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Reclaims and Recycle

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Reclaims

A reclaim is the return of a DO, PO, institutional delivery transaction or MMI transaction received by a Participant. All reclaims are considered original transactions for purposes of DTC processing and are subject to DTC’s risk management controls and RAD.



Recycle

One critical function of ATP is Recycle Processing, also referred to as Pend Processing. DTC's recycle processor holds your transactions that cannot immediately complete. All transaction types recycle if they cannot immediately complete, except:

  • Minimum amount (MA) to net additions (NA) moves (using Collateral Classifications)
  • Releases of collateral
  • Memo segregations (using Memo Segregation/Release)
  • Segregations (using Segregation/Release)
  • Transactions input with the "prevent pend" option.
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All reclaims to the OCC account will recycle until the OCC submits a redelivery back to the lender or until the reclaim drops at the recycle cutoff. If the OCC does not submit a delivery to the lender, then the borrower’s reclaim to the OCC will drop at the recycle cutoff, i.e., the borrower will retain the securities and the debit for the stock loan delivery it received from the OCC.

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Transactions can recycle because of Risk Management Controls or insufficient position. A transaction may recycle under any of the following circumstances:

  1. The deliverer has insufficient position to complete the transaction.

  2. Completing the transaction would make the deliverer's collateral monitor negative, that is, the total remaining collateral in the deliverer’s account is less than the resulting net settlement obligation. This could happen if the collateral value of the securities to be delivered exceeds the settlement value that would be credited to the deliverer’s account, or if the delivery is free and the deliverer’s collateral monitor is not sufficient to absorb the decrease.

  3. Completing the transaction would cause the total value in the receiver's account, including the securities involved in the transaction, to be less than the resulting net settlement obligation, that is, the receiver’s collateral monitor would be made negative. This could happen if the amount that would be charged against the receiver’s account exceeds the collateral value of the applicable securities and the receiver’s collateral monitor is not sufficient to absorb the decrease.

  4. Completing the transaction would cause the receiver's net settlement obligation to exceed its net debit cap.
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When DTC receives instructions to effect a transaction, it may first be processed through one of several DTC systems before any DTC accounts are updated. For example, a transaction involving a delivery of securities may first be processed through one or more of the following:

  • The IPO Tracking System
  • The Receiver Authorized Delivery (RAD) system
  • The Money Market Instrument (MMI) system.

After the transaction is processed, it is entered into DTC's Account Transaction Processor (ATP) sstem, where it is checked for various criteria (see Reasons for Recycling) before it is completed.

One critical function of ATP is Recycle Processing, also referred to as Pend Processing. DTC's recycle processor holds Participant transactions that cannot immediately complete. All transaction types recycle if they cannot immediately complete, except:

  • Minimum amount (MA) to net additions (NA) moves (using Collateral Moves functions)
  • Releases of collateral
  • Memo segregations (using the Memo Segregation functions)
  • Segregations (using the Account Segregation Releases function)
  • Transactions input with the "prevent pend" option (see below).


Note: These transactions will be dropped if they cannot complete when ATP performs its initial check.

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The recycling system operates within a single processing day. A transaction that remains incomplete at the end of the processing day is dropped from the recycle processor. Dropped transactions must be reentered on a subsequent day.

Transactions will automatically recycle unless you expressly tell DTC not to recycle it when the transaction is input. This option, referred to as "prevent pend," is available for most types of deliveries. When instructed, DTC drops the transaction if it cannot complete immediately.

Note- The recycle processor also allows you, as a deliverer, to cancel ("kill") a recycling transaction using the Pending Transactions or Activity Inquiry functions. To activate these functions, contact your Settlement Access Coordinator.


How DTC prioritizes risk management recycles differs from how it prioritizes insufficient position recycles.