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Issuer Failure Process

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MMI Acronym Payment Failure processing is designed to protect DTC and notify Participants if there is no timely MMI Funding Acknowledgment from the IPA(s) for an Acronym for which presentments are due on that day and/or DTC is aware that the issuer of an Acronym is insolvent and therefore payments due to Participants relating to presentments for that Acronym will not be funded by IPA(s) through DTC settlement (“Acronym Payment Failure”). Using the IPA Decision Making Application or automated messaging, IPAs can notify DTC that they refuse to pay for Presentments for an MMI Acronym. An IPA must inform DTC of its refusal to pay in accordance with the timeframe set forth in the Settlement Processing Schedule above. After DTC verifies the default it begins MMI Issuer Failure procedures.

In the event that an IPA does not fund, then the rights of the IPA as a Participant and all Participants that are party to the subject MMI transactions shall be resolved outside of DTC.

 

How the Process Works

If there is an Acronym Payment Failure, DTC will initiate the following process, pursuant to which DTC:

  • Prevents further issuance and maturity activity at DTC for that Acronym.
  • All CUSIPs under the failed Acronym are blocked so that no Participant may instruct any delivery of such Acronym on that Business Day. The block will be lifted the following Business Day.
  • Devalues all of the Issuer's MMIs for collateral monitor calculations.
  • Notifies Participants of the event

Notwithstanding the occurrence of an Acronym Payment Failure, the IPA shall remain liable for funding pursuant to any MMI Funding Acknowledgment.

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"Temporary Acronym Payment Failure" with respect to Income Presentments occurs when an IPA notifies DTC of issuer's temporary inability to fund Income Presentments (IPs) and therefore the IPA refuses to pay Income Presentments for the Acronym. This is a situation that DTC expects the issuer and/or IPA to resolve by the next Business Day. Using the IPA Decision Making Application (IPA DMA) or automated messaging, IPAs can notify DTC that they refuse to pay Income Presentments for an MMI acronym for which there is a Temporary Acronym Payment Failure. When DTC receives such a notification, it:

  • Temporarily devalues to zero all of the Issuer's MMIs for Collateral Monitor purposes. (The value will be reinstated the following Business Day if the funding is paid.)
  • Automatically submits these transactions for processing the next Business Day.
  • Notifies Participants of the delayed payment.
  • Blocks from DTC's systems all further issuances and maturities by that Issuer for the rest of the Business Day.

    Note: An IPA cannot notify DTC of a Temporary Acronym Payment Failure for the same Acronym on consecutive days. If a Funding Acknowledgment of the Acronym is not made by the IPA on the Business Day following the day of a Temporary Acronym Failure, then DTC will follow the Acronym Payment Failure process with respect to the Acronym as described above.

Note: An IPA may notify DTC of a Temporary Payment Failure for Income Presentments only if the issuer's only obligations that day are IPs.