To support the tracking of holders in a designated security, DTC provides access to IMS to those administrators assigned by the issuer. Once the issue is established on the DTC master file as one that requires tracking, all transactions are held in IMS awaiting administrator approval to proceed to settlement.
In order to use the service, DTC must be notified during the underwriting eligibility process that the issue requires third-party tracking. Upon receipt of all required documentation, DTC will activate the tracking indicator on its security master file and provide IMS access to the assigned administrator, but only to allow for inquiry and approval/disapproval of transactions assigned to the respective administrator.
During the Underwriting closing process, the position will move from a DTC internal account to a designated sub-account of the lead underwriter. The move from the DTC internal account to the lead underwriter is subject to the approval of the administrator. Once the shares are moved into the designated sub-account, all share movement from that point on will require the approval of the designated administrator through IMS.
Once transaction approval has been received, and all other settlement risk controls have been met, the shares will move from the delivering Participant’s sub-account to the receiving Participant’s sub-account, either free or versus payment. These Security Holder Tracking transactions will use a new Account Transaction Processor (ATP) activity code in DTC (42). Normally, deliver orders move position from one Participant’s general free account to another Participant’s general free account, either free or versus payment.
For risk management purposes, these issues will be designated as having zero collateral within DTC’s settlement system.