SETTLEMENTSERVICE GUIDE[Changes to this Settlement Service Guide, as amended by File No. SR-DTC-2024-010, areavailable at www.dtcc.com/legal/sec-rule-filings. These changes have been approved by the
SEC but have not yet been implemented. On November 15, 2024, these changes will be
implemented, and this legend will automatically be removed from this Settlement Service
Guide.]

October 31, 2024

Copyright
IMPORTANT LEGAL INFORMATIONThe contents of all Service Guides constitute "Procedures" of The Depository Trust Company ("DTC") as
defined in the Rules of DTC. If Participants or other authorized users of DTC's services fail to follow these
Procedures precisely, DTC shall bear no responsibility for any losses associated with such failures.
In connection with their use of the Corporation’s services, Participants and Pledgees must comply with allapplicable laws, including all applicable laws relating to securities, taxation, and money laundering, as well
as sanctions administered and enforced by the Office of Foreign Assets Control (“OFAC”). As part of theircompliance with OFAC sanctions regulations, all Participants and Pledgees must agree not to conduct any
transaction or activity through DTC that violates sanctions administered and enforced by OFAC.
From time to time, DTC receivines from outside sources notices and other documents, including corporate
action information, and communications concerning financial assets. Although DTC may make certain ofsuch documents and communications, or extracts therefrom, ("Information") available to Participants andother authorized users, it shall be under no obligation to do so nor, having once or more done so, shall DTC
have a continuing obligation to make available Information of a certain type. Information is notindependently verified by DTC and is not intended to be a substitute for obtaining advice from anappropriate professional advisor. Therefore, Participants and other authorized users are advised to obtainand monitor Information independently. In addition, nothing contained in Information made available toParticipants and other authorized users shall relieve them of their responsibility under DTC's Rules andProcedures or other applicable contractual obligations to check the accuracy, where applicable, of Participant
Daily Activity Statements and all other statements and reports received from DTC and to notify DTC of any
discrepancies. DTC DOES NOT REPRESENT THE ACCURACY, ADEQUACY, TIMELINESS,COMPLETENESS, OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY INFORMATION (ASDEFINED ABOVE) PROVIDED TO PARTICIPANTS AND OTHER AUTHORIZED USERS, WHICH IS
PROVIDED AS-IS. DTC SHALL NOT BE LIABLE FOR ANY LOSS RELATED TO SUCH INFORMATION(OR THE ACT OR PROCESS OF PROVIDING SUCH INFORMATION) RESULTING DIRECTLY OR
INDIRECTLY FROM MISTAKES, ERRORS, OR OMISSIONS, OTHER THAN THOSE CAUSED DIRECTLYBY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF DTC. Further, such Information
is subject to change. Participants and other authorized users should obtain, monitor, and review
independently any available documentation relating to their activities and should verify independently
information received from DTC.
DTC SHALL NOT BE LIABLE FOR: (1) ANY LOSS RESULTING DIRECTLY OR INDIRECTLY FROMINTERRUPTIONS, DELAYS, OR DEFECTS ARISING FROM OR RELATED TO ITS SERVICES; AND (2)ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY, INCIDENTAL, OR PUNITIVE DAMAGES.
The services provided by DTC to its Participants and other authorized users are provided only pursuant to
the terms and conditions of the Participants Agreement, which references the Rules and Procedures of DTC,
and/or other contractual documents (collectively, the "Contractual Documents"). DTC's obligations toParticipants and other authorized users are therefore contractual in nature and are limited solely to thoseobligations expressly set forth in the Contractual Documents. Participants and other authorized users are
obligated to, among other things, follow precisely the procedures outlined in the Contractual Documents andprovide DTC with complete and accurate information. In accepting financial assets from Participants and/or
providing services to other authorized users, DTC relies, among other things, upon the duty of Participants
and other authorized users to exercise diligence in all aspects of each transaction processed through DTC.
Participants and other authorized users expressly acknowledge that the services provided by DTC areministerial in nature. Moreover, as further reflected by DTC's fee structure (which typically bears no
relationship to the dollar value of any given transaction), DTC does not accept any risk of loss toParticipants, other authorized users and possible third party beneficiaries with respect to transactions being
processed by DTC.

2

Copyright © 2024 by The Depository Trust Company ("DTC"). All rights reserved. This work (including,
without limitation, all text, images, logos, compilation and design) is copyrighted, is proprietary, and isintended for the exclusive use of DTC's Participants and other authorized users of DTC's services. If thiswork is received in any electronic medium, authorized users of this work are permitted the limited right tomake reproductions and transmissions necessary for downloading and storage of this work on the users'
computers. Such users are also permitted to print one or more paper copies from the electronic version for
their own use. Other than to this limited extent, no part of this work (including any paper copies thereof or
print versions thereof) may be altered, reproduced or distributed (including by transmission) in any form orby any means, or stored in any information storage and retrieval system, without DTC's prior written
permission.
REDISTRIBUTION BY PARTICIPANTS OF CERTAIN DATA FILES AND THE INFORMATION PROVIDED BY DTCIS STRICTLY PROHIBITED. FOR PURPOSES OF THIS PROCEDURE, “DATA FILES” SHALL MEAN THE BULKCORPORATE ACTIONS DATA FILES PROVIDED BY DTC TO PARTICIPANTS. EACH DATA FILE PROVIDED BY
DTC TO A PARTICIPANT IS AND SHALL CONTINUE TO BE THE PROPERTY OF DTC AND NOT OF ANY
PARTICIPANT IN RECEIPT THEREOF; THIS PROCEDURE DOES NOT CONSTITUTE THE GRANT OF ANY
LICENSE IN, TO OR FOR THE USE OF, ANY DATA FILE OR INFORMATION DISTRIBUTED HEREUNDER OTHER
THAN TO DISTRIBUTE TO ITS ACCOUNT HOLDERS INFORMATION CONTAINED IN ANY DATA FILE IT
RECEIVES TO THE EXTENT SUCH INFORMATION IS RELEVANT TO THE SECURITY HOLDINGS OF SUCHACCOUNT HOLDERS, OR IS OTHERWISE REQUIRED BY APPLICABLE LAW.
Participants shall not use, distribute, transmit or otherwise make available any Data File or Information, withor without any service charge or fee, as the basis for or as part of a data product or service offered forcommercial gain to any other person. DTC’s affiliate DTCC Solutions LLC (“DTCC Solutions”) has the right tolicense usage of the Data Files for purposes other than those permitted in the first paragraph of thisProcedure, and any Participant which wishes to use or distribute Data Files other than as contemplated
hereby must contract directly with DTCC Solutions prior to any such distribution. This restriction includes,
but is not limited to, service bureaus and other third parties, whether or not affiliated with a Participant,regardless of whether such person as previously itself received and/or used any Data Files in the past; such
entities may obtain the Data Files only upon execution of a license agreement with DTCC Solutions.
DTC shall have the right, but not the obligation, to audit the use and distribution of Information and Data
Files by any Participant. Unauthorized use or distribution by Participant, any of its Affiliates or any of its
account holders may result in a fine or other reasonable penalty determined by DTC in accordance with its
rules in light of the facts and circumstances of such unauthorized use or distribution. By its acceptance ofInformation or any Data File, each Participant agrees that, in addition to all other remedies that may beavailable, DTC and its affiliate DTCC Solutions shall be entitled to seek specific performance and injunctive
and other equitable relief as a remedy for any breach of this Procedure by such Participant, its officers,
employees, advisors or agents. Neither DTC nor DTCC Solutions shall be liable for any loss, cost or expense
arising out of the use of any Data File or the Information contained therein, or the gross negligence or willful
misconduct of any Participant with respect to any Data File or the Information contained therein, provided
hereunder, the failure of any Participant to comply with these Rules and Procedures or applicable law, or for
any consequential, special or punitive damages related thereto.
The contents of the Service Guides are updated in different formats on a periodic basis. Participants andother authorized users of the Service Guides will find the most current version of the Service Guides, as wellas DTC Important Notices which address the contents of the Service Guides, at http://www.dtcc.com. You
can access the Important Notices at http://dtcc.com/legal/important-notices.aspx. DTC shall bear no
responsibility for any losses associated with the failure of Participants or other authorized users to follow
DTC's most current Service Guides and/or Important Notices.

3

About Settlement
Overview
This chapter describes DTC's Settlement products. Each section includes a description of the product andhow it works, as well as corresponding functions a Participant can use to access the product.
Note: It is the sole responsibility of Participants to perform a daily reconciliation of their activity andpositions with the information, reports and statements provided by DTC. Participants must immediately
report to DTC any discrepancy between their activity and positions with the information, reports andstatements provided by DTC or other issues relating to the accuracy of the information, reports andstatements provided by DTC. Such reports must be made to DTC by (i) calling the Client Support hotline at
1-888-382-2721 (and selecting Option 1, Option 1) to speak with a DTC representative and (ii) providing awritten detailed description of the discrepancy to the DTC representative, or as otherwise directed by DTC in
writing. DTC shall not be liable for any loss resulting or arising directly or indirectly from mistakes, errors,
or omissions related to the information, reports or statements provided by DTC, other than those caused
directly by gross negligence or willful misconduct on the part of DTC.
Note: DTC, as it deems appropriate, may extend any deadline, timeframe, or cutoff established by DTC,
including, without limitation, to (i) address operational or other delays that could reasonably affect theability of DTC, a Participant or other stakeholder from meeting the deadline, timeframe, or cutoff; or (ii)allow DTC time operationally to exercise its existing rights under the Rules and Procedures. In addition,
times applicable to DTC are standards and not deadlines; actual processing times may vary, based upon thecircumstances. Any action taken by DTC in connection with this paragraph shall not establish a precedent
for any situation that may occur in the future (or otherwise bind DTC in any manner). DTC disclaims all
liability for any losses and/or expenses incurred by a Participant, stakeholder or any third-party resulting
from, relating to, or arising from (i) any action taken by DTC in connection with this paragraph, (ii) thedetermination of DTC to decline to take action pursuant to this paragraph, and/or (iii) the failure of a
Participant, stakeholder or any third-party to meet any deadline, timeframe, cutoff or requirement
established by a party other than DTC.

About DTC's Settlement Department
DTC's Settlement Department is responsible for overseeing the process of the settlement of Participanttransactions. Specifically, the Settlement Department:•

Ensures the collection/disbursement of Participant net settlement obligations and credits throughthe Fedwire system•

Ensures that major components of DTC's Settlement Service are updating/processing in a timely
manner•Helps resolve problems affecting the settlement process•

Grants input extensions when processing problems arise•

Provides backup to the extent possible when Participant systems go down•

Answers questions regarding all aspects of settlement processing•

Processes deposits and withdrawals of Federal book-entry eligible securities.

4

Settlement Transactions
There are three main types of transactions processed through the Settlement system.
1.

Deliveries: DTC's delivery program allows a Participant to settle securities transactions by making
book-entry deliveries to another Participant's account. The securities are immobilized in DTC's
custody, eliminating the need for physical movement of certificates. DTC reduces the seller's
position and increases the buyer's position without the need to move physical certificates. Deliveries
can be made with or without the condition of money payment, depending on the applicable
Participant’s delivery instructions.

2.

Payment Orders (POs): The payment order service provides Participants with a convenientmethod for settling amounts of money related to securities transactions that are effected separately
through DTC earlier on the same day or on a previous day. Participants can use payment orders tocollect option contract premiums, mark-to-market open contracts such as stock loans, and Price
Differentials (as defined in the NSCC Rules).

3.

Collateral loans: The collateral loan service allows a Participant (the Pledgor) to Pledge securities
as collateral for a loan or for other purposes and also request the release of Pledged securities. This
service allows such Pledges and Pledge releases to be made free, meaning that the moneycomponent of the transaction is settled outside of the depository, or valued, meaning that themoney component of the transaction is settled through DTC as a debit/credit to the Pledgor's andPledgee's DTC money settlement account. When Pledging securities to a Pledgee, the Pledgor's
position continues to be credited to the Pledgor’s account, however with a system notation showing
the status of the position as Pledged by the Pledgor to the Pledgee. This status systemically
prevents the Pledged position from being used to complete other transactions. Likewise, the releaseof a Pledged position results in the removal of the notation of the Pledge status of the position andthe position would become available to the Pledgor to complete other transactions.

Important Terms
The following terms are important to understanding the Settlement Service:
This term

Refers toAggregate AffiliatedFamily Net Debit Cap

A limit to the settlement debit an Affiliated Family can incur at any point during
the processing day.

chill

A systemic way DTC can prohibit a Participant from processing certain activities(for example, valued delivery chill will prevent the Participant from making
valued deliveries from its account).

Collateral Monitor (CM)

DTC's process for measuring the sufficiency of the collateral in a Participant’s
account to cover its net settlement obligation.

collateral value
Computer-to-Computer
Facility (CCF/CCF II)

The market value of a security less the applicable DTC haircut.
A batch transmission system for input/output based on various protocols
between a Participant’s mainframe and DTC's mainframe.

Continuous Net
Settlement (CNS)

The system employed by NSCC to settle NYSE, AMEX, NASDAQ, and over-thecounter trades.

deliver order (DO)The term used to define a book-entry movement of shares of a particular
security between two DTC Participants.

drop

A transaction that does not complete because of insufficient position, Risk
Management Controls, and so forth.

haircut

The percentage decrease of a security's market value in determining thecollateral value of the security.

initial distribution

The delivery of shares of a new issue from the lead manager and syndicate
members to their customers. Shares are considered initial distribution shares
until they are sold on the secondary market.

5This term

Refers tolong allocations

Deliveries from NSCC's Omnibus Account 888 to a Participant’s DTC account asa result of Continuous Net Settlement processing.

market value

The prior day's closing price of a security for security valuation purposes.

memo segregation

An inventory control mechanism that allows a Participant to protect fully-paidfor securities in its general free or IPO control account.

Message Queuing (MQ)

A system for messaging across multiple platforms. Developed as part of IBM’s
WebSphere family, it is also referred to as "WebSphere MQ" or "MQ Series."

Minimum Amount (MA)

DTC's classification for securities in a Participant’s account that are notconsidered collateral.

Money Market
Instrument (MMI)

Debt securities such as commercial paper or medium-term notes that are
eligible for DTC's MMI Program.

Net Additions (NA)

DTC's classification for securities in a Participant’s account that are consideredcollateral.

net debit cap

A limit to the settlement net debit a Participant can incur at any point during
the processing day.

Night Batch Process

A process that operates to control the order of processing of transactions in thenight cycle.

night deliver order(NDO)

A DO input on the day prior to settlement. A reduced rate is charged for NDO
transactions.

NSCC Securities
Financing Transaction(SFT) Service

A securities financing transaction clearing service offered by NSCC.

payment order (PO)The payment order service provides Participants with a mechanism for settlingamounts of money related to securities transactions that are effected
separately through DTC. Participants use payment orders to collect option
contract premiums (premium payment order), mark-to-market open contracts
such as stock loans (securities payment order), and Price Differentials (SFT PD
payment order).

Receiver Authorized
Delivery (RAD)A control mechanism that allows a Participant to review transactions prior tocompletion of processing. It limits the Participant’s exposure from misdirectedor erroneously entered DOs, POs, institutional delivery transactions, MMI
transactions, reclaims, pledges and releases of pledged securities..

reclamation or reclaim

The return of a DO, PO, institutional delivery transaction or MMI transaction
received by a Participant. All reclaims are considered original transactions forpurposes of DTC processing and are subject to Risk Management Controls andRAD.

Risk Management
Controls

The controls, primarily net debit cap and CM, that are used to provide
protection to all DTC Participants against the inability of one or more
Participants to settle net settlement obligations.

Settlement progress
payments (SPP)

An intraday funds transfer sent via Fedwire to a Participant’s DTC Participant
account.

Settlement User
Interface

Any system or combination of systems that allows for input/inquiry into the
DTC Settlement System.

SFT Price Differential(“SFT PD”) payment
order
short covers
syndicate

A payment order through which the amount of a Price Differential (as defined in
the NSCC Rules) is (i) debited from the account of a Participant and credited to
the NSCC SFT Account, or (ii) is debited from the NSCC SFT Account andcredited to the account of a Participant.
Deliveries to NSCC's Omnibus Account 888 as a result of CNS.
A group of broker-dealers that agree to purchase a new issue of securities fromthe issuer for resale to the investment public.

6

This term

Refers to

Unknown Rate

For variable rate MMI Securities, the interest rate that the IPA will pay for theincome portion of a presentment.
Unvalued additions to a Participant’s security account that do not carry arelated payment obligation with the receipt of securities. They include:

unvalued additions•

Deposits•

Free release of pledged securities•

Receipt of a free DO•

Releases of segregated securities

Preparing to Use the Products
In order to use the products associated with this service, you must have access to one of the following:•

DTC’s Settlement User Interface•

Computer-to-Computer Facility (CCF or CCF II) or Message Queuing (MQ).

Contact your Relationship Manager for more information.

Settlement Contact Numbers
For general questions about DTC's Settlement Service, call one of the following numbers:•

For general inquiries: the Customer Support Center at (888) 382-2721•

For input extensions: the Settlement Hotline at (212) 855-5800.

Service Topics
Activation / Account Coding
DTC's Activation/Account Coding product describes the various account options available to your Participant
account.

Requirements
To use DTC services, you must:•

Become a DTC Participant•

Make your mandatory deposit to DTC's Participants Fund•

Engage the services of a Settling Bank to settle daily on your behalf, and submit a formal Settling
Bank agreement to DTC.

7

Account Options
When you open your account and any time thereafter, you can:1.

Instruct DTC to group multiple accounts into different collateral families and allocate specificpercentages of your start-of-day collateral and net debit cap to each family. If we do not receive
this instruction, all your accounts will be grouped into one collateral family. See Grouping
Accounts Into Collateral Families for more information.

2.

Instruct DTC to classify all of your start-of-day positions as collateral. At the opening of businesseach day, all security positions in the minimum amount (MA) account that are not memosegregated will be moved into your net additions (NA) account, giving you collateral value credit
for those securities. Absent your instructions, DTC will code the MA account for start-of-day
positions.

3.

Instruct DTC to classify all unvalued additions as non-collateral (such as deposits, free deliver
orders (DOs), release of segregated securities). Absent your instructions, DTC will code the NA
account.
Warning! You are advised to consider the implications of classifying your securities as collateral.
Collateral can be used to support your net debit and therefore can be liquidated by DTC in theevent you are unable to pay your settlement obligation.

4.

Elect to have the ability to make late, valued transactions to your Settling Bank's Participant
account, with the consent of the Settling Bank.

5.

Elect to have the ability to withdraw SPP Return /P&I Withdrawal allocations intraday. See
Principal and Income Withdrawals and Settlement Progress Payments for more information.

6.

Elect to have the ability to chill (block) your account from transactions involving securities eligible
for Federal book-entry.

7.

Choose between two recycle options. See Recycle Processing for more information.

8.

Choose from various memo-segregation options. See Memo Segregation.

9.

Elect to have Initial Public Offering (IPO) positions released automatically upon the input of a DO,
if you act as a prime broker. See the IPO Broker Manual or call your Relationship Manager for
more information.

10.

Elect to have all free DOs entered after 5:00 p.m. eastern time subjected to RAD approval before
they are processed by DTC.

Activation/Account Coding Contact Number
For more information about Activation/Account Coding, contact DTC's Customer Support Center at (888)382-2721.

Settlement User Interface
About the Product
The Settlement User Interface is a user interface that features a Navigation Bar and Dashboard. The
Navigation Bar allows Participants access to improved inquiry and update capabilities for their settlementtransactions. The Dashboard consists of individual windows, each of which offers a view into different
settlement related activity.

8

Transactional Information and Settlement Balance Information Files
A Participant may elect to receive files containing: (a) its DTC settlement transaction information on a daily
basis (known as the “Transactional Information File”) and/or (b) its settlement balance information via afeed that would be provided on an intraday basis, with final settlement balance information provided at endof-day (known as the “Settlement Balance Information File”). Applicable fees are set forth in the DTC Fee
Schedule.

Collateral Loan Program
About the Product
The Collateral Loan Program allows you to Pledge securities held in your general free account as collateral
for a loan or for other purposes (such as Letters of Credit) to a Pledgee participating in the program. You
can also request the Pledgee to release Pledged securities. These Pledges and releases can be free (whenmoney proceeds are handled outside DTC) or valued (when money proceeds are applied as debits andcredits to the Pledgee's and Pledgor's money settlement accounts). A Pledgee may, but need not be, aParticipant. Only a Pledgee which is a Participant may receive valued Pledges.

How the Product Works
The guidelines for using the Collateral Loan Program are as follows:1.

You can use the Collateral Loan Service function, the Computer-to-Computer Facility (CCF), or
Message Queuing (MQ) to submit collateral loan pledges and release requests to DTC. Release
returns are also available through CCF and MQ. However, release approval is available only throughthe Settlement User Interface.

2.

You must ensure that the securities you are pledging are available in your general free account.

3.

When a stock distribution requiring due bills is declared on securities pledged as collateral, thedistribution automatically becomes additional collateral.

4.

In the instance of a substantial cash distribution, for which an exchange or similar securities
organization would require due bills to accompany stock certificates, for the amount of cash
accruing on pledged shares, the Pledgee may direct DTC to pay such funds directly to it as partial
repayment of the loan. Otherwise, such funds will be paid by DTC to the Participant.

5.

At any time, the pledgee can direct DTC to deliver pledged securities (demand of collateral).

6.

Voting rights are assigned to you for pledged securities.

Demand of Collateral
A demand of collateral takes securities that you pledged to a pledgee and places them in the general freeaccount of a DTC Participant designated by the pledgee. Pledgees can enter demand of collateral instructions
by using the Demand of Collateral function or by making special arrangements with DTC's Settlement
Department. A pledgee that is a DTC Participant can move securities to its DTC Participant account.

