custody eligibility function with a new web-based offering for both internal and external users. Key features to include: •

New inquiry, update and modification capability.

•

On-demand search of the DTC master file by issuer description and other criteria to locate an eligible CUSIP, prior to making a request to set-up a CUSIP for a custody deposit.

•

Functionality to upload spreadsheets for large-volume submissions and custody conversions.

•

Real-time CUSIP request process via new submission function to capture critical custody eligibility data elements.


Jon Ciciola Director DTC Product Management [email protected] 212-855-4628

• Dematerialization Cross Stakeholder Forum

Engaged with:

Dematerialization

Contacts & Links

• Securities Processing Advisory Board • Underwriting Client Forums

Jon Ciciola Director DTC Product Management [email protected] 212-855-4628

• FAST Balance Agreement, Q2

• Complete Technical Design and Commence Development, Q4 2016

Javette Laremont Director DTCC Underwriting Product Management [email protected] 212-855-2414

• Client Testing, Q1 • Implementation, Q2

Page 16 of 17


Key NSCC/DTC Initiatives

Shortened Settlement Cycle (SSC) Impact: Mandatory for Clients of Settlement for Equities and CMUs (Corporate and Municipal Debt and UITs) The Depository Trust & Clearing Corporation (DTCC), in collaboration with the U.S. financial service industry, is working on an industry initiative to reduce the settlement window for Equities, Corporate and Municipal debt and Unit Investment Trust (UIT) securities from the current three day (T+3) to a two day cycle (T+2).

Industry Cost/Benefit Analysis Industry Project Planning Industry Test Strategy Planning Industry Implementation Planning Continued Engagement with Regulators Shortened Settlement Cycle Industry Steering Committee (ISC) Shortened Settlement Cycle Industry Working Group (IWG)

Milestone Targets* 2015 • Published Industry Requirements, Q2 • Identified Preliminary DTCC Rule Changes, Q4 • Complete High-level Industry Test Approach, Q4 • Complete High-level Industry Implementation Plan, Q4 • Complete DTCC Internal Requirements, Q4 • Engagement with Regulators 2016 • Internal Development, Q1-Q4

Contacts & Links John Abel Vice President DTC Product Management [email protected] 212-855-8434

http://www.ust2.com/ Industry White Paper Shortening the Settlement Cycle: The Move to T+2 (covers Industry Requirements to effect the move to T+2) Letter to Regulators that outlines necessary regulatory changes Letter from SEC Chair White, expressing support for T+2

2017 • Complete Development, Q1 • Identify Final Rule Changes, Q1 • Rule Filing, Q2 • Complete Industry Testing, Q3 • Implementation, Q3

* Implementation Target Dates could be subject to regulatory filing approval. About DTCC 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.


Page 17 of 17