globepicThe Fixed Income Clearing Corporation’s (FICC) Automated Funds-Only Settlement (FOS) Service provides a standardized, automated method for settling non-trade, funds-only obligations each day between FICC and its customers’ settling banks for the DVP Service.

Funds-Only Settlement eliminates manual processing and reduces costs by aggregating payments due to or from a customer and then automatically transferring the funds into or out of the customer’s settling bank.

For DVP the Funds-Only Settlement is an aggregate cash amount that is paid to, or collected from, participants each day. It is composed of calculated values that are associated with each participant’s overall trading activity calculated at End of Day (paid/collected Start of Day, next day) and Intraday. Funds-Only Settlement amounts reflect changes in the value of securities marked-to-market, cash adjustments related to the settlement of securities and the pass-through of coupon payments for term repos or trade obligations that cross a coupon date.

Who Can Use the Service

The service is automatic and mandatory for FICC Members that have funds-only settlement obligations. This includes both Government Securities Division (GSD) Netting Members and Mortgage-Backed Securities Division (MBSD) clearing Members.

globepicThe Fixed Income Clearing Corporation’s (FICC) Automated Funds-Only Settlement (FOS) Service provides a standardized, automated method for settling non-trade, funds-only obligations each day between FICC and its customers’ settling banks for the DVP Service.

Funds-Only Settlement eliminates manual processing and reduces costs by aggregating payments due to or from a customer and then automatically transferring the funds into or out of the customer’s settling bank.

For DVP the Funds-Only Settlement is an aggregate cash amount that is paid to, or collected from, participants each day. It is composed of calculated values that are associated with each participant’s overall trading activity calculated at End of Day (paid/collected Start of Day, next day) and Intraday. Funds-Only Settlement amounts reflect changes in the value of securities marked-to-market, cash adjustments related to the settlement of securities and the pass-through of coupon payments for term repos or trade obligations that cross a coupon date.

Who Can Use the Service

The service is automatic and mandatory for FICC Members that have funds-only settlement obligations. This includes both Government Securities Division (GSD) Netting Members and Mortgage-Backed Securities Division (MBSD) clearing Members.

Start of Day Cycle

For the Start of Day cycle, settling banks need to acknowledge on Netting Members behalf by 9:30 AM* and the settlement of obligations is completed by 10:00 AM. You may refer to the  pdf FICC GSD Rules (891 KB)  for more details.

The Start of Day Funds-Only Settlement Amount for each Netting Member may consist of the following components:

Transaction Adjustment Payment (TAP) – the difference between the obligation settlement money and the contract money as indicated on the Netted Summary Report

Delivery Differential Adjustment Payment – (applicable to auction trades traded by primary dealers only) – the difference between the obligation settlement money (calculated by the Fed Avg. price) and the obligation money (calculated by the system price) as indicated on the Netted Trade Summary Report

Fail Mark Adjustment Payment – the difference between the aggregate of the settlement value of failed obligations and the settlement value of current fails at the current system price as indicated on the Mark to Market Report. This is equivalent to the mark-to-market value of the fails

Coupon Adjustment Payment / Charge payments due to or owed by a Netting Member who have a coupon eligible close leg repo position or a failed settlement position on an eligible Netting Security where the coupon payment falls on or before the settlement date as indicated on the Coupon Paid Report

Redemption Payment / Charge – similar to Coupon Payments / Charges, these amount are payments due to or owed by a Netting Member who has a close leg repo position or a failed settlement position on an eligible Netting Security where the maturity date of the security falls on or before the settlement date as indicated on the Coupon Paid Report

Clearance Difference Amount– the difference between the obligation value and the actual value that has cleared as indicated on the Clearance Difference Report.

Forward Mark Adjustment Payment (Start of Day) - for cash trades, it is a debit or credit mark-to-market adjustment payment based on the collateral mark on open term & forward starting buy/sell trades. For repo trades, it is a debit or credit mark-to-market adjustment payment based on the collateral mark and financing mark on already started and forward starting repos. These mark-to-market adjustment payments are passed from the date the transaction enters the net until the transactions settlement date as indicated on the Forward Mark Report

Intraday Open Position Mark Return – the return of the Intraday Open Position Mark amount collected or paid during the previous business day's Intraday Funds-Only Settlement cycle

Intraday Open Position Mark Interest (Interest Adjustment Payment) – the interest earned on the Intraday Open Position Mark collected or paid during the previous business day's Intraday Funds-Only Settlement cycle. The interest calculation is based on the Overnight Investment Rate.

Invoice Amount – on the 10th business day of the month, GSD will apply charges based on actual business activity of the prior month, fines imposed during any month and adjustments to prior bills as indicated on the Invoice Report

Miscellaneous Adjustment – any other cash adjustment payments due to or owed by a Netting Member

GCF Funds Settlement – for those Members who participate in the GCF Repo® Service, this amount carries over the net Total Pay/Collect figure from the GCF Funds Settlement Report

 

*All times herein are EST.

Intraday Cycle

For Intraday Funds Settlement FICC collects forward margin on all open positions in the system as of noon using the market price as of noon (EST). Positions that are marked include all compared trades settling on the next business day and beyond and all unsettled obligations. This is known as the Intraday Open Position Mark or Margin. The Intraday Open Position Mark is returned to participants on the next business day along with accrue interest for that time period based on the overnight investment rate. The Intraday Funds-Only Settlement Amount for each Netting Member may consist of the net total of the following components:

Intraday Open Position Mark – a debit or credit mark-to-market adjustment payment assessed on all open positions in the system at noon using the market price also as of noon (EST). Positions that are marked include all compared trades settling on the next business day and beyond and all unsettled obligations as indicated on the Open Position Mark Intraday Report

Start of Day Forward Mark Return – the return of the Forward Mark amount collected or paid during the Start of Day Funds-Only Settlement process

Miscellaneous Adjustment – any other cash adjustment payments due to or owed by a Netting Member


To learn more, check out the DVP FOS FAQs here or check out the below examples showing how DVP Funds-Only Settlement is calculated based on trade type and Member type. p

  pdf DVP FOS Dealer View Overnight Repo Trade - Example (594 KB)

  pdf DVP FOS Dealer View Term Repo Trade - Example (961 KB)

  pdf DVP FOS Sponsored Account View Overnight Repo Trade - Example 1 (476 KB)

  pdf DVP FOS Sponsored Account View Overnight Repo Trade - Example 2 (554 KB)

aler View Term Trade Usage Scenario (704 KB)

  pdf DVP FOS Dealer View Overnight Cash Trade - Example (544 KB)

  pdf DVP FOS Dealer View Term Cash Trade - Example (1.38 MB)

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