9Pledges to Federal Reserve Banks
If you are a depository institution maintaining a deposit account at a Federal Reserve Bank (FRB), you canmake free pledges and release requests to the FRB. You must use the COLL function to pledge and releasepledges to FRBs. FRBs have special requirements and procedural modifications to which DTC has agreed.
DTC or an FRB may change these operating procedures no later than one day following receipt of writtenconsent from the other. DTC or the FRB will notify DTC Participants in writing at least 10 business days
before such changes become effective. However, if DTC consents to the FRB's request that such changes
become effective immediately (according to DTC's Rules and applicable law), Participants will receive
immediate notification in writing from the FRB of changes taking effect immediately.
Note- Pledges to FRBs are free of value.

FRB Pledge Eligibility
Pledgor Eligibility: All DTC bank Participants that are members of the Federal Reserve are automaticallyeligible to pledge securities to FRBs that are DTC pledgee banks using the Participant/non-participant pledge
facility.
Non-Participant Eligibility: DTC allows non-participants to pledge collateral to FRBs through DTC bankParticipants. Bank Participants and non-participants must provide their American Banking Association (ABA)
number and the purpose of the loan.

Pledging Purposes
Any securities you pledge to the FRB through the Collateral Loan Program are deemed pledged to the FRB(as fiscal agents of the United States for its principal, the Treasury Department) when pledged for:•Treasury Tax and Loan: Collateral for Treasury Tax and Loan account balances under 31 C. F. R.
Part 203 (Treasury Circular No. 92)•

Public Purposes: Collateral for deposits of public money under 31 C. F. R. Part 202 (Treasury
Circular No. 176).

Any securities you pledge to the FRB through the Collateral Loan Program are deemed pledged to the FRB asprincipal, as Collateral when pledged for:•(i) discount window advances under 12 C. F. R. Part 201 (Regulation A of the Board of Governors of
the Federal Reserve System) (“Discount”) or•(ii) daylight (funds) overdrafts on the books of the FRB (“Daylight Overdraft”)
Collateral pledged for either purpose may be credited to a single Pledgee Account of the FRB.
Note- An indication that a security is pledged for Discount, or Daylight Overdrafts is made whencollateral is initially or primarily used for either purposes. However, in accordance with FRB
agreements and operating circulars, such collateral so designated, regardless of such designation,
shall serve as security for any obligation of the pledgor to the FRB.

Categories of Securities to be Pledged
DTC-eligible securities are generally good for all services provided by DTC. However, the FRB must approvesecurities pledged to FRBs under the subheading Pledging Purposes. You should contact the appropriate FRB
to determine whether the securities pledged are accepted and to inquire about particular instructions forindicating the purpose of the pledge.

10Issues Not Acceptable to FRBs
The FRB may not permit the pledging of certain securities that might be DTC-eligible. If a pledge is made in
an issue not accepted by the FRB, the FRB will initiate the release of the pledge after receiving pledge
notification.

Inquiries
Pledgors can monitor all pledges, releases (Participant and non-participant) and current collateral loaninquiries intraday using the Activity Inquiry functions.

Pledges to the Options Clearing Corporation
A Participant writing an option on any options exchange may fully collateralize that option by Pledging theunderlying securities by book-entry through DTC to the Options Clearing Corporation (OCC). If the option iscalled (exercised), the securities may be released and delivered to the holder of the call. If the option
contract is not exercised, OCC validates a release of the Pledged securities.

Rollover of Collateral
After an option contract has expired, the option writer may rollover or continue to use the original collateralfor subsequent contracts. By following an OCC procedure, you may rollover the collateral without preparinga Release of Collateral form and a new Options Depository Receipt form. Contact OCC for information about
this procedure.

Deposits With Options Clearing Corporation
You can deposit securities at DTC between 8:30 a.m. and 1:00 p.m. eastern time for same-day deposit
credit. You can then pledge your free position by book-entry to the OCC as follows:•

Segregate underlying securities supporting put and call options•

Pledge U. S. government securities to satisfy OCC put and call margin requirements•

Pledge U. S. government securities to meet clearing fund obligations•

Pledge U. S. government securities of sufficient value to cover the exercise price of put and call
option contracts.

Release of Deposits with Options Clearing Corporation on Expired Options
OCC automatically releases securities deposited with it to cover margin requirements on an option contract
when the option contract expires. Notification of the released securities is received via the Collateral Loan
Services functionality in the Settlement User Interface or automated output.
Note- OCC will begin releasing expired options at the close of business on the Friday following the expiration
weekend. On the following Monday, OCC will release the deposits on expired options to DTC.

11

Deposits to the Options Clearing Corporation Clearing FundYou can deposit U. S. government securities at DTC to be pledged by book-entry to OCC to meet clearing
fund requirements.
The term "U. S. government securities" refers to securities issued or guaranteed by the United States
government and having a maturity of 5 years or less from the date of issuance.

•

Short-term government securities: Securities maturing less than one year from the date of deposit.

•

Long-term government securities: Securities maturing one to five years from the date of deposit.

U. S. government securities are valued for clearing fund purposes as follows:•

Short-term government securities: Securities valued at the lesser of par value or 100 percent of
their current market value.

•

Long-term government securities: Securities valued at the lesser of par value or 95 percent of theircurrent market value.

OCC determines the current market value of U. S. government securities at any given time on the basis of
the quoted ask price supplied by the Federal Reserve Bank of New York (FRBNY) on the last day of thepreceding month, or such later date as its Margin Committee designates.

Option Exercise & Assignment Loan Program
About the Product
Under this program, a Participant may use securities pledged at The Depository Trust Company (DTC) tomeet the Options Clearing Corporation (OCC) margin requirement on these positions as collateral for a loan
from an approved lender. The cash proceeds of this loan will then be credited to the Participant’s settlement
account at the National Securities Clearing Corporation (NSCC).
OCC, DTC, and NSCC have jointly created the loan program to minimize the collateral and financing
requirements of common OCC and NSCC member firms by synchronizing the release of OCC’s guarantee
obligation with satisfaction of the member’s obligation to NSCC.

How the Product WorksThe Options Clearing Corporation Disbursement (OCCD) function has been developed by DTC and OCC toallow Participants to negotiate loans with pledgee Participants using securities pledged to OCC for margin
purposes as collateral. The OCCD function allows Participants to submit collateralization requests that
require approval from the pledgee and OCC. The OCCD function allows pledgee Participants to review
Participants’ collateralization requests and either approve or reject them. Only pledgee-approved
collateralization requests appear on OCC’s approval screen in the OCCD function. Pledgee approved
collateralization requests can then be approved or rejected by OCC. Only collateralization requests approvedby both the pledgee and OCC are processed by DTC.

12

An OCC approved collateralization request generates a Demand of Collateral (DCL) transaction (activity code58) that moves the securities from the requesting Participant’s pledge account (014) to an OCC control
account. Once the DCL transaction completes, a valued pledge (activity code 54) will be processed from the
OCC control account to the pledgee designated by the Participant in the collateralization request. The valued
pledge credit received into the OCC control account is then applied to the Participant’s NSCC balance.
Participants will see these credits as activity code 35 (OCC Collateral Money) in NSCC’s settlement system.
Note: Although Participants will see the DCL transaction from their pledge account to the OCC control
account in DTC’s Activity Inquiry function, they will not be able to view the valued pledge from the OCC
control account to their pledgee in the Activity Inquiry function. However, Participants can determine if thevalued pledge portion of the collateralization request has been completed in DTC’s system by viewing thestatus of the collateralization request in the Browse option of OCCD. A “Made” status indicates that thevalued pledge has completed in DTC’s system. In addition, Participants will see the credits from the valued
pledges in their NSCC balances after 2:30 p.m. eastern time.
Once DTC settlement is final (all net-net debits have been received) and DTC releases its risk management
controls, the securities are moved from the OCC control account’s pledge position to the Participant’s pledge
position (14 account). The Participant and the pledgee will see this movement as a Participant Swing(activity code 7) in the Activity Inquiry function.
DTC will charge the same fee for processed OCC collateralization requests as it does for valued pledges.

Demand of Collateral Reversals
In the event that a valued pledge from an OCC control account recycles to the pledgee and does notcomplete (drops) by DTC’s valued recycle cutoff at approximately 3:10 p.m. eastern time, DTC will reverse
the associated demand of collateral transaction. The demand of collateral reversal will, in effect, “repledge”
the Participant’s securities back to OCC. The demand of collateral reversal will appear as an adjustment in
the Activity Inquiry function.

Pledge Returns
Pledgees should be aware that pledge returns of valued pledges from OCC control accounts will not be
permitted systemically. Requests for pledge returns to OCC control accounts should be directed to DTC’s
Settlement Department. However, pledgees will be permitted to process pledge returns using the normal
pledge return process once the securities are swung from the OCC control account to the Participant after
DTC releases its risk management controls at approximately 5:00 p.m. eastern time.

Eligibility
Participants wishing to utilize the OCC Collateralization procedures must first contact a representative from
OCC’s Risk Management Department. In addition to contacting OCC, interested Participants must contact
their DTC Relationship Manager and request access to the OCCD function and the OCCA sub-function.
Pledgees planning to accept OCC collateralization requests must also contact their Relationship Managers
and request access to the OCCD function and the OCCP sub-function.
Participants and pledgees interested in participating in OCC’s Collateralization service should request
eligibility for their respective OCCD functions and sub-functions with their Relationship Managers at least twodays prior to the actual day they anticipate using the service.
Note: All collateralization requests by Participants must be approved by OCC. Therefore, OCC must be
contacted before a request is submitted through the OCCD function.

13

Cutoffs
Eligible Participants are permitted to submit OCC collateralization requests until 11:00 a.m. eastern time.
Eligible pledgees are permitted to approve or reject OCC collateralization requests until 1:00 p.m. easterntime, and OCC will be permitted to approve or reject pledgee-approved OCC collateralization requests until
2:00 p.m. eastern time. Participants and pledgees should refer to the OCCD function for detailed instructions
on how to use this function.

Repo Accounts
About the ProductRepo accounts enable Participants to distinguish repurchase transactions or other types of financing
transactions processed through the mechanism of the Collateral Loan Program from pledges of collateral. A
Participant engaging in a repurchase transaction or other type of financing transaction is able to transfer
securities to a Repo account of the receiving party instead of a pledgee account of the receiving party.
Whenever a Participant instructs DTC to transfer securities to a Repo account, the Participant will be deemed
to instruct DTC to transfer to the receiving party the entire interest in the securities, not a security interest
or other limited interest.

BackgroundPreviously, procedures in the Collateral Loan Program did not permit Participants to differentiate between apledge of securities, which involves the transfer of a security interest or other limited interest in the
securities, and a sale, which involves the transfer of the entire interest in the securities.
Effective September 2, 1997, DTC implemented procedures to specifically provide Participants with thecapability to process repurchase transactions or other types of financing transactions through themechanism of DTC’s Collateral Loan Program.
Repo accounts and pledge accounts are individually identified in DTC’s Reference Directory. Organizations
interested in establishing a repo account should contact their Relationship Manager.

Procedures for DTC Repo Accounts
The repo account procedures listed below should be used in conjunction with DTC’s existing Collateral Loan
Program procedures.
The procedures listed below are an addition to DTC’s Procedures for Pledgees.
1.

Any organization (a ‘Receiver’) that is eligible to establish a pledgee account at DTC may establish a
repo account at DTC. A repo account is available to effect repurchase transactions or other types offinancing transactions through use of the procedures in DTC’s Collateral Loan Program where theparties wish to distinguish transactions from pledges of collateral. A repo account is identified with aseparate account number from any pledgee account of the Receiver, and the repo accounts ofReceivers are separately identified in all listings of accounts made available by DTC. Except as
modified by these Procedures, all DTC procedures applicable to pledgee accounts are applicable torepo accounts.

14

2.

Whenever a Participant instructs DTC to deliver securities from the account of the Participant to arepo account of a Receiver, the Participant will be deemed to instruct DTC to transfer to the
Receiver the entire interest in the securities which are the subject of the instruction, not a security
interest or other limited interest in such securities. The terms of the transaction between theParticipant and the Receiver (which may be a repurchase transaction or other type of financing
transaction) are determined by agreement of the parties to the transaction.

3.

The operation of a repo account at DTC is identical to the operation of a pledgee account. As with apledgee account, voting rights on securities credited to a repo account are assigned to theParticipant which delivered the securities to the repo account. Cash dividend and interest payments
and other cash distributions on such securities are credited to the account of the Participant.
Distributions of securities for which the ex-distribution date is on or prior to the payable date, or inwhich the distribution is payable in a different security, are also credited to the account of theParticipant. Any stock splits or other distributions of the same securities for which the exdistribution date is after the payable date are credited to the repo account of the Receiver.

4.

The instructions for a delivery of securities to a repo account at DTC use the same data fields as the
instructions for a pledge to a pledgee account. Those data fields include a mandatory hypothecation
code field. A Participant delivering securities to a repo account must enter the number 7, 8 or 9 in
the hypothecation code field. The entry of the number 7, 8, or 9 in the hypothecation code field of
instructions for a delivery to a repo account does not constitute a notice or representation as to any
matter by the delivering Participant. The entry of the number 7, 8 or 9 in the hypothecation code
field of such instructions is merely an action needed to effect the delivery through DTC’s facilities. A
Participant pledging securities to a pledgee account must continue to enter the number 1, 2 or 3,
whichever is applicable, in the hypothecation code field. Participants are responsible for entering theappropriate number in the hypothecation code field for all transactions.

5.

The DTC reports and statements to the Participant and the Receiver for a transaction involving a
repo account are the same as the reports and statements for a transaction involving a pledgee
account. If the account number indicated in a DTC report or statement is the account number of arepo account, the information in the report or statement does not represent a pledge of, or othertransfer of a limited interest in, the securities credited to the repo account but instead represents atransfer by the Participant to the Receiver of the entire interest in such securities.

6.

DTC will accept instructions solely from the Receiver with respect to the disposition of securities
credited to the Receiver’s repo account. The Receiver may redeliver the securities to the Participant
which delivered them to the Receiver’s repo account. The Receiver may instruct DTC to deliver
securities credited to the Receiver’s repo account to the Receiver's DTC Participant account, if theReceiver is also a Participant, or to any other DTC Participant account. DTC has no duty to inquire
whether any instruction to DTC from the Receiver is permitted by any agreement among the parties
to the transaction. If a Receiver is unable to submit instructions to DTC by automated means, theReceiver may submit instructions by contacting DTC’s Settlement Department. Any Receiver that
instructs DTC to deliver securities credited to the Receiver’s repo account to the Receiver or to a
DTC Participant designated by it shall:a.

be deemed to represent and warrant to DTC that (i) the Receiver has the right to have thesecurities specified in such instruction delivered to the Receiver or to a DTC Participant
designated by it and (ii) DTC’s compliance with such instruction will not violate any noticeof levy, seizure or similar notice, or order or judgment, issued or directed by a government
agency or court, or officer thereof, andb.

indemnify, hold harmless and agree, on demand, to reimburse DTC, its stockholders,
officers, directors and employees from and against and for any and all claims, liabilities,
obligations damages, actions, penalties, losses, costs, expenses and disbursements,
including, without limitation, attorneys’ fees and disbursements (“Claims”), which they may
sustain by reason of DTC’s compliance with such instruction except for any Claims which
result from the gross negligence or willful misconduct of the person asserting a right toindemnification.

15

Shared Control Accounts
About the Product
Shared control accounts are available as an alternative to “agreement to pledge” arrangements.

Background
When a Participant Pledges securities to a Pledgee at DTC (sometimes called a “hard pledge”), the securities
are under the sole control of the Pledgee. Only the Pledgee can redeliver or release the securities.
Shared control accounts are available at DTC as an alternative to agreement to Pledge (sometimes called“agreement to deliver”) arrangements. A Pledgee has control over securities delivered by a Participant to theParticipant’s shared control account at DTC since the Pledge has the ability to redeliver the securities without
further consent by the Participant. Until the Pledgee redelivers the securities, the Participant has theflexibility to redeliver or make substitutions for the securities without obtaining the Pledgee’s release of the
securities.
Shared controls are separately identified in DTC’s Reference Directory. Participants interested in establishinga shared control account should contact their Relationship Manager.

Procedures for DTC Shared Control Accounts
The following procedures are an addition to DTC’s Procedures for Pledgees.
1.

Any Participant may establish a shared control account at DTC and may designate any DTC Pledgee
to be the Pledgee for that shared control account. A Participant may deliver securities (or otherfinancial assets) by a Free Pledge from any of its DTC accounts (the “original account”) to its sharedcontrol account in order to grant a security interest or other interest in the securities to the Pledgee.
The shared control account is an account of the Participant and is identified with a separate accountnumber from any other account of the Participant. A Participant may establish multiple sharedcontrol accounts, but only one Pledge can be designated for each shared control account.

2.

Except as modified by these procedures, the operation of a shared control account is identical to theoperation of a DTC Pledge and all DTC procedures applicable to Pledges are applicable to sharedcontrol accounts. No Deliveries Versus Payment, Pledges Versus Payment, or physical deposits canbe made to a shared control account and no Deliveries Versus Payment, Pledges Versus Payment, or
physical withdrawals can be made from a shared control account. A Participant should not deliver
securities to another Participant’s shared control account. In the instructions for a delivery of
securities to a shared control account, the mandatory hypothecation code field should be completed
in the same manner as it is for a Pledge made without the use of a shared control account. The DTC
fees and charges for a transaction involving a shared control account are the same as the fees andcharges for a Pledge transaction that does not involve a Pledge account. The DTC monthly accountusage charges applicable to a shared control account are charged to the Participant. The DTC
reports and statements to the Participant and the Pledge for a transaction involving a shared control
account are the same as the reports and statements for a transaction involving a Pledge that does
not involve a shared control account.

3.

Voting rights on the securities credited to a shared control account are assigned to the Participant.
Cash dividend and interest payments and other cash distributions on such securities are credited tothe original account. Distribution of securities for which the ex-distribution date is on or prior to thepayable date or in which the distribution is payable in a different security are also credited to theoriginal account. Any stock splits or other distributions of the same securities for which the exdistribution date is after the payable date are credited to the shared control account.

4.

The securities credited to a shared control account cannot be designated as or included in thecollateral for any obligation of the Participant or the Pledgee to DTC. DTC has no lien or otherinterest in any securities credited to a shared control account.

16Collateral Loan Program Contact Number
For more information about Collateral Loan Programs, call DTC's Customer Support Center at (888) 3822721.

Continuous Net Settlement (CNS)
About the ProductContinuous Net Settlement (CNS) is the primary clearing mechanism for the New York Stock Exchange(NYSE), American Stock Exchange (AMEX), National Association of Securities Dealers (NASD), and othermarketplaces. The National Securities Clearing Corporation (NSCC) operates CNS, which is the securities
industry's largest trade clearance and settlement system.

How the Product WorksFor each security, CNS nets down to one net buy and/or sell on all trades expected to settle on the next
settlement day, including trades unable to settle on the previous settlement day. After the trades arenetted, free book-entry movements at DTC to or from Omnibus Account 888 allow NSCC participants todeliver short covers to NSCC and receive long allocations.
After the trades are netted, free book-entry movements at DTC to or from Omnibus account 888 allow NSCC
participants to:•

Deliver short covers to NSCC (for those participants obligated to deliver securities)•

Receive long allocations from NSCC (for those participants entitled to receive securities).

To process transactions smoothly between DTC's system and the CNS system, DTC and NSCC have put inplace certain collateralization arrangements and financial guarantees to ensure that:•

Debits created in DTC's system continue to be collateralized when the securities serving as collateralare delivered as CNS short covers, and•Long allocations, or approximate values of long allocations, are made available to NSCC to covercertain exposures.

Short Covers
When short covers are delivered from your DTC account, NSCC guarantees that:•

The value of securities received versus payment that are used for CNS short covers will be equal tothe prior day's closing price, and•The value of securities not received versus payment that are used for CNS short covers will be equal
to the prior day's closing price less an applicable haircut.

17

In either case, your Collateral Monitor is increased by the amount guaranteed by NSCC. Without theseguarantees, deliveries to CNS may not be permitted under DTC's collateralization rules because DTC would
have neither the securities nor the collateral in the event of a failure to settle.
Note- The NSCC settlement credit generated from short covers cannot be used to offset your DTC
settlement balance intraday. DTC and NSCC legal entity balances will be cross-endorsed before final net
settlement figures are published. The short cover guaranty does not apply to ACATS transactions because
there are no funds settlement obligations related to ACATS transfers.

Long Allocations
DTC guarantees to NSCC replacement collateral for any long allocations which may be redelivered in the
DTC system intraday. Therefore, DTC will only process the redelivery if the Participant has substitutecollateral available. The purpose is that collateral will be available if the Participant fails to settle at NSCC.
The collateral treatment of long allocations received into a Participant account is as follows:
1.

The Participant does not receive credit for the delivery in its Collateral Monitor; and2.

The securities are classified as collateral (net additions).

CNS Look-Ahead Processing
DTC recognizes that the net effect of a receive and a turnaround delivery might permit the completion of
those transactions, whereas in some cases attempting to complete the receive by itself would not allow thetransactions to complete because of collateral constraints. Because the CNS account (888) has no Net Debit
Cap or Collateral Monitor constraints, DTC's system can perform look-ahead processing to determine
whether the net effect of your receive-versus-payment (RVP) transaction (which is recycling for insufficientcollateral), and the turnaround CNS transaction (for example, short cover), allows you to remain
collateralized. If so, DTC will complete both transactions.
Look-ahead processing helps maximize the smoothness of transactions and limits infusions of collateral byParticipants. Although this situation is rarely encountered in transactions daily, DTC provides automatedlook-ahead processing so that each receive pending for insufficient collateral that has a corresponding
turnaround to CNS is checked by this process (unless you place the CNS transaction on hold).

CNS Processing Contact Number
For more information on CNS Processing, call the Customer Support Center at (888) 382-2721.

NSCC ACATS Settlement Accounting Operation - Processing at DTC
NSCC’s Rules & Procedures establish the NSCC ACATS Settlement Accounting Operation which interfaces
with DTC’s system to move securities from the account of one Participant to another. NSCC maintains anaccount at DTC with respect to the associated securities movements.
When securities that are the subject of an ACATS transfer are credited to a receiving Participant’s Account at
DTC, those securities will automatically be designated as Minimum Amount (MA), as defined in the DTC
rules. Accordingly, when such securities are credited to the receiving Participant’s account, DTC will not haveany security interest, lien or other claim on those securities and those securities will not constitute Collateralor be counted in the Collateral Monitor of the receiving Participant.

