In October 2019, the Federal Reserve Banks will implement several enhancements to the Fedwire® Securities Service’s Automated Claim Adjustment Process (ACAP) (PDF). The enhancements are designed to provide Fedwire Securities participants with increased opportunities and benefits for using ACAP.
The ACAP enhancements will add security types and a new transaction type for tracking and claim adjustments. These updates will also change how and when claim adjustments are effected.
- Additional security types: ACAP eligibility will expand from only Agency Mortgage-Backed Securities (MBSs) to all interest-paying securities held on the Fedwire Securities Service. For additional information on the issuers and types of securities issued on the Fedwire Securities Service, please refer to the Issuer Guide.
- New transaction type: ACAP will add securities lending as a transaction type available for tracking and claim adjustments. ACAP is currently available for repo, interim accounting and fail transaction types. Upon implementation of the enhancements, participants will have the option to use ACAP to track securities lending transactions for claim adjustments by including a new securities lending identifier in the Fedwire Securities transfer message.
- New process for effecting claim adjustments: Claim adjustments will be effected promptly after an issuer’s principal and interest (P&I) payments are paid to record-date holders over the Fedwire Securities Service. Once the enhancements are implemented, ACAP claim adjustments will be settled on a gross basis through two new “funds-only” securities messages on the Fedwire Securities Service.
Benefits of the enhancements
By expanding to additional security types and a new transaction type, the ACAP enhancements offer participants the opportunity to centralize their automated claim adjustments for all of their fail, interim accounting, repo and securities lending transactions that settle over the Fedwire Securities Service. ACAP also offers daily reporting to support participants’ back-office reconcilement. Finally, settlement of claim adjustments earlier in the day and promptly after P&I payments are made by issuers may provide intraday liquidity benefits for some participants.
Participant preparation and testing
The ACAP enhancements will result in changes in how participants and their service providers interact with the Fedwire Securities Service. Depending on how your institution accesses the Fedwire Securities Service, technical changes may be required to achieve operational readiness. In addition, participants should be prepared for the shift in timing and change in settlement for effecting claim adjustments, including the operational capacity for handling their expected volume of the new “funds only” securities messages.
A communication (Off-site) distributed to all participants in October 2018 provided additional details regarding the ACAP enhancements, benefits and implications for participants.
Participants and their service providers have the opportunity to test their operational readiness for the ACAP enhancements in the Depository Institution Testing (DIT) environment. The DIT testing window opened on May 13, 2019 and is available until mid-October.
Testing is required for:
- Participants that use FedLine Direct® to access the Fedwire Securities Service
- Service providers of participants that use FedLine Direct to access the Fedwire Securities Service
- Participants that use FedLine Advantage® to access the Fedwire Securities Service and currently use ACAP and (1)export incoming messages through the FedPayments® Manager—Securities application and/or (2) receive their Fedwire Securities statements via the FedLine Direct File, FedLine Direct Message or FedLine Command® Solution
Testing is highly recommended for participants that use FedLine Advantage and export incoming messages through the FedPayments Manager—Securities application even if the participant does not currently use ACAP.
Communications providing additional information regarding DIT testing were sent to End User Authorization Contacts (EUACs), FedPayments Manager Subscribers and Fedwire Securities vendor contacts on April 23, 2019. If you have questions regarding testing, please contact your designated Wholesale Testing Unit.
Questions regarding the enhancements to ACAP should be directed to the Fedwire Securities Service contact at the East Rutherford Operations Center: (800) 390-2788.