18

NSCC Securities Financing Transactions (SFT) Service
About the Product
The NSCC SFT Service would provide central clearing for equity securities financing transactions, which are,broadly speaking, transactions where the parties exchange equity securities against cash and simultaneously
agree to exchange the same securities and cash, plus or minus a rate payment, on a future date (each, an“SFT”).

Initial Transfer of SFT Securities at DTC
The initial transfer of the securities that are the subject of the SFT is typically initiated by the delivering
Participant at DTC. The delivering Participant submits a Delivery Versus Payment instruction to DTC todeliver the securities versus the SFT payment amount from the account of the delivering Participant to
Account 881, which is the NSCC SFT Account that was established by NSCC at DTC for SFT transactions.
The Delivery Versus Payment instruction of the Participant must contain the fourteen-digit UTC Loan ID that
was assigned by NSCC to the relevant SFT (“DTCC Reference ID”).
Once DTC receives a corresponding Delivery Versus Payment instruction from NSCC to deliver the subject
securities versus the SFT payment amount from the NSCC SFT Account to the account of the receiving
Participant, DTC will use look-ahead processing to process the pair of Delivery Versus Payment instructions,as discussed below.
If DTC does not receive the corresponding Delivery Versus Payment instruction from NSCC by 3:10pm ET,then the Delivery Versus Payment instruction from the delivering Participant will be rejected.

NSCC Instructions to DTC
NSCC submits two types of instructions to DTC in connection with SFT transactions at NSCC: (i) Delivery
Versus Payment, and (ii) SFT Price Differential (“SFT PD”) payment orders. All instructions submitted to DTC
by NSCC must contain the DTCC Reference ID. With the exception of the initial transfer of the SFT
securities described above, NSCC will submit all instructions to DTC in pairs.
For each Delivery Versus Payment transaction in connection with an SFT, NSCC submits a pair of
instructions to DTC: (i) one instruction as the Special Representative (as defined in DTC Rule 6) of thedelivering Participant to deliver the securities that are the subject to the SFT versus the SFT payment
amount from the account of the Participant to the NSCC SFT Account, and (ii) one instruction, on NSCC’s
own behalf, to deliver the securities that are the subject of the SFT versus the SFT payment amount fromthe NSCC SFT Account to the account of the receiving Participant. Upon receipt of the pair of instructions
from NSCC, DTC will use look-ahead processing to process the pair of Delivery Versus Payment transactions,as discussed below.
An SFT PD payment order is a payment order in the amount of a Price Differential calculated by NSCC, in
accordance with NSCC Rules, in connection with cleared SFT activity at NSCC. For further information about
the calculation of Price Differentials by NSCC in connection with the NSCC SFT Service, see NSCC Rule 56.
For each SFT PD, NSCC submits a pair of instructions to DTC: (i) one SFT PD payment order as the Special
Representative (as defined in DTC Rule 6) of the payee Participant to credit the amount of the Price
Differential to the account of the payee Participant and debit the amount of the Price Differential to the
NSCC SFT Account, and (ii) one SFT PD payment order, on NSCC’s own behalf, to credit the NSCC SFT
Account the amount of the Price Differential and debit the amount of the Price Differential from the accountof the payor Participant. Upon receipt of the pair of instructions from NSCC, DTC will use look-ahead
processing to process the pair of SFT PD payment orders.

19

NSCC SFT Account Look-Ahead Processing
With respect to Delivery Versus Payment instructions and SFT PD payment orders, look-ahead processing
determines whether (i) the pair of instructions from NSCC are consistent in terms of the number of subject
shares, dollar amount, CUSIP and SFT UTC Loan ID, and (ii) the net effect of processing the instructions will
not violate the respective net debit caps, collateral monitor or other Risk Management system controls of theParticipants that are on each side of the Delivery Versus Payment or SFT PD transactions. If the look-ahead
is satisfied, DTC will process the pair of instructions. If the look-ahead is not satisfied, then the pair of
instructions will recycle until the look-ahead is satisfied or until the 3:10pm cutoff, when all recyclingtransactions are dropped.
The purpose of using a look-ahead process for Delivery Versus Payment and SFT PD transactions throughthe NSCC SFT Account is: to reduce the blockage of transactions processing through the NSCC SFT Account
while maintaining the risk management controls of the delivering/receiving or payor Participant, as the casemay be. In addition, the NSCC SFT Account has a Net Debit Cap of $1, for the purpose of preventing theprocessing of the pairs of Delivery Versus Payment and SFT PD transactions until the look-ahead is satisfied.
Note: In an effort to ensure that the processing through the NSCC SFT Account operates effectively, theDelivery Versus Payment transactions and the SFT PDs to/from the NSCC SFT Account are not subject toRAD, and reclaims from the NSCC SFT Account are blocked.

End-of-Day Settlement Process
Overview
DTC's Settlement Operations group controls and coordinates the settling of Participant accounts and Settling
Bank accounts on DTC's systems. A Settling Bank is a bank Participant that settles for itself and may settle
for other Participants for which it is the designated Settling Bank, including other bank Participants. A
Settling Bank can be located in any Federal Reserve district, but it must have access to the Settlement User
Interface and online access to the National Settlement Service (“NSS”) provided by the Federal Reserve
Banks (individually and collectively, the “Fed” unless indicated otherwise) and Fedwire®.
Note–A Participant must make formal arrangements with DTC and a Settling Bank for that Settling Bank to
be designated as the Settling Bank to settle with DTC on the Participant’s behalf. Each Settling Bank mustsign an agreement with DTC prior to the bank performing as a Settling Bank. The actual settlement process
occurs through NSS and is initiated when DTC posts final figures for Participants and Settling Banks.
Although the actual settlement process begins with the posting of final settlement figures at approximately
3:45 p.m. eastern time each day, DTC operates a settlement system that provides Participants and Settling
Banks with online reports throughout the processing day. These reports reflect intraday gross debits, grosscredits, and the net debit or credit for each Participant, as well as a net-net figure for each Settling Bank.
The end-of-day net-net settlement balance for each Settling Bank that settles on behalf of more than one
Participant is the net of the net debit and net credit balances of all Participants for which that Settling Bank
settles, after cross-endorsement with the National Securities Clearing Corporation (NSCC), including the
Settling Bank’s own settlement obligations as a Participant if it settles for itself.
A Settling Bank may refuse to settle on behalf of another Participant for which it is the designated Settling
Bank, in accordance with the processing schedule and other provisions set forth below. It is the primaryobligation of each Participant to ensure that its net settlement balance, if any, is settled timely. If a Settling
Bank does not settle on behalf of a Participant, as a result of a refusal to settle or otherwise, the Participantmust make alternative arrangements to make payment to DTC via Fedwire® as set forth below. A
Participant that acts as its own Settling Bank, whether or not it settles for others, may not refuse to settle
for itself; if it does not fund its settlement obligation, it will be in default under the DTC Rules andProcedures.
Note-Any Settling Bank that settles for both Participants of DTC and members of NSCC will have its net-net
credit or debit balances at DTC and NSCC aggregated and netted to one consolidated debit amount or credit
amount, as applicable.

20

Example of the Calculation of a DTC Settling Bank’s Net-Net Settlement Balance:
The following details illustrate and example of how the settlement process works for DTC:•

Settling Bank ABC settles for Participants 1, 2, and 3.

•

Participant 1 has a gross debit of $2 million and a gross credit of $1 million, giving it a net debit of $1
million.

•Participant 2 has a gross debit of $3 million and a gross credit of $2 million, giving it a net debit of $1
million.

•Participant 3 has a gross debit of $2 million and a gross credit of $3 million, giving it a net credit of $1
million.

•Settling Bank ABC's net-net settlement balance would be a debit for $1 million, which is the sum of the
net debits and credits of Participants 1, 2, and 3.

As illustrated in the example, net-net settlement reduces the number and the dollar amount of payments
due to DTC. In the example, DTC would instruct the Fed to charge the Settling Bank's American Banking
Association (ABA) routing number for $1 million via NSS.
Note–Although each Settling Bank settles with DTC on one net-net amount, the Settling Bank is responsible
for collecting final net debits from, and paying final net credits to, the Participants it represents.

About the Netting Process
As part of the net-net process, DTC employs a netting procedure with NSCC called cross-endorsement.
Under cross-endorsement, each Participant's net debit at one organization is netted against the amount of
its net credit, if any, at the other organization.
Looking back at the previous example, if Participant 1 had a net credit of $1 million at NSCC, it would beapplied to its DTC net debit of $1 million, making its DTC net balance zero. This would make Settling Bank
ABC's net-net balance zero and eliminate the need to settle a debit with DTC. (Participant 1's net balance
would be zero after the cross-endorsement process; Participant 2's net balance would still be a debit of $1
million, but this debit would be offset by Participant 3's net credit of $1 million.) While the crossendorsement process impacts the net-net figures of Settling Banks by affecting the net balances of theParticipants for which they settle, the process is transparent to Settling Banks and is simply a component ofeach Participant's net balance.

Limitation of Participant Net Debit Caps by Settling Banks
A Settling Bank can limit the net debit cap assigned to each Participant it represents. However, themaximum amount set by a Settling Bank cannot exceed the Participant’s system-calculated net debit cap
established by DTC.
To establish or change the net debit cap for a Participant for which it settles, the Settling Bank must submit
a letter of instruction to DTC requesting the amount of the net debit cap for the Participant. This lettershould be sent via e-mail to DTCProductRisk@dtcc.com using the Settling Bank’s e-mail domain, or via mailor overnight delivery addressed to:21

The Depository Trust Company
Executive Director, Enterprise Risk Management
55 Water Street
New York, NY 10041
DTC will process an instruction received by 2:30 p.m. eastern time, in time to be effective as of the openingof the next business day.

Settling Bank Processing Schedule
The following table shows the processing schedule for Settling Banks. All times are eastern time.

At this time

This process takes place¹
All settlement balances become final and the settlement period begins:

3:45 p.m.
(approximately)•

DTC posts the final net debit or net credit for each Participant andthe final net-net debit or net-net credit for each Settling Bank.

•

Verification that final net cutoff has taken place; the message 'Final
Figures' and the time they became final will appear in the
Settlement User Interface. Settling Banks can view their respective
final net-net settlement balances via the Settling Bank AccountStatement made available via the Settlement User Interface.

•

Settling Banks that settle for other Participants must acknowledge
their net-net settlement balances at this time (the system will notallow this until final figures are posted). However, a Settling Bank
that settles only for itself (only its own Participant account) is not
required to acknowledge its settlement balance.

•

Once final figures are posted, DTC sends periodic reminder
messages to each Settling Bank until the Settling Bank either
affirmatively acknowledges its balance or notifies DTC of its refusal.
(Note that reminder messages may still be generated after the
Settling Bank has been deemed to have acknowledged its
settlement balance in accordance with the “Acknowledgment andRefusal Procedures” set forth below. Notwithstanding delivery of
reminders, once a Settling Bank is deemed to have acknowledged
its balance it may not notify DTC of a refusal to settle for a
Participant for which it is the designated Settling Bank).

•

A Settling Bank with a final net-net debit must ensure that funds areavailable in its Fed account for payment via the NSS. (SeeSettlement Payment for Net-Net Debit Balances below for more
information.)

The later of :4:15 p.m. and thetime that is 30
minutes after net-net
settlement balances
are first madeavailable

Cutoff for each Settling Bank to acknowledge its net-net settlementbalance or notify DTC that it refuses to settle for one or more
Participants for which it is the designated Settling Bank (the“Acknowledgment Cutoff Time”).

22

At this time

This process takes place¹

Approximately 4:30
p.m. (subject tosettlement
extensions)

DTC processes an NSS file (“NSS File”) with the Federal Reserve Bank of
New York (“FRBNY”) to debit or credit each Settling Bank’s NSS account,
as applicable. Note: If instructed by DTC, in the event that NSS isunavailable, Settling Banks in a net-net debit balance must remit
payments to DTC via Fedwire® by the later of 5:00 pm or 1 hour 1after
net-net settlement balances are first made available, except that all
such payments must be remitted prior to the close of the Fedwire®.
Cutoff for Participants to enter valued DOs and pledges to their Settling
Banks and the Settling Bank's authorization of those transactions:

5:00 p.m.

•

Eligible Participants can process valued DOs and pledges to a
Participant or to pledgee accounts of their Settling Bank (forexample, to a Participant or pledgee account specified in advance by
the Settling Bank, not just any Participant or pledgee within the
Settling Bank)•

These transactions can be processed after final figures and before
5:00 p.m. because they only affect a Participant's net figures, notthose of the Settling Bank.

Note–DTC programmatically subjects these transactions to the SettlingBank's authorization via the Receiver Authorized Delivery (RAD)process. Also, to become eligible to process these transactions,
Participants must sign an agreement with their Settling Bank and notify
DTC about it.

Acknowledgment and Refusal Procedures
Each Settling Bank that is the designated Settling Bank for another Participant or for other Participants must
use the Settling Bank Acknowledgment function to perform acknowledgment activities promptly after final
figures have been posted and by the Acknowledgment Cutoff Time. Once the message 'Final Figures'
appears on the Settlement screen, each Settling Bank that settles for other Participants should access the
Settling Bank Acknowledgment function and take one of the following actions:1.

Acknowledge its entire net-net settlement balance, or2.

Refuse to settle for one or more other Participants for which it is the designated Settling Bank.

Subject to Item 7 and Item 9 below, if a Settling Bank that settles for other Participants does not, by the
Acknowledgment Cutoff Time (i) affirmatively acknowledge its net-net settlement balance or, alternatively(ii) notify DTC that it refuses to settle for one or more Participants for which it is the designated Settling
Bank, then, at the Acknowledgment Cutoff Time, the Settling Bank is deemed to have acknowledged its netnet settlement balance. If the net-net settlement balance is a debit, then the Settling Bank’s Fed accountwill be charged; if the net-net settlement balance is a credit, then the Settling account will be credited.
The following additional procedures also apply to the acknowledgment and refusal process:1.

A settling Bank that settles for other Participants must acknowledge its net-net settlement balance orrefuse to settle for one or more other Participants for which it is the designated Settling Bank by the
Acknowledgment Cutoff Time, but cannot refuse to settle for itself.

2.

A Participant that is a Settling Bank only for itself (and not for any other Participant) need not
acknowledge its balance and cannot notify DTC that it refuses to settle.

1

DTC interfaces with Settling Banks via the Settlement User Interface.

23

3.

A notification to DTC by a Settling Bank of the Settling Bank’s refusal to settle for a Participant for which
it is the designated Settling Bank is a refusal to settle all settlement obligations of that Participant(including the Participant's main account and all subaccounts thereunder).

4.

After a Settling Bank notifies DTC of its refusal to settle for one or more Participants for which it is thedesignated Settling Bank, DTC extracts from the net-net settlement balance of that Settling Bank the
net balance(s) of the Participant or Participants for which the Settling Bank has refused to settle, andprovides the Settling Bank with an adjusted settlement statement reflecting the Settling Bank’s adjusted
net-net settlement balance (the “Post-Refusal Adjusted Balance”). The Settling Bank’s response toprovide an acknowledgement of the Post-Refusal Adjusted Balance is immediately required.

5.

Subject to Item 7 and Item 9 below, if a Settling Bank that has been provided with a Post-Refusal
Adjusted Balance does not immediately affirmatively acknowledge its Post-Refusal Adjusted Balance,
then, the Settling Bank is deemed to have acknowledged its Post-Refusal Adjusted Balance. If the PostRefusal Adjusted Balance is a debit, the Settling Bank’s Fed account will be charged; if the Post-Refusal
Adjusted Balance is a credit, the Settling Bank’s Fed account will be credited.

6.

If, after the initial release of final settlement figures, a Settling Bank’s net-net settlement balance isadjusted by DTC for any reason other than as a result of a Settling Bank’s refusal to settle on behalf of a
Participant for which it is the designated Settling Bank, then the Acknowledgment Cutoff Time for that
Settling Bank would change to become 30 minutes after DTC advises the Settling Bank of the adjusted
net-net settlement balance.

7.

If a Settling Bank cannot (i) by the Acknowledgment Cutoff Time, send an acknowledgment or refusal
instruction, or (ii), if applicable, send an immediate acknowledgment of the Post-Refusal Adjusted
Balance, to DTC then it must immediately contact DTC using the Settlement Hotline at (212) 855-5800.
If a Settling Bank complies with this Item 7, then it will not be deemed to have acknowledged its
balance. If the problem is due to a connectivity issue with DTC, DTC Settlement Operations may thendirect the Settling Bank to submit its acknowledgement/refusal instruction via e-mail tosettlementstaff@dtcc.com, or as otherwise specified by DTC at that time.

8.

In order to facilitate timely processing of the NSS File, DTC maintains its discretion to exclude a SettlingBank’s balance from the NSS File, and proceed with NSS settlement, if the Settling Bank does not
acknowledge its net-net settlement balance by the Acknowledgment Cutoff Time, or if the Settling Bank
has provided a refusal, does not immediately acknowledge its Post-Refusal Adjusted Balance, asapplicable. If a Settling Bank’s debit balance is excluded from the NSS File, then, the Settling Bank
must pay it via Fedwire® in accordance with the instructions provided below.

9.

For a Settling Bank that is the designated Settling Bank for other Participants, DTC will attempt tocontact the Settling Bank if (i) no acknowledgment or notice of a refusal to settle on behalf of one ormore Participants for which it is designated as the Settling Bank is received by the Acknowledgment
Cutoff Time, (ii) if applicable, the Settling Bank has failed to respond to DTC to acknowledge its PostRefusal Adjusted Balance, or (iii) the Settling Bank has not contacted DTC in accordance with Item 7
above. If (x) DTC is able to contact the Settling Bank, and (y) the Settling Bank notifies DTC that it
cannot, at that time, acknowledge or refuse its net-net settlement balance or acknowledge their PostRefusal Adjusted Balance, as applicable, then the Settling Bank will not be deemed to haveacknowledged its net-net settlement balance or Post-Refusal Adjusted Balance, as applicable. If theSettling Bank cannot be reached, the Settling Bank will be deemed to have acknowledged its net-net
settlement balance or Post-Refusal Adjusted Balance, as applicable.
DTC uses the most recent contact information provided by the Settling Bank to DTC. Each Settling
Bank must ensure that it maintains up-to-date and accurate contact details with DTC to facilitate DTC’s
ability to contact a Settling Bank regarding settlement issues. A Settling Bank must promptly provide
its DTC Relationship Manager with up-to-date and accurate contact details for this purpose on an
ongoing basis when previously provided contact details are no longer accurate.

24Settlement Payment for Net-Net Debit Balances
In the event that a Settling Bank has insufficient funds when the NSS file is run, or if Settling Banks must
use Fedwire® because NSS in not available, a Settling Bank with a net-net debit settlement balance must
fulfill its payment obligation to DTC by the later of 5:00 p.m. eastern time and the time that is one hour
after the time that final figures are provided by DTC, except that all such payments must be remitted prior
to the close of the Fedwire®. DTC's receipt of funds after the deadline will result in a late fee charged to theSettling Bank. (See Ultimately Funds Settlement / Failure to Acknowledge Fees.)1.

A Settling Bank must settle its net-net debit settlement balance via NSS unless it has notified DTC
of a connectivity issue with DTC or other good faith reason it cannot do so. NSS will allow DTC to
instruct the Fed to debit the Settling Bank's account at the Fed for its net-net debit balance. If theSettling Bank's account has sufficient funds, it will be debited. Upon confirmation from the Fed, theSettling Bank's DTC account will be credited to reflect payment of its net-net debit. If the SettlingBank's account has insufficient funds, DTC will receive notification from the Fed that the account
was not debited. If this occurs, DTC will notify the Settling Bank of its deficiency. The Settling Bank
must then transfer the required funds to DTC by Fedwire®.

2.

Any Settling Bank that settles for both Participants of DTC and members of NSCC will have its netnet credit or debit balances at each of DTC and NSCC aggregated and netted to one consolidated
amount (See attached ADDENDUM A ). At the end of each settlement day, after the
acknowledgment process is complete, DTC will instruct the Fed to debit the Fed account of eachsuch Settling Bank which has a Consolidated Settlement Debit Amount by the amount determined inaccordance with ADDENDUM A.

3.

If a Settling Bank settles only for NSCC participants, DTC will instruct the Fed to debit such bank’s
Fed account by the amount of its net-net debit owed to NSCC. If the Settling Bank’s account at the
Fed has sufficient funds, it will be debited. If the Settling Bank’s account has insufficient funds, DTC
will receive notification from the Fed that the account was not debited. If this occurs, DTC will notify
the Settling Bank of the deficiency. Any Settling Bank with a deficiency must then transfer the funds
to DTC by Fedwire®

Note– Each Settling Bank must monitor its Settling Bank Account Statement through the Settling Bank
Statement function in the Settlement User Interface to ensure that funds have been credited to theiraccount and that no debit balance exists. The Settling Bank must be prepared to transfer funds to DTC by
Fedwire® if (i) there is a deficiency in its Fed account, (ii) the NSS File has been processed excluding the
Settling Bank’s debit balance, as applicable, in accordance with the Acknowledgment and Refusal Procedures
above, or (iii) NSS is unavailable or inoperable. DTC requires that a bank representative authorized totransfer funds be available at the Settling Bank until settlement is complete. If a Settling Bank is unable toaccess NSS due to extenuating circumstances and will send its wire directly to DTC’s FRBNY account for its
debit balance, that Settling Bank must notify the DTC Settlement group prior to the Acknowledgment CutoffTime.
If funds need to be transferred to DTC's account at the FRBNY, use the following guidelines for sending
settlement payments:•

Enter 026002066 (DTC's ABA number) in the Receiving Bank ABA Number field.

•

Enter DTC SDFS (DTC's telegraphic name) in the Receiving Bank Name field.

•

Enter 1600 in the Type Code field.

•

Note–Type Code 1600 is the Fedwire® code for settlement wires. Wires sent with this code
can be processed after the Interdistrict Fedwire® cutoff, whereas Type Code 1000 wires cannot. In
the event that system problems delay outgoing wires, Type Code 1600 prevents wires to DTC frombeing rejected by the Fed after the Interdistrict cutoff.

•

Enter OBI = SET (indicating SET as the purpose of the wire) in the Originator to Beneficiary
Information (OBI) field.

•

Note–The SET purpose must be indicated in the wire. If another field is used to indicate SET
asthe purpose of the wire, OBI and SET must be separated by a space. For example, BBI =OBI SET, where BBI is the field used instead of the Originator to Beneficiary Information (OBI) field.

25

•Enter values in other fields in Fedwire® format according to the Settling Bank’s own standard
procedures.

•

Submit the instruction. DTC posts the payment as a credit to the Settling Bank’s Account Statement
when payment for the net-net debit is received.

•

Review the Settling Bank’s net-net balance via the Settling Bank Statement function to ensure thatDTC receives the funds.

•

Note–The instruction format described above conforms to Fedwire® standards for funds
transfers. Settling Banks should note that the Originator to Beneficiary Information (OBI) field is
required for DTC processing and must be included in all SET wires processed through the Fedwire®
system.

Untimely Funds Settlement/Failure to Acknowledge Fees
1.

If DTC makes a borrowing as a result of the failure of a Settling Bank or Participant to complete
timely settlement the Settling Bank or Participant will be charged interest on that borrowing asfollows:

Interest Rates for Borrowings Made Due to Untimely Payment of Funds
Net Debit of Settling Bank or Participant

Rate (percent)First $5 million

2.0

Next $20 million

1.5

Next $50 million

1.0

More than $75 million

0.5

Note: A Settling Bank will not be charged interest under this provision with respect to the settlementbalance of a Participant or Participants for which the Settling Bank settles where the Settling Bank timely
notified DTC of its refusal to settle on behalf of such Participant or Participants.
Example:Interest is calculated overnight on a 360 day/year basis. For a net debit of $100 million, the interest
calculation is:[($5 mm x 2%) + ($20 mm x 1.5%) + ($50 mm x 1%) + ($25 mm x 0.5%)] /360
which equals $2,847.

2.

a. Settling Banks and Participants are charged flat fees in accordance with the table below if their
net settlement obligations are not timely satisfied. This fee is in addition to any interest charged
pursuant to Item 1 above.

26

b. In addition to Item 2a. above, a Settling Bank that settles on behalf of other Participants shallalso be charged flat fees in accordance with the table below if it does not, by the Acknowledgment
Cutoff Time, (i) affirmatively acknowledge its net-net settlement balance or (ii) notify DTC that it
refuses to settle for one or more Participants for which it is the designated Settling Bank. The
Settling Bank will not be charged a fee for failure-to-acknowledge or notify DTC of its refusal if it
notifies DTC in accordance with Item 7 or Item 9 of the Acknowledgment and Refusal Procedures
above that it cannot acknowledge or refuse its net-net settlement balance. This fee is in addition to
any fee(s) for failure to timely satisfy a net settlement obligation charged pursuant to Items 1 and2.a. above.

Flat Fees–Untimely Satisfaction of Settlement Balance /Settling Bank Failure-toAcknowledge its Net Debit or Credit Settlement Balance
Net Balance of Settling
Bank or Participant

First
Occasion

SecondOccasion

Third
Occasion

FourthOccasion

$

$

$

$

$

0 to 100,000

100

200

500

1,000

Between 100,000 and 900,000

300

600

1,500

3,000

Between 900,00 and
1,700,000

600

1,200

3,000

6,000

Between 1,700,00 and
2,500,000

900

1,800

4,500

9,000

More than 2,500,000

1,000

2,000

5,000

10,000

Example:For a first occasion $100 million net debit, total fees equal $2,847 (fee interest) + $1,000 (flat fee) =$3,847.
Note–a.

The number of occasions will be determined as a cumulative sum of the number of occasions incurredby a Settling Bank pursuant to Items 2.a. and 2.b. above over a rolling three-month period. If a Settling
Bank or Participant, as applicable, exceeds four occasions in a three-month period, it will be subject tofurther fees and/or other actions at DTC's discretion.

b.

DTC may waive the fee in appropriate circumstances (e.g. such as a DTC system delay).

c.

A Settling Bank will not be charged a flat fee under this provision with respect to the settlement balance
amount of a Participant or Participants for which the Settling Bank settles where the Settling Bank
timely notified DTC of its refusal to settle on behalf of such Participant or Participants.

Settlement Contact Number
For more information about Settlement processing, call DTC's Settlement Hotline at 212-8555800.

27

Settlement Processing Schedule 2
The following table describes the DTC Settlement processing schedule. All times are eastern time.
Cutoff TimeETThis Occurs

1:15 p.m.

DTC's cutoff for syndicate closings.

1:30 p.m.

DTC releases all pending delivery account (PDA) positions and reverts to default
recycle processing.

2:00 p.m.

Cutoff for:•

Valued MMI issuances

Cutoff for:2:30 p.m.

2:45 p.m.

•

An Issuing and Paying Agent (IPA) to replace the Unknown Rate with a final
rate for distribution - the IPA must successfully transmit the final rate to DTC
before 2:30 PM ET.

Cutoff for:•

RAD approval of MMI valued issuance deliver order transactions.

Cutoff for:2:55 p.m.

•Entering release requests designating position as eligible for CNS.

•

Processing Valued MMI transactions for issuances, MMI DOs and maturity
presentments in the MMI Optimization process.

Cutoff for:3:00 p.m.

•

DTC’s receipt of an IPA’s MMI Funding Acknowledgement or refusal to pay
notification.

•

An IPA to notify DTC of a Temporary Acronym Payment Failure (as defined
below).

•

SFT transactions cannot be entered into after 3:00pm.

•

Forced Receiver Authorized Delivery (RAD) period begins.

Note – A Participant can continue to enter valued and free transactions.
However, all valued transactions are forced into RAD and require the receiving
Participant's approval.
Cutoff for:3:10 p.m.

•

Pledgees to approve pledge release requests designating position as CNSeligible.

•

Valued recycle cutoff. All non-MMI valued, CNS / SFT transactions and fully
paid for and secondary MMI deliveries or maturity presentments that cannot
be completed because of insufficient position, collateral, or net debit cap are
dropped from the system.

Note–All valued transactions input or approved by Participants after this time will
not recycle; they will either complete or drop.

2

To be read in conjunction with the Settling Bank Processing Schedule above.

28

Cutoff TimeET

3:15 p.m.

This Occurs
Optional “Push” profile that allows Participants to establish a standing withdrawal
request for SPP returns and P&I withdrawals.
Cutoff for government deposits and withdrawals.

3:20 p.m.

Cutoff for Settlement payment withdrawals and principal and income
withdrawals.
Note-These are manual withdrawals as opposed to the “Push” profile describedabove.
Forced RAD Delivery Period ends. Cutoff for entering:

3:20 p.m.

•

Valued original DOs including unmatched reclaims•

Original POs•

Valued pledges•

Valued pledge release requests.

Note–If a Participant has made prior arrangements with DTC and its Settling
Bank, the Participant can continue to submit valued transactions to its Settling
Bank.
Cutoff for:•

Pledgees to approve valued pledge release requests and enter valued
release returns•

RAD approval or cancellation for valued transactions (except MMI valued
issuance DOs).

3:30 p.m.

3:45 p.m.

DTC calculates DTC and NSCC cross-endorsement balances.

3:45 p.m.

DTC finalizes settlement balances for Participants and Settling Banks.
Cutoff for:5:00 p.m.

•Entering free Fed pledges to the Fed with extensions upon request to theFed.

•

Pledgors' requests for release of positions pledged to the Fed.

•

Fed to input pledge release returns.

•

Entering valued DOs and pledges to a Settling Bank.

•

Settling Banks to authorize valued DO and pledge transactions.

•

MMI issuing agents to enter free original issuances (new CUSIP).

•

DTC to lift Risk Management Controls.

•

Free non-MMI DOs input after 5:00 p.m. to RAD if that option is activated by
the receiving Participant.

29

Cutoff TimeETThis Occurs
Cutoff for:6:15 p.m.

•Entering free additional MMI issuances (existing CUSIP) and free deliveries•

Pledgors to enter free pledges and free release requests•

MMI issuing and paying agents to withdraw MMI securities.

•

IPA deadline to set the MMI MP Pend or Issuer Priority Control (IPC) profilethat will be effective for next processing day.

•

OCC member’s release of deposit request and authorization to release
positions pledged to the OCC.

Cutoff for:6:30 p.m.

•

Approving or cancelling free MMI issuances through RAD.

•

Inputting day and night position transfer instructions (MA-to-NA transfers).

•

Pledgees to enter free pledge release returns.

•

Pledgees to approve free pledge release requests.

6:35 p.m.

Recycle cutoff for all free transactions.

6:45 p.m.

Cutoff for inputting segregation instructions.

10:45 p.m.

Cutoff for the Authorization and Exemption function.

11:00 p.m.

NDO cutoff.

Extension Requests
DTC cannot grant any Participant an extension of the foregoing deadlines unless a substantial volume oftransactions is involved. A Participant should notify DTC as early in the processing day as possible if it thinks
it may need to request an input extension. This will allow DTC to discuss alternative methods of input.
To request an extension call DTC's Settlement Hotline at 212-855-5800.

30

ADDENDUM A

DTC/NSCC Settling Bank Netting Arrangements
Any Settling Bank that settles for both Participants of DTC and NSCC will have its net-net credit or debit
balances at DTC and NSCC aggregated and netted to one consolidated debit amount or credit amount as
applicable.
DTC shall provide NSCC with services with respect to NSCC’s money settlement operations as described in,
and in accordance with, the following procedures 3:
1.

For purposes of this procedure, the following terms have the meanings specified:(a) “Common Settling Bank” means any entity that has qualified and acts as a Settling Bank for both
DTC and NSCC in accordance with their respective rules and procedures.
(b) “ DTC Credit Amount” or “NSCC Credit Amount” means, as applicable, any net-net credit settlement
payment due from the relevant clearing agency to a Common Settling Bank, as determined inaccordance with the Rules and Procedures of the relevant clearing agency.
(c) “DTC Debit Amount” or “NSCC Debit Amount” means, as applicable, any net-net debit settlement
payment due to the relevant clearing agency from a Common Settling Bank, as determined inaccordance with the respective Rules and Procedures of the relevant clearing agency.
(d) “Consolidated Settlement Debit Amount” means on any settlement day the net sum, if a negative
number (i.e. debits being deemed negative numbers, and credits being deemed positive numbers) of a
Common Settling Bank’s applicable DTC Debit or Credit Amount, plus its applicable NSCC Debit or Credit
Amount.

2. For each Common Settling Bank on each settlement day, DTC, as Settlement Agent, shall aggregate andnet the DTC Credit and/or Debit Amount of the Common Settling Bank with the applicable NSCC Credit or
Debit Amount of such Common Settling Bank and:(a) If the Common Settling Bank has both a DTC Debit Amount and an NSCC Debit Amount, thenfollowing the acknowledgement of those respective balances by such bank in accordance with DTC and
NSCC’s procedures, DTC shall instruct the FED to debit the FED account of such Common Settling Bankby the aggregate sum of such debit balances. DTC, upon receipt of such monies, shall credit NSCC withthe amount of the NSCC Debit Amount, and credit DTC with the amount of the DTC Debit Amount, fromsuch Common Settling Bank.

DTC will act as “Settlement Agent” (as that term is used in the Federal Reserve Board’s Operating Circular
12 and in NSCC’s Rule & Procedures) for NSCC and NSCC’s Settling Banks, for purposes of (i) receiving andpaying, as NSCC’s settling bank and for the account of NSCC, end-of-day money settlement payments fromor to, as applicable, NSCC Settling Banks and Participants, (ii) with respect to the FED’s National Settlement
Service, as the means of effecting such money settlement for NSCC, and (iii) netting the amounts of those
Settling Banks that act as such for both DTC and NSCC, and crediting the account of either NSCC, or DTC,
as the appropriate clearing agency, with the settlement amounts determined in accordance with thisprocedure.

3

Settler Agreements provided by the Settling Bank to DTC for delivery to the FRB are hereby deemed toinclude the Settling Bank’s NSCC settlement obligations as well as their DTC settlement obligations.

31

(b) If the Common Settling Bank has both a DTC Credit Amount and an NSCC Credit Amount, then at
the time established in DTC and NSCC’s procedures, DTC shall instruct the FED to credit payment to the
FED account of the Common Settling Bank with the aggregate sum of such credit balances, and shalldebit NSCC with the amount of the NSCC Credit Amount, and debit DTC with the amount of the DTC
Credit Amount, for such Common Settling Bank.
(c) If the Common Settling Bank has a Debit Amount at one clearing agency and a Credit Amount at
the other, then:--If the sum of such DTC Credit Amount and NSCC Debit Amount (or DTC Debit Amount and NSCC
Credit Amount, as the case may be) is a positive number,that excess amount (i.e. equal to the positive number) shall be owed by the clearing agency with the Credit
Amount to the Common Settling Bank, shall be paid to the Common Settling Bank in the manner provided inclause 3(b) above, and the clearing agency with the Credit Amount shall pay the other clearing agency anamount equal to the Common Settling Bank’s Debit Amount owed to the other clearing agency, in fullsatisfaction of the settlement obligation of the Common Settling Bank to the other clearing agency.
--If the sum of such DTC Credit Amount and NSCC Debit Amount (or DTC Debit Amount and NSCC
Credit Amount, as the case may be) is a negative number,then the absolute value of that amount shall be owed by the Common Settling Bank to the clearing agency
to which the Common Settling Bank has a Debit Amount, such amount shall be paid by the Common Settling
Bank via NSS in the manner provided in clause 3(a) above in full satisfaction of the settlement obligation of
the Common Settling Bank to such clearing agency, and the clearing agency with the Credit Amount shall
pay the other clearing agency an amount equal to the Common Settling Bank’s Credit Amount, in fullsatisfaction of the settlement obligation of the clearing agency from whom such Credit Amount was owed to
the Common Settling Bank.
--If the sum of such amounts equals zero (i.e. the Credit Amount due from one clearing agency
equals the Debit Amount owed to the other clearing agency), then the clearing agency that owes the Credit
Amount to the Common Settling Bank shall pay the amount of such Credit Amount to the other clearing
agency in full satisfaction of both the settlement obligation of the Common Settling Bank to the clearing
agency owed the Debit Amount and the settlement obligation of the clearing agency that owes the Credit
Amount to such Common Settling Bank. In that instance, no payment shall be due to or from such Common
Settling Bank to or from either DTC or NSCC.
3. Notwithstanding the foregoing, if any Common Settling Bank fails to pay its Consolidated Settlement
Debit Amount by the time specified in DTC and NSCC’s procedures, then (i) if that bank has an NSCC Debit
Amount, NSCC shall implement its failure to settle procedures, and (ii) if that bank has a DTC Debit Amount
DTC shall implement its failure to settle procedures.
4. Under FRB Operating Circular No. 12, DTC, as Settlement Agent, has certain responsibilities in allocating
an indemnity claim made by a FRB as a result of NSS. In making such an allocation, NSCC and DTC will firstapportion any such liability between them (and their respective Participants) in proportion to the amount of
the net-net debit due to each clearing agency by the Settling Bank to which the indemnity claim relates. If
that Settling Bank owed a debit to one and had a credit due from the other clearing agency, then the entire
indemnity amount will be allocated to the clearing agency to which the Settling Bank owed the debit amount(and for which, via NSS, its FRB account was debited) relating to the indemnity claim. NSCC and DTC willthen further allocate the FRB claim among their Participants for whom the Settling Bank was then acting. If
for any reason such allocation is not sufficient to fully satisfy the FRB indemnity claim, then the remaining
loss will be allocated pro rata among all the applicable clearing agency’s Participants in the same manner as
provided in NSCC’s and DTC’s Rules with respect to a general (i.e., non-system related) loss.

32

Special Procedures Relating to Settling Bank Processing on Behalf of Participants
In addition to the above, the following procedures apply when a Settling Bank does not timely satisfy its
settlement balance. Unless these procedures indicate otherwise, each paragraph of these procedures
applies whether a Settling Bank’s settlement balance is a net-net credit or a net-net debit (or a net credit or
net debit if the Settling Bank settles only for itself). A reference in these procedures to the Participants that
settle through a Settling Bank is also a reference to the Settling Bank itself as a Participant. As
supplemented by these procedures, all DTC agreements, rules and procedures relating to Settling Banks andParticipants remain in effect.
1.

If a Settling Bank that is the designated Settling Bank for other Participants (“Subject Settling Bank”)
does not timely settle with DTC on a given settlement date (“Due Date”) in accordance with thetimeframes provided in the DTC Settlement Service Guide, DTC will notify each Participant that settles
through the Subject Settling Bank. Each Participant must be prepared in advance to arrange foranother bank to pay or receive funds via Fedwire® on the Participant’s behalf upon the instruction of
DTC.

2.

In its discretion, DTC may decide not to make payments on the Due Date to some or all of theParticipants that settle through the Subject Settling Bank and have net credit balances. DTC will makesuch payments through the Subject Settling Bank on the next business day following the Due Date(“Next Business Day”) if, by 10 a.m. on the Next Business Day (the “SB Cure Time”), the Subject
Settling Bank completes settlement with DTC and/or all Participants with net debit balances that would
otherwise have settled through the Subject Settling Bank have wired payment to DTC in accordancewith the preceding paragraph. If the Subject Settling Bank does not complete settlement by the SB
Cure Time, DTC may make such payments to Participants only when DTC settles with all of theParticipants that otherwise would have settled through the Subject Settling Bank and had net debit
balances on the Due Date.

3.

If the Subject Settling Bank and defaulting Participants complete settlement with DTC by the SB Cure
Time, DTC will charge the Subject Settling Bank for any interest charges and other costs associated withliquidity costs of completing settlement. Once DTC has completed settlement with the Subject Settling
Bank, each Participant that settles through the Subject Settling Bank will be deemed to have settledwith DTC for purposes of its net settlement balance on the Due Date and, if any of these Participantsalso paid its settlement obligation to DTC directly by Fedwire®, those Participants must resolve their
obligations with the Settling Bank and, to the extent, if any, that DTC has been overpaid, it will refund
the amount directly to the affected Participant unless instructed otherwise by the affected Participant.
DTC will not be responsible for any obligations of the Subject Settling Bank to or from such Participants.

33

Honest Broker
About the Product
Honest Broker is a procedure to facilitate the liquidation of security positions that have been pledged bybook entry in DTC. It is exercised only in extraordinary circumstances, for example, when a pledgee isunwilling to release securities to a pledgor (typically, a broker under financial stress).

Requesting that DTC Perform the Role of Honest Broker
A pledgor may request that DTC perform as an honest broker for the pledgor's pledged securities.
DTC's Honest Broker procedure will be activated when requested by a pledgor when pledgees are unwilling
to return pledged securities directly to a pledgor, but only at DTC's option after consultations with concerned
parties indicate that such action is appropriate.
If the Honest Broker procedure is activated, DTC will notify pledgees and Participants of its activation andwill advise them of the possibility that deliveries in settlement of their transactions with the pledgor may bereceived from the DTC HB Account rather than from the pledgor's DTC Participant account. In performing
the role of honest broker, DTC will act as agent for the pledgee and will undertake no risk other than that
arising from its own gross negligence.

Responsibilities of the Pledgor
As the pledgor, DTC's Director of Compliance will notify you that the Honest Broker procedure will be madeavailable. After you are notified, you must•

Identify the affected pledgees to DTC and•

Notify the affected pledgees of your intent to use the Honest Broker procedure.

DTC will grant you access to the Honest Broker functions, which consist of various options that allow you to
execute and cancel deliver order (DO) transactions and to maintain the Pledgee-CUSIP Assignment List andenter CNS deliver orders.

Pledgee-CUSIP Assignment List
Via the Honest Broker function, you must specify which CUSIP numbers affect each pledgee participating in
the Honest Broker procedure. For each CUSIP number for which you have initiated a DO, you must type thecorresponding pledgee Participant number.
Note- The pledgee-CUSIP assignments specified using this option will remain in effect from one day to thenext, unless you cancel them.
DTC will provide you with output via the Settlement User Interface detailing complete and incomplete honest
broker DOs, as well as honest broker DOs that identify the pledgees whose shares were used to complete
the DOs.

Collection of DO Liquidation Data
Via the Honest Broker function, you can enter DO instructions for trades that you want to complete using
securities pledged to the pledgees.
Note- DTC will not allow any repurchase (repo) transactions (reason code 81) or due bill deliveries in the
Honest Broker function.

34

You can also use the Honest Broker Function to•

Browse previously input DO transactions in the Honest Broker Control Account for transactions input
on the same day.

•Cancel transactions in the queue. Canceling a transaction requires a reason for the cancel, and theitem must be canceled on the same day that it was entered.

Responsibilities of the Pledgee
Once the Honest Broker procedure has been made available to the pledgor, as the pledgee, you must•

Receive notification from the pledgor that the Honest Broker procedure will be used.

•

Confirm this understanding with DTC by calling DTC's Settlement Hotline at 212-855-5800.

Notice of Participation
If you elect to participate in the Honest Broker processing, you must notify DTC of your intent to do so.
Participating pledgees must identify the corresponding pledgee Participant number (for pledgees withmultiple Participant account numbers) that they will use to deliver positions to the DTC HB Account.
Note- If you are not a Participant, you must request that DTC establish a Participant account number to use
in Honest Broker processing.

How a Pledgee is Activated for the Honest Broker Process
DTC's Director of Compliance will notify you that the Honest Broker procedure will be made available. DTC
will provide access to the Honest Broker function using your designated Participant account. Access to thisfunction allows you to•

Browse the Honest Broker DOs input by the pledgor and•

Deliver previously demanded pledged securities to the HB Account for use in completing the Honest
Broker DOs.

On settlement date, you will be able to review the details of the Honest Broker DOs via the Honest Broker
function.

Securing Pledged Positions or Surrendering Positions to the DTC Honest Broker
Account
You can remove securities from the pledgor's account by using the Demand of Collateral function (DCL). Via
DCL, you can move the pledged securities from the pledged account of the pledgor to your unpledged (free)account or any other Participant account you designate, including the DTC HB Account.

Honest Broker Pledgee Free Deliveries
If you have previously demanded securities you are able to move, via the Honest Broker function, thedemanded securities to the DTC HB Account for redelivery. You will be required to enter the CUSIP number
and quantity of shares for each previously pledged security you want to surrender to the Honest Broker
facility for redelivery.

35

Settlement of Completed Honest Broker Deliveries
At the end of the processing day, if you have delivered pledged securities (which DTC will operate, acting
exclusively as agent for the pledgee delivery securities to the account) to the DTC HB Account, you will
receive from DTC your pro rata share of•Proceeds received by DTC for redeliveries made in such issue and•Securities that had not been redelivered.

Your pro rata share of settlement proceeds will be credited to your Participant settlement account.
Note- For pledgees with multiple Participant accounts, this credit will be applied to the account previously
designated.
The crediting of these proceeds, which will be applied as code 78 adjustments, will occur just before DTC's
final settlement figures are produced.
Transactions in Honest Broker processing will be included on the regular daily activity and settlement
reports. The Settlement Department can also provide individual reports upon request.

How the Product Works
Following is an outline of the Honest Broker procedure.
1.

DTC will activate its Honest Broker procedure only upon a pledgor's request when pledgees areunwilling to return pledged securities directly to a pledgor and only after it consults with theconcerned parties to determine that taking this action is appropriate.
DTC may also activate the procedures in case of a pledgor's extended operational outage.
DTC will notify pledgees and DTC Participants when the Honest Broker procedures are activated.
DTC will advise Participants of the possibility that deliveries in settlement of their transactions withthe pledgor, if any, may be received from the DTC Honest Broker Participant Account (DTC HB
Account).

Note- In performing the role of honest broker, DTC will undertake no risk other than that arising from its
own gross negligence.
2.

DTC will establish a DTC HB Account for the receipt and redelivery of the pledged securities.

3.

In operating the DTC HB Account, DTC will act exclusively as agent for the pledgees delivering
securities to the DTC HB Account.

4. Each pledgee must notify DTC of its intent to use the Honest Broker procedure and will use DTC's
Demand of Collateral procedure (see Collateral Loan Program for more information) for pledged
positions that the pledgee intends to deliver to the DTC HB Account. Pledgees can enter demand ofcollateral instructions by using the Demand for Collateral function (DCL).
Note- Using DTC's Demand of Collateral procedure a pledgee can move securities from its DTC pledge
account to the general account of any DTC Participant (other than the pledgor), including its own Participant
account or the DTC HB account.

36

5. In accordance with the function cutoff times, the pledgor will provide the following information via
the Honest Broker function to each affected pledgee, and to DTC:•

The identity of each issue for which the pledgee is requested to deliver shares to the DTC HB
Account.

•

For each issue, information on the pledgor's transactions proposed to be settled that day byredelivery of the pledged positions). This information will be in standard deliver order (DO)format for each delivery and will include quantity, price, and settlement amount.

•

The DTC HB Account number to which each redelivery is to be made.

Note- Pledgees will be able to view this information using the Honest Broker functionality.
6.

On settlement date, DTC will provide to the pledgees•

Pricing information on short positions in National Securities Clearing Corporation's (NSCC's)Continuous Net Settlement (CNS) system; and•The aggregate delivery price for each issue (assuming that all of the shares are delivered).

7. The pledgee can decide whether to deliver pledged positions to the DTC HB Account using theHonest Broker function.
8. The pledgor will advise the DTC Participants that their expected deliveries will be made from the HB
account rather than from the pledgor's own account. Provided that no bankruptcy ruling or courtimposed stay has occurred, shares will then be delivered from the DTC HB Account with deliveries madein descending price-per-share order (other than deliveries to settle open NSCC CNS short positions,which will be affected first).
Note- DTC will not process free deliveries. All settlement credits will be made to the DTC HB Accounts. DTC
will make special arrangements with NSCC for related money credits for CNS short positions.
9. For each issue, DTC will allocate on a pro rata basis to any pledgee that had delivered pledged
securities to the DTC HB Account•Proceeds received from the redeliveries and•Securities remaining in the account (including deliveries that were reclaimed or otherwise notcompleted).

Honest Broker Contact Number
For more information on Honest Broker for Redelivery of Pledged Securities, call DTC's Customer Support
Center at (888) 382-2721.

37

Affirmed Transactions
DTC may accept eligible affirmed institutional transactions (“Affirmed Transactions”) from a utility thatprovides a matching service 4 (“Matching Utility”). The Matching Utility must be (i) a clearing agency
registered pursuant to Section 17A of the Securities Exchange Act of 1934, as amended (the “Act”), (ii) an
entity that has obtained an exemption from such registration from the U.S. Securities and Exchange
Commission, or (iii) a “qualified vendor” for trade confirmation/affirmation services as defined by the rulesof a self-regulatory organization. A Matching Utility must establish a connection to DTC in accordance with
DTC’s reasonable requirements in order to be able to submit Affirmed Transactions to DTC. In this regard,in order for a Matching Utility to establish and maintain a connection with DTC the Matching Utility must beable to balance with DTC in an automated way 5 and communicate transactions to and from DTC with thenecessary mandated fields. 6 Also, Matching Utilities that intend to establish a new connection with DTC
must promptly contact DTC in order to start planning for establishment of the connection and allow
adequate time to develop and adequately test the interface prior to the date it expects to implement its
connection to DTC.
A Participant that is a counterparty to an Affirmed Transaction as submitted to DTC by a Matching Utility isdeemed to have authorized the Matching Utility to provide an instruction to DTC, on the Participant’s behalf,
to process the Affirmed Transaction in accordance with DTC’s Rules and Procedures. The submission of such
Affirmed Transaction by the Matching Utility to DTC, on behalf of such Participant, constitutes the duly
authorized instruction of the Participant to DTC to process the Affirmed Transaction in accordance with theRules and Procedures.
A Matching Utility that elects to enter into an arrangement to interoperate with another Matching Utility(“Interoperability Arrangement”) maintains the sole responsibility to ensure that its customers, including
DTC Participants that are their customers, are operationally prepared to process Affirmed Transactions
relating to the Interoperability Arrangement prior to the submission of such Affirmed Transactions to DTC.
DTC may provide information to a Matching Utility on the processing status of institutional transactions in
Eligible Securities (“Status Information”) that are (i) Affirmed Transactions submitted to DTC by the
Matching Utility and (ii) other institutional transactions that may have been confirmed at the Matching Utility
and received a Control Number relating to the Matching Utility, and are submitted directly to DTC by aParticipant in an instruction containing the Control Number (collectively, “Eligible Transactions”). The Status
Information provided to the Matching Utility would include, as applicable, the status of an Eligible
Transaction (e.g., the Delivery of Securities has been made within DTC, the transaction is pending Delivery
within DTC, or the transaction was reclaimed (i.e., sent back to the Deliverer)) and a reason for any pending
status (e.g., the Deliverer has insufficient inventory in the applicable Securities, the Deliverer has
insufficient Collateral, the Receiver to the transaction has insufficient Net Debit Cap, etc.). The Status
Information would also include information (“Identifying Information”) to facilitate the Matching Utility’s
ability to identify the applicable Eligible Transaction and reconcile the Status Information to the Eligible
Transaction in its records. Identifying Information would include, but not be limited to, (i) the applicable
Control Number (ii) identification numbers of the Participants to the transaction, (iii) quantity of Securities,(iv) dollar amount of the transaction, and (v) an indicator of whether the transaction was submitted to DTC

4
A “matching service” is an electronic service to match trade information, centrally, between a brokerdealer and its institutional customer.

For each Matching Utility interfacing with DTC, DTC requires the Matching Utility to deliver a daily
message on each business day shortly after noon from the Matching Utility with their accepted item counts
of institutional delivery and ID Net (defined below) transaction totals for Settlement Date minus one
transactions. DTC’s system will compare the totals from the Matching Utility to its accepted item counts. If
the totals match, an “acknowledged balance” balance file will be sent to the Matching Utility. If the totals do
not match, DTC will respond with the list of Settlement Date minus one control numbers received from the
Matching Utility, along with their respective transaction types for the originating Matching Utility to compare.

5

6
The mandated fields for this purpose are the transaction control number, DTC receiver and deliverer
account number, CUSIP, message type, share quantity, market type, buy-sell indicator, broker ID, ID agent
internal account number, broker internal account number, agent bank ID, settlement amount, origination
entity, recipient of message, institution, and settlement date.

38

by the Matching Utility or directly by a Participant. DTC may charge a fee (“Status Information Fee”) to
Matching Utilities that receive Status Information as set forth in the DTC Fee Guide.
Prior to providing Status Information to a Matching Utility, DTC would obtain the written agreement, in suchform as determined by DTC from time to time (“Status Information Agreement”) from the Matching Utility
that includes (i) a request from the Matching Utility to receive Status Information from DTC, (ii) anagreement by the Matching Utility that the Matching Utility will not distribute Status Information to any third
party other than (a) the Participants indicated on the Status Information and (b) the institutional customers
that are counterparties to the transaction for which the Participants indicated on the Status Information are
acting with respect to the transaction, (iii) the agreement of the Matching Utility that the Matching Utility will
indemnify, hold harmless and agree, on demand, to reimburse DTC, its stockholders, officers, directors andemployees from and against and for any and all claims, liabilities, obligations, damages, actions, penalties,
losses, costs, expenses and disbursements, including, without limitation, attorneys’ fees and disbursements(“Claims”), which they may sustain by reason of DTC’s providing Status Information to the Matching Utility,
except for any Claims which result from the gross negligence or willful misconduct of the person asserting aright to indemnification, (iv) the agreement of the Matching Utility to pay the Status Information Fee,(v) the agreement of the Matching Utility to notify DTC immediately if the Matching Utility becomes aware of
Status Information provided to it by DTC being distributed to a third party other than as authorized pursuant
to (ii) above, and (vi) the acknowledgement of the Matching Utility that DTC may terminate the Status
Information Agreement in the event that (a) DTC becomes aware that the Matching Utility has used or
distributed the Status Information in a manner that violates the terms of the Status Information Agreement,(b) the Matching Utility does not pay the Status Information Fee in accordance with the terms of the Fee
Schedule, or (c) DTC submits a rule filing to the SEC, that is approved by the SEC or otherwise becomes
effective pursuant to the Securities Exchange Act of 1934, to discontinue DTC’s distribution of Status
Information to Matching Utilities.
DTC will develop the mechanism necessary for DTC to directly provide Status Information to a Matching
Utility for each transaction submitted to DTC to which a customer of the Matching Utility is a party to thetransaction and matched the transaction via the Matching Utility, regardless of whether or not that Matching
Utility submitted the transaction to DTC, subject to (i) the agreement by the Matching Utility to pay DTC for
the reasonable cost to cover for the development of the mechanism by DTC and (ii) the Matching Utility
subscribing to receive Status Information, as described above. To the extent that the transaction is aninteroperable transaction submitted to DTC by another Matching Utility, then in order to receive Status
Information for the interoperable transaction, the Matching Utility would be required to submit an indicatorto DTC for the purpose of notifying DTC that a customer of the Matching Utility is a party to the transaction.

39

ID Net Service
Benefits
The ID Net Service, or “ID Net”, is a service that ultimately benefits all parties involved in institutional
trading. ID Net processing:• Reduces the aggregate value of settlements system wide through netting efficiencies• Presents cost savings for banks and brokers through reduced fees and/or deliveries• Increases the certainty of settlement for matched institutional trades• Encourages early affirmation

Overview
Unlike exchange trades and most prime broker trades, most institutional delivery transactions do notcurrently flow through NSCC’s Continuous Net Settlement system (“CNS”). Rather these institutionaltransactions settle at DTC. The ID Net Service allows subscribers to the service to net all eligible Affirmed
Transactions against their CNS transactions, if any.
Eligibility for the ID Net Service requires that a participating entity be: (i) a Member of NSCC and a
Participant of DTC (“ID Net Firm”), or (ii) a bank that is a Participant of DTC (“ID Net Bank”) (collectively,“ID Net Subscribers”). In addition, eligibility for ID Net processing is based on the underlying security being
processed, the type of transaction submitted for processing and the timing of affirmation/matching.
Participation in the ID Net Service is voluntary and is governed by the DTC Rules and Procedures applicableto the ID Net Service. All ID Net Subscribers are required to enter into separate ID Net Subscriber
agreements with NSCC and/or DTC, as applicable which govern their use of the ID Net Service.
To facilitate the processing of ID Net transactions, NSCC maintains two securities accounts at DTC on behalfof all ID Net Firms that have elected to use the ID Net Service: the “ID Netting Subscriber Deliver Account”
and the “ID Netting Subscriber Receive Account” (collectively referred to as the “ID Netting Subscriber
Accounts”). NSCC is the owner of both accounts and acts as agent for the ID Net Firms. NSCC processes ID
Net transactions through these accounts on behalf of participating ID Net Firms. While NSCC directs
transactions through these accounts on behalf of ID Net Firms, the ID Net Firms, not NSCC, are responsible
for satisfying applicable DTC risk management controls and Participant Fund requirements for theirrespective activity through the ID Netting Subscriber Accounts.
The ID Net Service offers netting efficiency and reduced security movements for ID Net Subscribers that are
NSCC Members. NSCC Members, however, may need to make system changes to reflect how institutionaldeliveries are processed through their system. For ID Net Banks the ID Net service was specifically designed
to minimize development and to make ID Net processing as transparent as possible.
Note: A Participant should contact its Relationship Manager for more information.

40

Eligibility
A. Participant Eligibility
ID Net Firms must be NSCC Members eligible for CNS processing as well as Participants in DTC. ID Net
Banks must be DTC Participants. All agent ID numbers associated with a given ID Net Bank are included forprocessing.
•A subscriber to the ID Net Service must submit an ID Net subscriber form to both DTC and NSCC in
order to become an ID Net Subscriber.

•

Upon receipt of the form, DTC’s Account Administration reviews it for all required information andauthorization.

•

If acceptable, the appropriate master file update takes place that evening at approximately 8 p.m.

•

Once the update has occurred, Affirmed Transactions from that evening between the new ID Net
Subscriber and other eligible ID Net Subscribers are routed into the ID Net process. Thus, the earliest
time that eligible Affirmed Transactions of the new ID Net Subscriber are processed in ID Net is on thefollowing night.

Note: A Participant should contact its Relationship Manager about testing with DTC and NSCC prior tosigning up for ID Net.

B. ID Net Security Eligibility
Most equity securities that are eligible for CNS are eligible for ID Net processing.

ID Net Processing Eligibility
In addition to Participant and security eligibility requirements, for a transaction to be eligible for ID Net:•

The trade must be affirmed/matched by a Matching Utility.

•

DTC should receive the Affirmed Transaction from the Matching Utility no later than 9:00 p.m. easterntime on the business day immediately preceding settlement date (“SD-1”) to be considered for ID Net
eligibility.

•

The transaction must be between an ID Net Firm and an ID Net Bank, on behalf of an institutionalcustomer.

41

Inventory Management System (IMS) Processing
Authorization, Exemption and Cancel Processing for ID Net Banks
When an institutional delivery from a bank is affirmed, the delivery is sent to DTC’s Inventory Management
System (IMS). ID Net was developed to minimize systemic changes required by ID Net Banks.
If a trade is flagged as ID Net eligible, DTC will automatically “flip” the original clearing firm from thereceiver field into the third-party field of the ID trade and will put the ID Netting Subscriber Deliver Account(# 719) in the receiver field. ID Net Banks will only be notified of this change if they elect toreceive new messages that are produced by DTC specifically for ID Net.
•ID Net Banks may exempt, authorize or cancel ID deliveries before the night cycle. However for the day
cycle, it is recommended that ID Net Banks authorize their individual ID deliveries and discontinue thepractice of sending Deliver Orders (DO) for these trades. Otherwise, the contra Participant may
reclaim, subject to DTC’s risk management controls and applicable RAD limits, the DOs since these
trades are set up for settlement in ID Net. Authorization of individual ID deliveries versus sending DOs
is more cost effective for banks.

•

If an ID Net Bank cancels an ID trade, it can no longer be acted upon. If a trade is in the ID Net process
and is cancelled the trade can no longer be acted upon and the trade will be immediately exited from ID
Net processing.

•Transactions exempted by an ID Net Bank remain in ID Netting until 11:30 a.m. on settlement date. At
11:30 a.m., if still exempted, the delivery is removed from the ID Net Service. IMS will return theoriginal clearing firm’s Participant number back to the receiver field and populate the third-party field of
the delivery with the ID Netting Subscriber Deliver Account (#719). If a transaction is subsequently
authorized by the bank, it will be delivered to the original clearing Participant on a trade-for-trade basiswith all applicable comment information remaining intact.

The ID Net processing cut-off time of 11:30 a.m. eastern time will allow ID Net to give the obligations backto the original parties with sufficient time to allow them to complete the delivery from their account orborrow the security to complete the transaction.

Authorization, Exemption and Cancel Processing for ID Net Firms
ID Net Firms may exempt a receive before the night of SD-1 from a bank that is in the ID Net Service via a
new IMS capability. This receive exemption will only be permitted on a trade-for-trade basis. This exemption
will exit the transaction from ID Net by returning the original clearing firm number back into the receiverfield and making the appropriate CNS adjustment entries. The transaction will then be available for tradefor-trade settlement.
ID Net Firms should continue to authorize/exempt/cancel their deliveries from their account as they dotoday.
•

Authorization of ID Net Firm deliveries by the ID Net Firm is not necessary.

•

ID Net Firms may exempt their deliveries in the ID Net process either through an IMS function option orsystematically on a trade-for-trade basis by submitting the Institutional Delivery (ID) control number.

•

Global exemptions of ID Net deliveries are only available via the Settlement User Interface. If an ID Net
Firm sends in a global exemption systematically for its account, it will not apply to its ID Net deliveries.

•

If an ID Net Firm’s delivery is exempted or pend cancelled by the ID Net Firm, the transaction will be
exited from ID Net. For exempted transactions, the ID Net Firm can no longer act upon that delivery,i.e., authorize it at a later time.

•

If an ID Net Firm’s trade is exited from the ID Net process, it will not revert back to an original ID tradefrom the ID Net Firm’s account. The ID Net Firm will need to submit the delivery itself or use the reintroduced drop feature described below.

42Settlement and Risk Management Processing
Changes to Risk Management Control Updates for ID Net Firms
ID Net processes an ID Net Firm’s DTC debits and credits for its eligible ID trades through the NSCC ID
Netting Subscriber accounts. These ID trades have offsetting debits and credits in the CNS system. As aresult, NSCC may owe DTC on any given day for the net of all the ID Net trades processed for all ID Net
Firms. In order to protect DTC from having a failure exported from NSCC for liquidity purposes, updates toParticipants’ net debit caps and collateral monitors are necessary as described below:
An ID Net collateral monitor and net debit cap balance is recorded in the processing system. The ID Net
collateral monitor records the net balance of collateral generated for all ID transactions processed throughthe ID Net service. If the balance of collateral generated by all ID Net receives and delivers is positive, theID Net Firm’s collateral monitor will not be increased by that amount. However, if an ID Net transaction
requires collateral, the system will use the ID Net collateral surplus for that ID Net Firm before attempting touse other collateral from that ID Net Firm. If there is insufficient ID Net collateral for that ID Net Firm, thesystem will look to the ID Net Firm’s excess collateral in its account.
Similar to collateral, the system creates an ID Net settlement balance. When this balance is a net credit
from deliveries on the ID Net Firm’s behalf through the #919 account, it is only used to offset incoming ID
Net receives to the #719 account. If there is an insufficient ID Net credit to absorb the debit of the ID Net
delivery to the #719 account for that ID Net Firm, the system will create an ID Net debit that will effectively
treat the ID Net debit as a reduction of the ID Net Firm’s net debit cap and will be displayed via the Risk
Management Control Inquiry function. The ID Net debit is only used for net debit cap calculation purposesand does not represent a Participant’s actual settlement balance.
•

If the ID Net Firm has insufficient collateral or net debit cap, the transaction will pend until 11:30 a.m.
eastern time on settlement date.

Risk Controls for the ID Netting Subscriber Deliver Account:•

Authorized bank deliveries are checked for position and collateral. The original clearing firm, which is
identified in the third party field, is responsible for collateralizing the ID Net securities being processed
into the ID Netting Subscriber Deliver Account #719.

•

Receives into the ID Netting Subscriber Deliver Account #719 for the ID Net Firm are available for
immediate delivery to CNS. The original clearing firm’s memo seg, if any, is not applicable.

Risk Controls for ID Netting Subscriber Receive Account:•

Receives from CNS into the ID Netting Subscriber Receive Account #919 for the original clearing firm
are available for immediate delivery to ID Net Banks. The original clearing ID Net Firm’s memo seg, ifany, is not applicable.

•

An ID Net Firm can also cancel a pending ID Net delivery (referred to as a pend cancel) from the ID
Netting Subscriber Receive Account #919 account through the Settlement User Interface.

Deliveries from the CNS account to the ID Netting Subscriber Receive Account # 919 will be on a higher
priority basis except for buy-in receives, corporate actions and other delivery types as determined
periodically by the clearing corporation. By placing the ID Netting Subscriber Receive Account #919 on ahigher priority for long allocations, the number and value of ID Net fails is reduced.

43

Processing of ID Net Firm Trades Exited from ID Net
A previously eligible ID Net trade can be exited from the ID Net process for a number of reasons. If an ID
Net trade is exited from the ID Net Service, it will revert back to an original ID trade from the ID Net Firm’s
account, despite the fact that the ID Net Firm or IMS may have already performed the authorization or
exemption process for ID trades from its account. Trades that are exited from ID Net before settlement
processing begins on the night of SD-1 will be placed back into an unprocessed state in IMS and the ID Net
Firm has to authorize these trades if it intends to deliver them. Applicable output messages are available forall exited ID Net trades.
If an ID Net trade is exempted or pend cancelled, the transaction will be exited from ID Net. For exemptedtransactions, the ID Net Firm can no longer act upon that delivery, i.e., authorize it at a later time.
Some of the reasons that a trade may be exited from ID Net are as follows:
Change of Eligibility
After a trade has been affirmed and deemed eligible for ID Net, the ID Net process will continue to check thetransaction’s eligibility up until 8 p.m. on the night of SD-1. If a trade becomes ineligible, for example, aReorganization is announced, the trade will be removed from the ID Net process regardless of whether it isin an authorized or an exempt state. The trade will be staged for trade-for-trade settlement between the ID
Net Firm and the ID Net Bank and will maintain its current state, i.e., authorized trades will remain
authorized and exempted trades will remain exempted.
Attempts to Cancel
After an ID trade is affirmed, ID Net Firms, on occasion, generate an attempt to cancel and exempt the ID
trade because the trade may no longer be valid. If the trade is in the ID Net process and is being staged fordelivery from the ID Net Subscriber Receive Account #919, ID Net Firms should continue to exempt
transactions when an “attempt to cancel” message is generated. Automated exemptions on a trade-for-tradebasis via the Institutional Delivery (ID) control number will still be accepted for ID Net trades from the ID
Net Subscriber Receive Account #919.
Cut-off of 11:30 a.m. on Settlement Date
Trades that are eligible for ID Net but are still in an exempt or unprocessed state or are pending for position
or risk management controls at 11:30 a.m. on settlement date will automatically revert to trade-for-trade
settlement versus the original clearing firm. They will be exited from the ID Net process at NSCC through a
new “Miscellaneous” adjustment to their CNS position. Any exits from ID Net after the start of the nightcycle that create a short or increases an existing short in CNS, are subjected to the one-day settling trade
exemption indicator (the default for this indicator is level 1, i.e., the position is exempted). The exit
processing for ID Net Banks and ID Net Firms differs as follows:44

ID Net Bank Deliveries
ID Net Bank deliveries that remain exempt at 11:30 a.m. eastern time on settlement date will be exitedfrom ID Net as follows:•

ID Net will move the original clearing firm back into the receiver field and the ID Net Subscriber
Deliver Account #719 will be placed into the third-party field by the ID Net Service. Thus, if a bankauthorizes the delivery after the 11:30 a.m. (eastern time) ID Net cutoff, the ID delivery will go
directly to the original clearing firm.

•

Authorized ID Net Bank deliveries that are pending for position or the deliverer’s or receiver’s risk
management controls will also be exited from ID Net and will continue to recycle in the system tothe ID Net Firm. The ID Net Bank delivery will be systematically updated so that the original
clearing firm will be moved back from the third party field to the receiver field and the ID Net
Subscriber Deliver Account #719 will be placed into the third-party field. The transaction willcontinue to recycle with the same Relative Block Number (RBN – the unique transaction number
applied by the processing system); however, if it re-pends or completes, it will be assigned a new
RBN # that will point to the original RBN.

ID Net Firm Deliveries•

ID Net Firm deliveries from the ID Netting Subscriber Receive Account #919 that are pending for
position or because of risk management controls will drop at 11:30 a.m. eastern time on settlement
date

Re-introduction of ID Net Deliveries for ID Net Firms
Deliveries that do not complete for position or controls will be available for immediate reintroduction from the original clearing firm’s account through an optional IMS function at 11:30 a.m.
eastern time.
The ID Net reintroduced drop will appear and will be charged as a regular ID trade (MITStransaction type in IMS). The reintroduced drop can be viewed by the ID Net Firm in the“Transaction Authorization Inquiry” option in IMS. An ID Net reintroduced drop will remain in an
Unprocessed state (will not be processed) unless the ID Net Firm authorizes the delivery in IMS. ID
Net Firms can elect to have their ID Net reintroduced drops automatically authorized by setting their“ID Net Drop Authorization Profile” to passive. ID Net Firms should use the new “ID Net Drop AuthProfile Update” option in the IMS function to switch their ID Net drop profile from Active (thedefault) to Passive. ID Net Firms can view their ID Net drop authorization profile in the IMS function
by selecting the “ID Net Drop Auth Profile Inquiry” option.

Reclaims
ID Net same-day reclaims are only applicable to deliveries from the ID Netting Subscriber Receive Account#919. These reclaims will be directed to the original clearing firm rather than the omnibus account #919
and are subject to DTC’s risk management controls and applicable RAD limits.

DTC strongly recommends that ID Net reclaims of receives from the ID Netting
Subscriber Receive Account #919 include the Relative Block Number (RBN) andOriginal Date Pend Holds
ID Net Banks will be permitted to place holds on their ID Net deliveries that are pending for insufficient
position in the Pending Transaction function.
ID Net Firms will not be permitted to place pend holds on their ID Net deliveries that are being processedfrom the ID Netting Subscriber Receive Account #919.

45

NSCC Clearing Fund Offset and Mark-to-Market
ID Net transactions will be used to offset the balance of any other CNS transactions, and the “net” of thosetransactions will be used for purposes of determining Clearing Fund obligations pursuant to NSCC’s current
procedures, subject to a revised mark-to-market calculation applicable to ID Net Firms.
ID Net transactions will receive their own separate mark-to-market (MTM) calculation. This ID Net MTM total
will be added to each member's daily clearing fund requirement.

DTC Participants Fund
DTC’s Participants Fund calculation is based upon a Participant’s legal entity net debit peaks. DTC willcontinue to include the debits and credits associated with ID Net deliveries that are processed on behalf ofan ID Net Firm in its fund calculation.

Terminating the ID Net Service
If an ID Net Subscriber wanted to terminate their participation in ID Net, the following procedure would
apply:•A subscriber to the ID Net service will need to submit an ID Net exit notification to DTC’s Account
Administration area.

•

Upon receipt of the form, it will be reviewed for all required information and authorization.

•

If acceptable, the appropriate masterfile update will take place that evening at approximately 7 p.m.
eastern time.

•

Once the update has occurred, affirmed trades would no longer be routed to ID Net after the masterfile
update. If an ID Net Subscriber wanted to exit all the trades it had in ID Net, it could do so.

•

ID Net Firms and ID Net Banks can cancel or exempt their future ID Net transactions where they are thedelivering party.

•

ID Net Firms can cancel or exclude their future ID Net transactions where they are the receiving party.

•

An ID Net Firm’s or ID Net Bank’s ID Net receives can also be exited by the Settlement department at
DTC by notifying the Settlement Operations department. This request will be processed on a best efforts
basis.

Initial Public Offering (IPO) Tracking System
About the Product
The Initial Public Offering (IPO) Tracking System tracks the movement of IPO shares for a specific time
period and reports activity to the IPO's Lead Underwriter and Syndicate Members. The goals of the system
are to provide:•

Automated tracking of IPOs with no disruption to the normal book-entry process•

Accurate, comprehensive and timely reports to the Lead Underwriter and Syndicate Members•

The greatest possible economic efficiency by allowing IPOs to be distributed and tracked in a bookentry environment.

Note- For a more detailed explanation of the IPO Tracking System, refer to the IPO Tracking System User's
Manual.

46

IPO Tracking System Contact Number
For more information about the IPO Tracking System, call DTC's Customer Support Center at (888) 3822721.

Investment Identification
About the ProductAt your request, DTC will segregate securities for the account of a firm, partner, officer, stockholder, or foran omnibus account.
Securities are segregated by the serial number appearing on the Investment Identification Instruction form.
The serial number appears on the Participant Daily Activity Statement on the date of activity and is reported
on the end-of-month statement until you no longer have a position in the issue or you have instructed DTC
to release the securities from segregation.
Dividends and interest due are allocated as follows:1.

Cash dividends and interest due are allocated to the Investment Identification positions and otherpositions. Allocations appear on your Dividend/Reorganization Cash Settlement List.

2.

Stock dividends are calculated on the Investment Identification positions and other positions, andare credited to your general free account on the payable date.

3.

Stock splits are calculated on the general free and pledged positions as well as the Investment
Identification account. The dividend is added to each respective account on settlement date.

4.

DTC allocates cash merger and mandatory put payments as well as municipal and corporate
redemption payments for positions segregated on DTC's books.

Investment Identification activity is recorded on your Participant Daily Activity Statement. Check yourstatement to be sure your transactions were properly processed and recorded.
Warning! Under DTC's Rules and Procedures you are responsible for verifying the accuracy of yourParticipant Daily Activity Statement. You must report discrepancies to DTC's Reconciliation division as soon
as possible after you receive the statement.

Investment Identification Contact Number
For more information on Investment Identification, call DTC's Customer Support Center at (888) 382-2721.

47

Look-Ahead Processing
DTC’s Look-Ahead process runs on two minute intervals and selects pairs of transactions that whenprocessed simultaneously will not violate the involved Participants net debit cap, collateral or other Risk
Management system controls.
The Look-Ahead process reduces transaction blockage for securities by identifying a receive transaction
pending due to a net debit cap insufficiency and determines whether an offsetting delivery transaction
pending because of a quantity deficiency in the same security would permit both transaction pending
because of a quantity deficiency in the same security would permit both transactions to be completed incompliance with DTC’s Risk Management system controls. DTC’s processing system, Account Transaction
Processor (ATP) calculates the net effect to the collateral and net debit cap controls for all three Participants
involved and if the net effect will not result in a deficit in the collateral or net debit cap for any of the three
Participants, ATP processes the transactions simultaneously.
DTC’s Look-Ahead process also allows Money Market Issuance Deliveries pending for a Custodian’s or
Dealer’s net debit cap to complete against Maturity Presentments pending for an Issuing/Paying Agent’s net
debit cap. The processing system calculates the net effect of the dollar amount of offsetting transactions in
the accounts of the two Participants involved. If the net of the transactions results in positive risk
management controls in those two accounts, the transactions will be completed.
Note: The Look-Ahead process is not utilized during the Night Batch Process.

OCC Market Loan Program
In order to reduce the possibility of mis-matched stock loans, look-ahead matches on number of shares anddollar amount in addition to CUSIP on stock loan transactions in the OCC account.

48

Memo Segregation 7
About the ProductParticipants can protect fully-paid-for customer securities using the Memo Segregation function. Memo
Segregation is similar to the Segregation function, which allows a Participant to protect fully-paid-for
customer securities by moving them from a free position to a protected (segregated) position. However,whereas Segregation allows a Participant to move only existing positions, Memo Segregation allows theParticipant to create memo-segregated positions within its free positions, thus allowing the Participant toprotect anticipated, fully-paid-for customer securities.

How the Product Works
A Participant can have its Memo Segregation counter automatically increased upon receipt of certaintransactions. The Participant can also allow positions resulting from certain transactions to be available forredelivery (turnaround) regardless of Memo Segregation constraints. DTC gives the Participant two options
for creating Memo Segregation positions:
1.

Provide DTC with specific Memo Segregation transactions using the Memo Segregation function,
instructing DTC to establish or adjust Memo Segregation positions.

2.

Provide DTC with standing instructions to have certain types of transactions automatically increase
Memo Segregation positions, and ignore Memo Segregation positions in order to allow redeliveries(turnarounds) to complete.

To provide DTC with standing instructions, submit a Memo Segregation Request form. To get a copy of thisform a Participant should contact its Relationship Manager.

Non-Optional Memo Segregation Transactions
Independently of the preceding options, the following transactions always reduce a Participant’s Memo
Segregation position:•••

Withdrawals-by-transfer (WTs) Certificates-on-demand (CODs)
Free deliver orders (DO), except those processed with reason codes 10 - 29, 98, 100, 220, 260 268, 270-278, 280 - 288, 290 – 291, 396, 600-619, 704-708, and CNS short covers
Deliveries processed with reason codes 95, 97, 630, 640 and reclaim codes 197, 631, and 641 (freeand valued).

When one of these transaction types is processed against a Participant’s account with a Memo Segregation
position, the system checks the Participant’s free account. If sufficient shares exist, both the free position
and the Memo Segregation position are reduced by the amount of the transaction.
Note- If the free position is greater than the Memo Segregation position, and the transaction is for the entire
free amount, the Memo Segregation position is reduced to zero; it does not become a negative value.

7

See ANNEX A for descriptions of the reason codes referenced in this Memo Segregation section.

49

Optional Memo Segregation Indicators
A Participant can activate any of five Memo Segregation indicators by providing DTC with a standing Memo
Segregation instruction. When the Participant activates a Memo Segregation indicator, the Participant’s free
position and Memo Segregation position are automatically updated according to the indicators that theParticipant has elected.

Activate
Indicator

To

Automatically increase the Participant’s Memo Segregation counter upon the receipt of:

1•

Free and valued DOs with reason codes 40, 99, 330, & 340•

DRS-related Deliveries with reason codes 390 and 391•

WT reversals•

Positions resulting from voluntary and mandatory reorganizations.

2

Automatically increase the Participant’s Memo Segregation counter upon receipt oftransactions with reason codes 41-48, 331-338, and 341-348.

3

Automatically increase the Participant’s Memo Segregation counter upon the receipt of
CNS receives from the Fully-Paid-For Securities or "E" account.

4

Turnaround securities positions, regardless of Memo Segregation constraints, forpositions received from DOs with reason codes 10, 30, 200, and 600, except those withreason codes 10, 20, 200, 201, 260, 270, 280, or 290.
Turnaround securities positions, regardless of Memo Segregation constraints, forpositions received from:5

6

All DOs, except those with reason codes 20-29, 40 - 48, 99, 201, 261-268, 270-278,
290, 291, 330-338, 340-348, 390, 610-619, 705-707 and CNS receives from the “C” and“E” accounts except if the turnaround is a reason code 10, 20, 200, 201, 260, 270, 280,
or 290.
A Participant may elect to increase automatically its Memo Segregation counter by theunits of securities credited to the Participant’s account in any ACATS transfer to that
account.

Memo Segregation indicators 4 and 5 control the capability that allows certain positions to be used forturnarounds up to the amount of the received position, regardless of Memo Segregation constraints.
Even if the Participant has no pending deliveries at the time a position is received from a DO with reason
code 10 or 30, DTC retains, throughout that day's processing cycle, a notation of the number of shares
received from such deliveries. DTC also processes any deliveries regardless of when they are submitted thatday, up to that number, regardless of the Participant’s Memo Segregation position.

Memo Segregation Contact Number
For more information about Memo Segregation, call DTC's Customer Support Center at (888) 382-2721.

50

Money Market Instrument (MMI) Processing
MMIs are subject to, and are processed in accordance with, Rule 9(A), Rule 9(B), Rule 9(C) of DTC and theProcedures set forth in this Settlement Service Guide.

MMI Funding Acknowledgment by the IPA
Subject to DTC risk controls, DTC processes maturing Presentments for delivery versus payment to theapplicable IPA with respect to an Acronym in the Rules and these Procedures only after an acknowledgment(“MMI Funding Acknowledgment”) is made by the IPA to DTC whereby either: (i) the value of issuances
approved by receivers via Receiver Authorized Delivery (RAD) alone 8 or a combination of receiver-approved
issuances plus an amount the IPA(s) has been funded by the issuer exceed the Acronym’s Presentments, or(ii) the IPA acknowledges it will fund the entire amount for the gross value of an Acronym, regardless of
issuances. 9An IPA must make an MMI Funding Acknowledgment using the Decision Making Application(DMA). When an MMI Funding Acknowledgement has occurred, it constitutes the IPA’s instruction to DTC to
attempt to process transactions in the Acronym.

Testing for Position and Risk Management Controls
After an IPA has acknowledged that it will fully fund the Acronym, then the transactions are sent to theprocessing system and attempted against position and Risk Management Controls. If the IPA provides an
MMI Funding Acknowledgement for only partial funding of the entire amount of Presentments for an
Acronym, DTC tests Risk Management Controls of deliverers and receivers with respect to that Acronym todetermine whether Risk Management Controls would be satisfied by all deliverers and receivers of theAcronym and all parties maintain adequate position to complete the applicable transactions, i.e., “MMI
Optimization”. In the case that the aggregate amount of RAD approved Issuances of an Acronym exceeds
the aggregate amount of Presentments, Risk Management Controls for all deliverers and receivers are tested
using MMI Optimization as well.
As indicated above, when partial funding from the IPA is necessary, transactions are routed to MMI
Optimization. In MMI Optimization, it is generally required that all deliverers and receivers of the Acronym
must satisfy risk management controls and delivering Participants hold sufficient position, in order for thetransactions in that Acronym be processed. However, as long as the Issuances that can satisfy Deliverer
and Receiver risk controls for that Acronym are equal to or greater than the Maturing Presentments of that
Acronym, the applicable transactions (i.e., those that pass risk controls) are processed.
Note: If there are multiple IPAs for an Acronym, DTC determines funding based on the satisfaction of
conditions for all deliverers and receivers with respect to all Presentments, Issuances and applicable DOs in
the Acronym and MMI Funding Acknowledgements for all IPAs with Issuances and Presentments in the
Acronym. No instruction of an IPA to DTC to process the subject MMI transactions shall be effective until
MMI Optimization is satisfied with respect to all transactions in the Acronym.

An affirmative MMI Funding Acknowledgement by the IPA is not required in the case that the aggregate
amount of RAD approved Issuances of an Acronym exceeds the aggregate amount of Presentments. In thisinstance, the IPA is deemed to provide a standing instruction to process transactions in the Acronym,
subject to Risk Management Controls. Any such instruction or deemed instruction by the IPA is irrevocable
once given.

8

In the case where an affirmative MMI Funding Acknowledgment by the IPA is required for Presentments tobe processed, the MMI Funding Acknowledgement must be a notification provided by an IPA to DTC withrespect to an Acronym, that the IPA acknowledges and affirms its funding obligation for a maturing Acronym
either (i) in the entire amount of the Acronym or (ii) for an amount at least equal to the difference between
the value of Issuances and the value of the Presentments. In the case of (ii) above, the IPA may (later thatday) increase the funding amount it acknowledges, but in no event may the IPA reduce the amount of its
obligation previously acknowledged that day.

951

Money Market Instrument (MMI) Acronym Payment Failure Processing
MMI Acronym Payment Failure processing is designed to protect DTC and notify Participants if there is notimely MMI Funding Acknowledgment from the IPA(s) for an Acronym for which presentments are due onthat day and/or DTC is aware that the issuer of an Acronym is insolvent and therefore payments due toParticipants 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 cannotify 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 thatare 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 ofsuch 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.

Temporary Acronym Payment Failure Process“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 resolveby 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 theBusiness 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 theBusiness 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.

52

Acronym Payment Failure Contact Number
For more information on DTC Acronym Payment Failure processing, call DTC's Settlement Operations Hotlineat (212) 855-5800.

Participants Fund and Preferred Stock Investment
PurposeThe Participants Fund and the Participants Preferred Stock Investment provided in DTC Rule 4 create
liquidity and collateral resources to support the business of DTC and to cover losses and liabilities incident tothat business. For this purpose, every Participant has a Required Participants Fund Deposit and a Required
Preferred Stock Investment; the amount of each is based on the Participant’s activity at DTC as further
explained in this Service Guide. Additionally, a Participant may make a Voluntary Participants Fund Deposit,
to further support its activities. The Required and Voluntary Participants Fund Deposits must be in cash,
which, if a Participant fails to settle for any reason, are available to DTC as immediate liquidity to complete
settlement and collateral to support any borrowing against DTC lines of credit.

Amounts
Each Participant must make a minimum deposit of $7,500 to the Participants Fund. Many Participants are
required to deposit additional amounts based upon a 60 business day rolling average of the Participant’s six
highest intraday net debit peaks. A Participant’s portion of the Participants Fund is in direct relation to theliquidity requirements generated by the Participant and its Affiliated Family, if any, as more fully described
below.
The aggregate Participants Fund includes four component amounts, as set forth below: the “Core Fund,” the“Base Fund,” the “Incremental Fund” and the “Liquidity Fund.” The Core Fund is set by DTC at an aggregate
amount of $450 million and is comprised of the Base Fund and the Incremental Fund. The Base Fund is thesum of minimum deposits by all Participants, i.e., the amount that is $7,500, times the number ofParticipants, at any time. The Incremental Fund is the balance of the Core Fund up to $450 million; this is
the amount that must be ratably allocated among Participants that are required to pay more than aminimum deposit 10. The Liquidity Fund component (set at $700 million) applies to Participants whose
Affiliated Families have Net Debit Caps that exceed $2.15 billion.
The Required Preferred Stock Investment of a Participant must be in a minimum amount of a par value of$2,500. A Participant’s actual Required Preferred Stock Investment is calculated on a substantially similarbasis to the calculation of the Required Participants Fund Deposit.

How the Required Deposit to the Participants Fund and the Required Preferred Stock
Investment are Calculated for a Participant
DTC monitors the levels of each Participant’s net settlement debits during each Business Day and records
the highest net debit. This measure of liquidity is referred to as the Participant’s intraday net debit peak.

Those Participants whose “PF Averages” (as defined below) exceed the total amount of the Base Fund are
required to make a Deposit to the Incremental Fund.
1053Required Participants Fund Deposit Calculation
For a Participant, its Required Participants Fund Deposit will include a deposit to the Base Fund and some or
all of the following: the (i) Incremental Fund (which together with the Base Fund comprises the Core Fund)
and/or (ii) the Liquidity Fund.
The aggregate amount of all Participants’ Required Participants Fund Deposits is $1.15 billion.

Core Fund
Each Participant's Required Participants Fund Deposit for the first $450,000,000 (i.e., the total amount of
the Core Fund) of the aggregate Participants Fund (for all Participants) is calculated taking account of thefollowing:
The minimum deposit is $7,500 per Participant which, across all Participants (the number of which may varyfrom time to time) adds up to an aggregate threshold amount of cash in the Participants Fund (i.e., the BaseFund). The difference, if any, between the total amount of the Base Fund and the total amount of the Core
Fund, $450,000,000, (i.e. the “Incremental Fund”) is then allocated among all Participants that are required
to deposit more than the minimum of $7,500. The amount assessed above the minimum deposit of $7,500
is based on each Participant’s average (the “PF Average”) of its six largest intraday net debit peaks over arolling 60 business day period and the ratio of each Participant’s PF Average to the PF Averages of otherParticipants.
In order to determine the amount a Participant must deposit to the Incremental Fund, DTC makes thefollowing calculations.
First, DTC determines the PF Average of each Participant as the rolling average, over 60 Business Days, ofthe Participant’s six highest intraday net debit peaks.
Second, DTC arrays these PF Averages from highest to lowest and “ranks” them accordingly. As a result,each Participant will have a “PF Average Rank”, an absolute number that is the Participant’s numericalranking in this array.
Each Participant’s PF Average is compared to the next lowest ranked PF Average and DTC calculates thedifference between the amounts of the two PF Averages as the “Ranked Amount Difference”.
Separately, a “Factor” is calculated by dividing the total amount of the Incremental Fund, by the PF Averageof the Participant with the highest PF Average Rank minus the amount of the Base Fund.
Finally, the amount that a Participant shall Deposit to the Incremental Fund (“Required Incremental Fund
Deposit”) is calculated as the sum of each Participant’s Ranked Amount Difference divided by theParticipant’s PF Average Rank, and multiplied by the Factor, for all Participants with a PF Average Rank thatis less than or equal to the PF Average Rank of the Participant.
Note: Pursuant to the calculation set forth above, based on the PF Average for each Participant, thecalculation ratably allocates the Incremental Fund to calculate the required cash deposit of each Participant.
Participants with the highest PF Averages will, accordingly, be required to make the largest required deposits
and Participants with the lowest PF Averages will be required to make smaller deposits or even, potentially,no amount above the $7,500 minimum.

54Liquidity FundThe remaining $700,000,000 aggregate amount of Required Participants Fund Deposits (i.e., the Liquidity
Fund) is allocated proportionately among the Affiliated Families whose aggregate Net Debit Caps exceed$2.15 billion, up to a maximum Aggregate Affiliated Family Net Debit Cap of $2.85 billion. The calculation todetermine a Participant’s portion of the Liquidity Fund is a two-step process, using algorithms described
below, to: (i) calculate an Affiliated Family’s portion of the Liquidity Fund, and (ii) determine eachParticipant’s portion of their Affiliated Family’s allocation.
Step One:
Algorithm used to calculate the Affiliated Family’s portion of the $700,000,000.
1.

Only those Affiliated Families whose Aggregate Affiliated Family Net Debit Cap exceeds$2,150,000,000 will be allocated a portion of the Liquidity Fund.
a.

The greater the Aggregate Affiliated Family Net Debit Cap, the larger allocation the AffiliatedFamily will receive. The first step of the calculation is to determine the amount by which theAggregate Affiliated Family Net Debit Cap exceeds $2,150,000,000. This is called the“Overage”.

b.

To calculate the allocation percentage for an Affiliated Family of Participants, the program will
perform the following:
Overage of the Affiliated Family------------------------------------------------------- = X%
Sum of ALL Affiliated Family Overagesc.

X% of $700,000,000 is the amount of the Affiliated Family allocation.

d.

The sum of the Affiliated Family allocations equals $700,000,000.

Step Two:An algorithm is used to determine the Participant’s portion of its “Affiliated Family allocation”
2.

Calculation will be based on the Participant’s Net Debit Cap (NDC) in relation to its total AggregatedAffiliated Family NDC.
Participant NDC------------------------------------ = Y %Affiliated Family NDCa.

Y% of the Affiliated Family allocation is the Participant’s portion of the “Affiliated Family
allocation”.

b.

This calculation will be done for all Participants within each Affiliated Family that has an
Overage.

Adjustments to a Required Participants Fund Deposit
DTC may increase the Required Participants Fund Deposit of a Participant as provided in Rule 9(A), including
due to a credit, market, operational, or other concern regarding the Participant. For illustrative purposes,
typically, the following factors may be taken into consideration for such an increase:(a)the Participant’s liquidity arrangements,(b)

the Participant’s overall financial condition,(c)published news or reports and/or regulatory observations relating to the Participant, and(d)the Participant’s internal credit rating, if any.

55

Required Preferred Stock Investment Calculation
The following are the steps taken to calculate the Required Preferred Stock Investment Calculation:
1.

The minimum investment is $2,500 per Participant which, across all Participants (the number ofwhich may vary from time to time) adds up to an aggregate threshold amount. The difference, ifany, between that aggregate threshold amount and $150,000,000 (the “PS Differential”) is thenallocated ratably among all Participants based on each Participant’s average (the “PS Average”) of
its six largest intraday net debit peaks over a rolling 60 business day period as of the last day ofeach quarter year.

2.

The calculation and reallocation among Participants of the Required Preferred Stock Investments are
performed as of the last business day of each quarter. Based on the PS Average as of the lastbusiness day of the quarter for each Participant, the calculation incrementally allocates the PS
Differential to calculate the Required Preferred Stock Investment for each Participant. Participants
having the highest PS Averages will, accordingly, be required to make the largest investment andParticipants with the lowest PS Averages will be required to make smaller investments or even,potentially, no amount above the $2,500 minimum.

Settlement of Participants Fund Deposits
The Required Participants Fund Deposit for each Participant is recalculated daily.

Settlement of Required Participants Fund Deposits Calculated at the End of a Month
After settlement on the last Business Day of each month, DTC calculates each Participant’s Required
Participants Fund Deposit. Each Participant will be notified of its new Required Participants Fund Deposit on
the first Business Day of the following month. If a Participant’s Required Participants Fund Deposit, ascalculated on the last Business Day of a month, exceeds its Actual Participants Fund Deposit, then theParticipant will be notified of the increase, and the amount representing the difference between theParticipant’s Required Participants Fund Deposit and Actual Participants Fund Deposit will be systematicallycharged to the settlement account of the Participant. The amount, once collected through settlement, (a)will be treated as a Deposit by the Participant to the Participants Fund and (b) will be noted on applicable
information and/or reports made available to the Participant as a Participants Fund contribution (Activity
Code 70-01).

Collection of Required Participants Fund Deposits Calculated on an Intra-month Basis
A Participant is required to Deposit the difference between its Actual Participants Fund Deposit and its
Required Participants Fund Deposit calculated on an intra-month basis, i.e., on a Business Day other thanthe last Business Day of a month, only if the Participant:(a)

has not been placed on the Watch List (as defined pursuant to Rule 1) and the difference
between the Participant’s Required Participants Fund Deposit and a reference amount (thedetermination of which is described below) (“Reference Amount”) (i) is equal to or exceeds$500,000 and (ii) represents a percentage increase of 25 percent or more over the Reference
Amount (“Standard Threshold”), or(b)

has been placed on the Watch List and the difference between the Participant’s Required
Participants Fund Deposit represents a percentage increase of 10 percent or more over theReference Amount (“Watch List Threshold”).

The Participant shall satisfy any deficit in its Required Participants Fund Deposit that it is required to satisfy
pursuant to this subsection, on the same Business Day that the difference is calculated and a report or othernotification of the deficit is made available to the Participant.

56

The Reference Amount equals the Participant’s Required Participants Fund Deposit as previously calculatedon the latter of:(a)the last Business Day of the prior month;(b)

the most recent Intra-month Business Day (prior to the then current Business Day), when theamount resulting from daily calculation of the Participant’s Required Participants Fund Deposit
met or exceeded either the Standard Threshold or the Watch List Threshold and a deficit
collection was effectuated; and(c)the most recent intra-month Business Day (prior to the then current Business Day) when DTC
effected an adjustment to the Participant’s Required Participants Fund Deposit in accordancewith Rule 9(A).

Return of Excess Deposits
At least quarterly, if a Participant’s Actual Participants Fund Deposit is greater than its Required Participants
Fund Deposit, DTC will so notify the Participant. The Participant may request, on a monthly basis, the returnof any part of its excess deposit. A Participant may maintain an excess deposit (i.e., Voluntary Participants
Fund Deposit) that could reduce administration or activity caused by the monthly calculation or intra-monthcalculation.
This section shall apply only to the calculation and collection of DTC Participants Fund Deposits, as describedabove, and does not supersede or limit any provisions of the DTC Rules or any rights of DTC in accordancewith applicable law and DTC’s Rule and Procedures, including but not limited to with respect to transactions
in securities and money payments.

Reallocation of Preferred Stock
On the first settlement cycle of each quarter, the aggregate of the Required Preferred Stock Investment of
all Participants will be reallocated among all Participants, based up the recalculation of each Participant’s
Required Preferred Stock Investments as described above. A Participant may be credited a settlement
amount if it is selling Preferred Stock or debited as settlement amount if it is purchasing additional
Preferred Stock, as appropriate.

57Submitting an Initial Participants Fund Deposit or a Voluntary Deposit
For initial deposits by new Participants and voluntary deposits by existing Participants, wire the funds to
DTC, formatting the instruction to conform to Fedwire standards for Fed fund transfers.

In this fieldReceiving Bank ABA Number
Receiving Bank Name
Originator (ORG)Enter
DTC's ABA Number: 026002066.
DTC's telegraphic name: DTC SDFS.
The name of the Participant whose account is to be credited.
Settlement Fund Deposit (SFD), followed by a slash and theParticipant's account number. For example:

Originator to Beneficiary(OBI)

OBI = SFD/123.
Note- The data in the Originator to Beneficiary Information(OBI) field is required for processing by DTC. For banks thatuse another field name, include OBI in your entry. For example:
BBI = OBI SFD/123.

58

Payment Orders
About the Product
DTC's Payment Order service allows you to settle money payments for transactions that were processed
separately. A payment order authorizes DTC to credit the payee Participant's settlement account with thespecified amount and to debit the payor Participant's settlement account for the same amount. All payment
orders must satisfy the payor Participant’s risk management controls before being processed.

How the Product Works
Premium Payment Order (PPO) and Securities Payment Order (SPO)
A Participant wanting to collect money (the payee Participant) from another Participant (the payor
Participant) first contacts the payor Participant to reach agreement on the amount payable. The payee
Participant then submits to DTC a premium payment order (PPO) or a securities payment order (SPO). The
PPO is used to collect a net option contract premium for an opening writing or closing purchase transaction.
The SPO is used to collect a mark-to-market payment based on the difference between the current andprevious market value of an open securities contract.
The following are typical situations in which you would use PPOs and SPOs.

•

A bank's customer writes an opening call option. Through DTC the bank deposits underlying
securities with the Options Clearing Corporation (OCC). The bank (the payee Participant) submits to
DTC a PPO crediting its settlement account for the amount of the net option contract premium anddebiting the account of the broker (the payor Participant) for the same amount.

•

A bank's customer purchases a closing call option. OCC releases underlying securities previously
deposited with it through DTC. The broker (the payee Participant) submits to DTC a PPO crediting
its settlement account for the amount of the net option premium and debiting the account of thebank (the payor Participant) for the same amount.

•

A Participant delivers securities to another Participant through DTC in a stock loan transaction.
Thereafter, the market value of the securities increases significantly. The lender (the payee
Participant) submits an SPO to DTC crediting its settlement account for the amount of the difference
between the original and new market values and debiting the account of the borrower (the payor
Participant) for the same amount.

SFT Price Differential (SFT PD) Payment Order
For a description of SFT Price Differential payment orders, please see NSCC Securities Financing
Transactions (SFT) Service.
Note- You can use Participant Settlement Statements to get a list of Settlement activity codes and theirdescriptions.

59

Receiver Authorized Delivery (RAD)About the ProductRAD allows Participants to review and either approve or reject incoming transactions before they areprocessed. Unless otherwise noted in DTC’s Rules and Procedures, client-initiated settlement instructions,
including valued DOs, POs, pledges and releases of pledged securities are subject to RAD controls. MMI
transactions are subject to RAD regardless of whether they are free of payment or for value.
Participants are allowed to set their own RAD limits on a global or bilateral level. Global limits apply to allcontra-participants and bilateral limits allow Participants to set individual limits against a specific contraparticipant.

Stock Loans
Participants may establish bilateral and global RAD profile limits specifically for their stock loan and stockloan return activity. Applicable stock lending transactions will be checked against the receiver’s stock lending
profile limits for passive approval or will otherwise await the receiver’s active approval based on theparameters of the profile. Absent a Participant establishing a Stock Loan RAD limit profile, a Participant’stransactions will be subject to the RAD functionality applicable to ordinary DOs, including the established
DTC limits as well as Participant established bilateral and global limits.

Approving or Cancelling Deliveries
You can approve or cancel transactions received via DTC’s Settlement User Interface or an automated RAD
messaging process.

Turning RAD Limits On and Off
You can turn off RAD limits via DTC’s Settlement User Interface and allow DTC to process all your incoming
deliveries. You may want to turn off your RAD limits, for example, when you are unable to modify thebilateral limits of your contra-participants because of time constraints. Your bilateral RAD limits will not be ineffect until you turn them back on via the Settlement User Interface.
Transactions that are automatically routed to RAD are not affected by your decision to turn off RAD
processing; they always require your approval before processing.

Free Transactions
Participants can force free receives (DOs) to their RAD if input after 5:00 p.m. eastern time. Forcing themwill effectively block free receives from being booked into a Participant's account between 5:00 p.m. and thefree delivery cutoff of 6:15 p.m.
Unless designated otherwise by a profile, all MMI free receives are sent to RAD, at all times. Participants
who elect to turn on RAD at 5:00 p.m. will have all their free receive activity routed to RAD for approval orcancellation. This will aid Participants who choose not to monitor their account for free delivery activity after
5:00 p.m., and are not aware of these free receives until the next day. Participants can update theiraccounts to turn on RAD at 5:00 p.m. for all free receives via a profile in the Settlement User Interface.

60Indexed Principal Transactions
You can view and act on MMI transactions in RAD for issues that contain an indexed principal feature.
Deliver Order (DO) transactions are directed to RAD whenever:•An issuing/paying agent (IPA) initiates a DO in an MMI program that allows for indexed principal asa possible feature of any issue under the program, or•A dealer/sales agent initiates a turnaround DO in an MMI program that allows for indexed principalof any issue under the program, or•

A Participant other than an IPA initiates a DO in an issue already designated as having an indexedprincipal feature.

Wind-Down Participant
DTC may, in its discretion, apply RAD to all DOs and POs initiated by a Wind-Down Participant, regardless ofvalue. Receiving Participants may raise their RAD limits to manage such transactions.

RAD Contact Number
For more information on RAD, call DTC's Customer Support Center at (888) 382-2721.

OCC Market Loan Program
All reclaims to the OCC account will recycle until the OCC submits a redelivery back to the lender or until thereclaim 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.
Note- OCC Market Loan Program transactions bypass RAD.

Recycle Processing
About the Product
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) system,
where it is checked for various criteria (see Reasons for Recycling) before it is completed.

61

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 ifthey 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.

Reasons for Recycling
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 totalremaining 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 thesecurities 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 thatwould be charged against the receiver’s account exceeds the collateral value of the applicablesecurities 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.

How Recycling Works
The recycling system operates within a single processing day. A transaction that remains incomplete at theend of the processing day is dropped from the recycle processor. Dropped transactions must be reenteredon 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.
The following topics explain how these transactions are prioritized.

62

Risk Management Recycles
DTC automatically gives priority to transactions that are recycling as a result of risk management controls as
follows:•

Specific types of transactions are given priority over others. See the Prioritization Schedule for thepriority order.

•

Within the transaction types, transactions are given priority on the basis of:
1.

Settlement value (for valued transactions), or2.

Market value (for free transactions, such as free deliveries or withdrawals).

Note- This prioritization schedule defines only the order in which DTC attempts to complete recyclingtransactions. DTC completes any transaction it can. If the first transaction on the recycling queue cannot becompleted, DTC will move to the next transaction and attempt to complete it.
Warning! If you have multiple Participant accounts, you must be aware of how your account structure
affects your recycling transactions. If you have grouped your accounts into a family structure (see Grouping
Accounts into Collateral Families), all your accounts within that family share the same collateral monitor andnet debit caps. This also means that all transactions within a family share the same risk management
recycling queues.
For example, suppose you have accounts A and B in a collateral family and have two RVP deliveries recycling
against your net debit cap, one for account A and one for account B. The larger of these deliveries is placed
first on the recycling queue. Hence, when settlement credits are applied against either account A or accountB, the larger delivery is attempted first.

Insufficient Position Recycles
If you enter a transaction to deliver or pledge securities, (such as a transaction to remove securities fromyour account) and you do not have enough position to complete the entire transaction, DTC will pend thetransaction until you have enough position to cover the entire delivery.
Note- An exception to this rule: DTC does allow for partial NSCC Continuous Net Settlement (CNS) and
ACATS deliveries.
DTC offers you two options for recycling your insufficient position transactions:•

Option 1- Automatic Prioritization•

Option 2- First In, First Out (FIFO) with Blockage.

To select a recycle option, you must complete a Recycle Option Instruction form, which you can obtain bycalling the Compliance Department at (212) 855-4931.

63

Option 1: Automatic Prioritization
If you select option 1, DTC will recycle your transactions using the same criteria used for Risk Management
Control recycles. See the Prioritization Schedule for the priority order.
Note- If DTC cannot complete the first transaction on the queue due to Risk Management Controls, theposition is immediately made available to complete other transactions. Therefore, once the Risk
Management Control requirements have been met, position may no longer be available for the transaction
and the transaction will then recycle because of insufficient position.
If you wish to control the order in which your transactions recycle, option 1 may not suit your needs.

Option 2: First In, First Out with Blockage
The difference between option 2 and option 1 is that with option 2 the recycle processor maintains the orderin which transactions are entered into the Account Transaction Processor (ATP), meaning FIFO ordering.
Except for CNS deliveries, which are always given the highest priority, transactions are not prioritized bytransaction type or size.
Note- If the first transaction in the recycling queue cannot complete, DTC does not attempt to complete anyother transactions in the recycling queue, even if there is sufficient position available, until it has completed
the first transaction in the queue. This feature is known as "blockage.”
To further allow you to control the order in which your transactions complete, once a transaction for a
specific security recycling exists, DTC automatically recycles all subsequent transactions for that security.
This ensures that after sufficient position exists for the first transaction, it will complete.
Note- Segregations do not recycle, so DTC uses the existing position to complete those transactions
regardless of what transactions are recycling.

Pending Delivery Account
DTC helps ensure the integrity of the FIFO queue by temporarily holding your position for transactions
recycling due to risk management controls. This account is called the Pending Delivery Account (PDA). Afteryour position is moved to the PDA, it is not available for other transactions that are recycling for insufficient
position.
You can use the POSM function to move your PDA position back to your general free account to complete
other items on the recycle queue. You can do this regardless of the deliveries that created the PDA position.
For example:
Suppose a single delivery of 100 shares creates a 100-share PDA position in your account. The POSM
function's PDA release feature allows you to move any quantity up to 100 shares from your PDA accountback to your general free account. Assuming you release 75 shares from the PDA, when the 100-sharedelivery clears Risk Management Controls, the system looks for 100 shares in the PDA. With only 25 sharesremaining in the PDA, the system looks for the additional 75 shares in your general free account to complete
the 100-share delivery. If the shares are there, the delivery completes; if not, the delivery is placed at theend of your recycle queue, and the 25 shares in the PDA are released back to your general free account.
At the cutoff for syndicate closings (approximately 1:15 p.m. eastern time), DTC releases all PDA positions
back to your general free account. At that time DTC also disables the "blockage" feature of option 2,
allowing transactions for which there is sufficient position to complete while attempting to complete
transactions you entered in FIFO order.
Warning! DTC cannot ensure FIFO ordering of transactions requiring RAD approval.

64

Pend Hold
Pend Hold allows you to hold and release ("unhold") transactions. DTC will not process held transactions
until the holding Participant releases the hold. Participants will be permitted to hold pending deliverer orders
and pledge transactions, including reclaims of deliveries, deliveries of Initial Public Offering (IPO) positions,and pending deliveries to Continuous Net Settlement (CNS short covers), with the exception of DOs to andfrom the NSCC SFT Account. Only the initiator (deliverer or pledgor) of a transaction will be permitted tohold or release a pending transaction. Moreover, only transactions that pend for insufficient position may beheld.
To give you additional flexibility DTC offers two hold options: hold with blockage and hold without blockage.
DTC maintains separate logical recycle queues for transactions pending for insufficient position and fortransactions pending for insufficient IPO position. Therefore, placing a hold with blockage on a transaction
pending for IPO position will block only that type of transaction. Similarly, a transaction pending for
insufficient non-IPO position will block only that type of transaction.
Newly introduced transactions (including CNS exemption overrides) for securities that have transactions heldwith blockage will be processed using DTC's current recycle logic. That is, a new transaction that you
introduce using option 1 will be processed when the transaction is received. A transaction can either
complete or not complete. A transaction that cannot complete because the initiating Participant has
insufficient position will be moved to the position recycle queue. There it will be mixed (in order oftransaction type or settlement value) with other transactions already in the recycle queue.
New transactions that you introduce using option 2 will not be processed on receipt. Instead, they will be
forwarded directly to the position recycle queue of the initiating Participant. Option 2 procedures keeptransactions pending for position in FIFO order; therefore, newly introduced transactions will be placed at
the bottom of the position recycle queue.
Regardless of the recycle option elected, newly introduced transactions that are placed below a transactionthat is held with blockage are subject to the blockage feature. Newly introduced transactions that are placed
above a transaction held with blockage are not subject to the blockage feature. DTC's hold procedures will
not alter the current process of placing at the top of the position recycle queue deliver orders with reason
codes 540, 560, and 570 and deliveries to CNS.

Pending Transaction Account
You can reserve position for pending transactions in DTC's Pending Transaction Account (PTA) using the PTA
indicator available in the Deliver Order functions. If you want specific transactions to be subject to the PTA
procedures (to have the position reserved), set the PTA indicator to Y. Transactions with the PTA indicator
left blank are not subject to the PTA procedures.

65How PTA Processing Works
PTA transactions input into DTC's system are subject to DTC's normal editing and processing requirements(including DTC's Risk Management Controls) . PTA transactions that meet all of DTC's editing and processing
requirements complete in DTC's system and no position is reserved in the PTA account. Likewise,transactions that recycle for an insufficient position will not affect your PTA account. Only PTA transactions
that recycle as a result of risk management controls (which means that the delivering or pledging Participant
has sufficient position to complete the transaction) will cause position to be reserved in the PTA account.
Non-PTA transactions that recycle as a result of risk management controls do not affect your PTA account.
After position is reserved in your PTA account, it is no longer available for any other transactions you may
initiate. The transactions associated with positions in the PTA account recycle normally (the PTA indicatordoes not affect recycle algorithms), and the position remains in the PTA account until any of the following
occurs:•Your Risk Management Controls change to allow completion of the transaction. The position is
automatically released from your PTA account at the PDA cutoff (approximately 1:30 p.m. easterntime).
Note- This condition applies to valued PTA transactions only; positions reserved for free PTA
transactions are not automatically released at the PDA cutoff, and positions for valued PTA
transactions entered after the PDA cutoff will not be reserved in the PTA.

•

The intended receiver cancels the PTA transaction.

•

DTC releases its risk management controls at approximately 5:00 p.m. eastern time.

Note- Initial Public Offering (IPO) transactions are not subject to PTA procedures. A PTA indicator enteredduring an IPO transaction will be ignored by DTC's system.

PTA Transactions Subject to a Hold with Blockage
PTA procedures allow delivering Participants to place holds, and holds with blockage, on a PTA transactionthat is recycling for insufficient position only. You cannot place holds and holds with blockage on PTA
transactions that are recycling for insufficient other NA.
Delivering Participants are permitted to place holds and holds with blockage on non-PTA transactions (atransaction with the PTA indicator set to N) that are recycling for insufficient position or insufficient other net
additions (NA). Additionally, free PTA transactions recycling for insufficient other NA that are subject to ahold with blockage (because a non-PTA transaction above the PTA transaction in the position recycle queue
has a hold with blockage placed on it) are automatically released from the hold status when DTC releases its
risk management controls.

Cancellation of PTA Transactions
Only receiving Participants can cancel a recycling PTA transaction. Delivering Participants of PTA transactions
that recycle for Risk Management Controls cannot cancel them. The position associated with cancelled PTA
transactions is automatically released from the PTA account and made available to the delivering or pledging
Participant for other PTA or non-PTA transactions.
Receiving Participants can cancel only PTA transactions that recycle for Risk Management Controls (including
PTA transactions that recycle for insufficient other NA). Only delivering Participants can cancel non-PTA
recycling deliveries and PTA deliveries recycling for insufficient position.

66

Prioritization Schedule
The following table shows the order in which DTC places transactions for Risk Management Controls andoption 1 recycling.
Note- These criteria do not apply to CNS deliveries, which recycle for position only.

Order

Transaction

Criteria (Market or
Settlement Value)

1

MMI Interest/Principal Presentments

Settlement Value

2

MMI Maturity and Reorganization Presentments

Settlement Value

Voluntary Reorganization Instructions(RRG account)3

Note- Instructions processed with contraCUSIPs, such as tender offers and put bonds,
are included with Free Deliver Order/Free
Pledge Releases below.

Market Value

4

Valued Pledges and Releases

Settlement Value

5

Free Pledges

Market Value

6

Valued Deliver Orders

Settlement Value

7

Free Deliver Orders/Free Pledge Releases

Market Value

8

Payment Orders

Settlement Value9

SPP Return/P &I Withdrawal Requests

Settlement Value

10

Rush Withdrawals/CODs

Market Value

11

Withdrawals By Transfer

Market Value

12

Position Transfers Between MA and NA

Market Value

67

Principal and Income Withdrawals
About the ProductPrincipal & Income (P&I) withdrawals allow you to withdraw intraday principal and income payments for
non-Money Market Instrument issues that DTC has received from paying agents and allocated to yoursettlement accounts down to a zero balance. You may not make a P&I withdrawal if it will put you into a
debit balance. These payments include dividends, interest and other periodic payments, as well as
reorganization and redemption payments. You can request that these payments be wired to your DTC
Settlement Bank intraday, before the settlement period.

How to Withdraw
You can submit P&I withdrawal requests via the Settlement User Interface only using the SPP Return/P&I
Withdrawal Request option, if you have activated this option. The SPP Return/ P&I Withdrawal Request
screen shows the bank account eligible to receive wires of P&I funds from DTC on your behalf. To request a
withdrawal, enter the amount of funds to be sent to the chosen bank account destination. You can enter P&I
withdrawal requests on business days until 3:20 p.m. eastern time.
Note- The total amount you withdraw cannot put you into a debit balance. You may withdraw your available
P&I funds, (that is, the sum of all your P&I payments allocated to this account, less any previous P&I
withdrawals) down to a zero balance. The minimum amount you can withdraw is $100,000.
The SPP Return/P&I Withdrawal Request option in the Settlement User Interface also allows you to view thestatus of your P&I withdrawal requests. You can view the following:•

Total P&I payments allocated to your account•Total amount of funds requested•

Amount available for withdrawal (total P&I payments less previous withdrawals submitted)•

Total amount of funds that have been wired to your bank•Total amount of withdrawal requests cancelled by DTC, if any.

P&I withdrawals are subject to Risk Management Controls and will not be permitted if your account will be
put into a debit balance. Dropped items are recorded on your Drop report.
P&I Withdrawals that have successfully completed are reflected on your settlement statements as "funds
transfer debit transactions" (Activity Code 95-3). DTC will provide you with a recap of your funds transfer
activity.

The Settlement Progress Payment (SPP)/ Principal & Interest (P&I) Push Profile:
In order to simplify the SPP/P&I withdrawal process and to allow Participants to maximize the return ofavailable liquidity, DTC offers the SPP/P&I “Push Profile” which allows Participants to establish a standing
withdrawal request. Rather than requiring Participants to manually request the return of their SPP/P&I
credits, DTC will “push” available SPP/P&I credits to Participants that have established an SPP/P&I profile via
the Settlement User Interface. The push of funds will occur after the valued recycle cutoff and the funds will
be sent to the Participant’s Settling Bank for the account specified in the SPP/P&I Push Profile.
Participants will be able to set a minimum balance they want remaining in their account based upon theirsettlement balance at the time of the “push”.

68

P&I Withdrawals Contact Number
For more information about P&I Withdrawals, call DTC's Customer Support Center at (888) 382-2721.
P&I withdrawals are subject to Risk Management Controls and will not be permitted if your account will be
put into a debit balance. Dropped items are recorded on your Drop report.
P&I Withdrawals that have successfully completed are reflected on your settlement statements as "funds
transfer debit transactions" (Activity Code 95-3). DTC will provide you with a recap of your funds transfer
activity.

Settlement Progress Payments
About the Product
If you approach or reach your net debit cap or have insufficient collateral, you can continue to receive
deliveries (and avoid having transactions recycle) by wiring Fed fund payments to your DTC account. This
procedure is called Settlement Progress Payments (SPP).
Note- SPPs must be received by 3:10 p.m. eastern time in order to prevent valued transactions fromdropping at the 3:10 p.m. valued recycle cutoff.

Submitting an SPPYour SPP instructions should conform to the Fedwire formatting standards for Fed fund transfers. Include thefollowing information:

For this Fedwire field:
Receiving Bank ABA Number
Receiving Bank Name

Originator (ORG)

Originator to Beneficiary(OBI)(6000)

Enter:
DTC's ABA Number: 026002066.
DTC's telegraphic name: DTC SDFS.
Your Participant name (or the Participant name on the accountyou want to credit).

The purpose of the wire, followed by a slash and your DTC
Participant number. For example: SPP/2199 or DSP/2199.

69

Returning an SPP
Using the SPP Returns/P&I Withdrawal Request, you can request that DTC return all or a portion of an SPP
you submitted earlier in the day down to a zero balance. You can request that these payments be wired toyour DTC Settlement Bank intraday, before the settlement period. Contact your Relationship Manager toobtain access to this update capability. DTC must receive your request no later than 3:20 p.m. eastern time.
When DTC receives your reversal request, it:•

Debits the amount from your settlement account providing you have sufficient collateral and a credit
balance.

•

Returns the funds via Fedwire to your Settling Bank as indicated on your standing wire instructions
with DTC.

Note- DTC will not return the funds if doing so would put your account into a debit balance.

Wire Instructions
Before using the SPP Return/P&I Withdrawal Request function, you must activate your account for thisoption and supply DTC with specific wire instructions for your DTC Settling Bank as outlined in Important
Notice # 4582-09. This information will be stored in DTC’s wire instruction database and may be accessed
when you submit SPP returns or P&I withdrawal requests. Each instruction must include:•Your Participant number•

The American Banking Association (ABA) routing number of the receiving bank which must be yourSettling Bank•Your Settling Bank’s Telegraphic ID•

Your account number at the receiving bank.

•

Beneficiary Name•

Beneficiary Account Number•

Beneficiary Address including the Street, City, State, Zip and Country

Note- You can add information to the wire instructions, such as a department name, if desired.
DTC will maintain up to five wire instruction formats in its wire instructions database. Complete the Wire
Instructions form for Settlement Progress Payment Returns and Principal and Income (P&I) Payment
Withdrawals attached to Important Notice # 4582-09 and send it to:
DTCC’s Membership Onboarding/Account Administration group at least two weeks prior to the desired
effective date. The executed form(s) should be sent via e-mail (PDF) to DTCAA@dtcc.com.

The Settlement Progress Payment (SPP)/ Principal & Interest (P&I) Push Profile:
In order to simplify the SPP/P&I withdrawal process and to allow Participants to maximize the return ofavailable liquidity, DTC offers the SPP/P&I “Push Profile” which allows Participants to establish a standing
withdrawal request. Rather than requiring Participants to manually request the return of their SPP/P&I
credits, DTC will “push” available SPP/P&I credits to Participants that have established an SPP/P&I profile via
the Settlement User Interface only. The push of funds will occur after the valued recycle cutoff and the funds
will be sent to the Participant’s Settling Bank for the account specified in the SPP/P&I Push Profile.
Participants will be able to set a minimum balance they want remaining in their account based upon theirsettlement balance at the time of the “push”.

70Risk Management Controls
About the ProductRisk Management Controls protect DTC and its Participants from the inability of one or more Participants to
pay their settlement obligations. Risk Management Controls are based on guidelines established by theFederal Reserve Bank (FRB). DTC currently employs three primary Risk Management Controls for processing
securities:•

Collateralization (Collateral Monitor)•

Net Debit Cap•

Issuer/Participant Number (IPN) Collateral Control.

Collateralization
Collateralization ensures that your account has sufficient collateral for DTC to liquidate if you fail to pay yoursettlement obligation and become insolvent. DTC's collateralization procedures prevent the completion oftransactions that would cause your net debit to exceed the total available collateral in your account.
DTC operates on a fully collateralized basis. You are required to have sufficient collateral in your account tosupport net settlement debits you incur. Transactions that would cause your net debit to exceed the total
value of collateral in your account are held in a recycle (pend) queue until sufficient collateral is available.
Your primary sources of collateral are:•Cash deposited to the Participants Fund•

Proprietary or firm positions (such as dealer, investment, or margin positions) that you designate as
collateral•

Securities received (and not paid for) versus payment•

Securities added to your account and not received versus payment (such as deposits, freedeliveries, free pledge releases, release of segregated securities) that you designate as collateral.

Collateral Valuation of Securities
The value of securities designated as collateral is based on the prior business day's closing market price,less a haircut. Haircuts are used to protect DTC and its Participants from price fluctuations if DTC is required
to liquidate collateral of an insolvent Participant. Furthermore, because DTC may have to finance a
Participant's failure overnight, DTC's haircut structure takes into consideration haircuts imposed by our lineof-credit banks. The full market value of securities is not normally obtainable from a bank that accepts
securities as collateral to support a loan; banks generally consider the relative price volatility of thecollateral and impose a haircut on the market value of securities. Securities that are not acceptable to DTC'sline-of-credit banks do not receive collateral value in our system; therefore, a 100 percent haircut is applied
to these securities.
DTC employs haircuts ranging from 2 to 100 percent. Because the collateral value of securities is based on
their prior day's closing market prices, these haircuts may not be sufficient in cases where prices fall
dramatically intraday. DTC can reprice and modify haircuts of selected issues intraday and can systemicallyrevalue the collateral of Participants holding these securities.

71

Using the Collateral Monitor to Measure Available Collateral
DTC tracks collateral in your account by a control position called the Collateral Monitor (CM). At the openingof each business day, your CM is credited with your Participants Fund deposit. At all times, the CM reflects
the amount by which the collateral in your account exceeds the net debit in your settlement account. In
other words, the CM equals the sum of the value of your collateral and net settlement obligation.
For example, if you have collateral securities with a market value of$10,000 and a 10 percent haircut, thevalue of your collateral is $9,000. If you also incurred a debit of $8,000, your CM is $1,000 {(10,000- [0.1 x
10,000] + (-$8,000)}.
Conceptually, every transaction translates into a collateral flow and a cash flow, one a credit and the other adebit. The net value of these two flows is used to update the CM. Since the value of securities as collateral issubject to a haircut on the market value, the cash component (for settlement value) of each transaction is
generally greater in value than its securities component. Thus, the completion of a delivery versus payment
generally results in an increase in the deliverer's CM and a decrease in the receiver's CM, based on the
difference between the collateral value of the securities and the settlement value of the transaction.
Transactions that do not have a cash component, such as deposits and "free" deliveries, are considered tohave a zero cash component.
When processing a transaction, DTC verifies that the deliverer's and receiver's CMs will not become negative
when the transaction completes. If the transaction would cause either party to have a negative CM andthereby be undercollateralized, the transaction will recycle until the deficient account has sufficient collateral
to complete (see Recycle Processing).

Controlling Collateral
Securities received versus payment are automatically designated as net additions (NA) because the receiver
has not yet paid for these securities. Your CM is credited the collateral value (market value minus theapplicable haircut) of all positions designated NA. Conversely, your CM is not affected by positions
designated as minimum amount (MA). You can manage your collateral in the following ways:•

Opening (start-of-day) securities positions as collateral: You can give DTC standing
instructions to designate as collateral all securities in your account at the opening of each day. All
start-of-day positions are then designated NA, and your CM is credited the collateral value of thestart-of-day positions. Contact your Relationship Manager to change your standing instructions.

•

Unvalued additional securities: You can give DTC standing instructions to designate all unvalued
additions of securities to your account (such as deposits and free DOs received) as either NA or MA.
Contact your Relationship Manager to change your standing instructions.
Warning! Consider the implications of classifying your securities as collateral. Collateral can beused to support your debt and therefore can be liquidated by DTC if you are unable to pay yoursettlement obligation.

•

Intraday reclassification of securities: You can submit instructions to DTC using the DYMA
Collateral Moves (MA/NA) function to reclassify an issue as collateral or non-collateral.
Note- A Collateral Moves instruction will not execute if the removal of the collateral from youraccount would cause your CM or simulated CM to become negative.

•

Settlement Progress Payments (SPPs): You can increase your CM by wiring Settlement Progress
Payments (SPPs) to DTC's account at the Federal Reserve Bank of New York (FRBNY). Your CM andyour settlement account will be credited for the amount of the SPP; thus, SPPs also reduce youractual net debit. See Wire Instructions for more information. )To view your CM balance, use the Risk Management Controls Inquiry function.

72

Net Debit Caps
Net Debit Caps help ensure that DTC can complete settlement, even if a Participant fails to settle. They arebased on your net debit history at DTC and automatically rise or fall relative to the average of your highest
intraday net debit peaks in accordance with the calculation described below (in “Calculating Your Net DebitCap”). A Net Debit Cap, recalculated daily, is applied to your account to limit the settlement net debit you
could incur at any point during a processing day.
Your Net Debit Cap is limited by DTC's established maximum Net Debit Cap, the value of which is always set
lower than DTC's total available liquidity. Currently, the maximum Net Debit Cap you can have is $2.15
billion.
Before completing a transaction in which you are the receiver, DTC calculates the resulting effect thetransaction would have on your account, and determines whether your resulting Net Debit Balance would
exceed your Net Debit Cap. Any transaction that would cause your net settlement debit to exceed your Net
Debit Cap is placed on a pending (recycling) queue until another transaction creates credits in your account(see Recycle Processing for more information). Most credits are generated when you deliver securities
versus payment; pledge securities for value; receive principal, dividend or interest allocations; or wire funds(SPPs) to DTC's account at the FRBNY.

Calculation of Participant Net Debit Caps
Net Debit Caps for a Participant are calculated daily as follows:1.

The system records the Participant’s collateral group's three highest intraday net debit peaks over arolling 70-business-day period, using net debit peaks. If the Participant has elected to group its
accounts into separate families (see Grouping Accounts into Collateral Families) , the system first
calculates the average net debit peak of each family, and adds together the average net debit peaksof all of the Participant’s families to obtain the Participant’s overall average net debit peak.

2.

The system multiplies the Participant’s average net debit peak by a factor to determine theParticipant’s Net Debit Cap, which cannot exceed DTC's established maximum of $2.15 billion.
(Factors are based on a sliding scale, between 1 and 2, where smaller average peaks are multipliedby larger factors and larger average peaks are multiplied by smaller factors.)

The established minimum Net Debit Cap is equal to twice the sum of all Participants' minimum deposits to
the Fund.
Note- Your Settling Bank can set your maximum Net Debit Cap. However, the maximum amount set by a
Settling Bank cannot exceed the Net Debit Cap calculated by DTC's system. DTC may also limit your Net
Debit Cap to any amount regardless of your intraday net debit peaks.
Although most transactions are subject to Risk Management Controls, the following activities override
collateralization and Net Debit Cap controls:•

Mutual funds purchases through DTC's Fund/SERV system•

DTC-generated activity (such as monthly billing charges)•

Deposit or settlement adjustments•

Short position charges•

Principal and income charges•

Participants Fund charges.

To view your Net Debit Cap and net settlement balance, use the Risk Management Controls Inquiry function.

73

As an added measure DTC has also established limits on the maximum settlement obligation that a financial
family of affiliated DTC Participants can incur. An Affiliated Family means each Participant that controls or iscontrolled by another Participant and each Participant that is under the common control of any Person. For
purposes of this definition, “control” means the direct or indirect ownership of more than 50% of the voting
securities or other voting interests of any Person. The maximum “Aggregate Affiliated Family Net Debit
Cap” for the Participants comprising an Affiliated Family is currently set at $2.85 billion.
So that DTC will be able to complete settlement each day in the event of a Participant’s inability to settle,
DTC currently maintains liquidity resources of $3.05 billion, including $1.15 billion cash in the Participants
Fund and a committed line of credit in the amount of $1.9 billion with a consortium of banks.

Batch Processing
During the Night Batch Process, DTC evaluates each Participant’s available positions, transaction priority andrisk management controls, and identifies the transaction processing order that optimizes the number oftransactions processed for settlement. The Night Batch Process allows DTC to run multiple processing
scenarios until it identifies an optimal processing scenario.
At approximately 11:30 p.m. on S-1, DTC will subject all transactions eligible for processing to the Night
Batch Process. The Night Batch Process will be run in an “off-line” batch that will not be visible toParticipants, allowing DTC to run multiple processing scenarios until the optimal processing scenario is
identified. Once the optimal scenario is identified, the results of the Night Batch Process will be incorporated
back into DTC’s core processing environment on a transaction-by-transaction basis, and Participant output
will be produced using existing DTC output facilities.

Grouping Accounts into Collateral Families
If you have multiple DTC accounts, you can group them into families and instruct DTC to allocate a specified
portion of your collateral and Net Debit Cap to each family. You must submit instructions in writing to DTC togroup your accounts into separate families. Otherwise, all of your accounts will be grouped into one family.
The accounts you designate as a family share a single CM and Net Debit Cap. Securities and cash credited to
one of these accounts increase the shared CM and the family's settlement balance, and could therefore
serve to benefit transactions of other accounts in the family.
Sharing collateral and Net Debit Caps has advantages and disadvantages. Sharing can be an efficientaccount structure because it allows accounts to use the available collateral and settlement credits of otheraccounts in the family. However, you will not be able to designate which account should benefit from specificcredits incurred by a member of the family. For example:
Suppose you maintain two accounts, A and B, which are grouped into one collateral family. Assume thatboth accounts have recycling transactions because of insufficient Net Debit Cap. If account A sends an SPP
to DTC, its settlement account is credited. However, because the accounts are set up so that either accountcan use the available credits, if account B's transactions have a higher priority on the recycle queue, they
will complete as a result of the funds that account A sent to DTC.
Conversely, assigning a separate collateral group for every account allows you to segregate your accounts
and to allow the accounts to use only a specific portion of your collateral and Net Debit Cap. However,segregating can decrease processing efficiency and increase your intraday financing requirements because
excess collateral in one family is not automatically available to an account belonging to another family. You
should carefully evaluate your internal procedures and determine which method is most efficient for youroperations.
Note- If you group your accounts into families and do not provide DTC with instructions on the specificpercentage of collateral and Net Debit Cap to be allocated to each family, DTC allocates collateral and Net
Debit Cap to each family based on your intraday net debit peaks relative to your other families.

74

You can maintain separate families of accounts to allocate your cap among your families at your own
discretion. However, DTC will apply a forced-allocation formula to major issuing paying agents, which aredefined as IPAs with average daily maturity presentments measured over the most recent month equal to or
greater than 5 percent of DTC's total MMI maturity presentments. A major IPA must allocate up to 40
percent of its total Net Debit Cap to its IPA family.

Issuer/Participant Number Collateral Control (IPN)
Collateral in a Participant's account associated with the Participant (such as the Participant's own commercial
paper) increases risk to DTC if that Participant failed to pay DTC and its obligation is supported partly or
fully by the failing Participant's associated securities. To eliminate this risk, DTC's system monitors collateral
received in a Participant's account related to that Participant.
IPN will link to a Participant's account securities related to it and withhold from the Participant any collateralvalue associated with the security. In effect, transactions processed to a Participant account will remain
essentially the same, except that no increase will be applied to the Participant’s collateral monitor for thecollateral value of securities received that are associated with the Participant. IPN is based on a Participant's
legal entity; therefore, this control will apply to every account of a Participant. For example:
When a Participant has an IPA account that issues MMI securities on its own behalf and has a custodyaccount in the same or a separate collateral group, and the IPA account processes an MMI issuance delivery
to its own custody account in its own MMI securities, the custody account will receive no collateral increase
for the collateral value of that issuance.
IPN control will not affect a Participant's net debit calculation. Because IPN control affects the collateralvalue of an associated account, IPAs may wish to monitor their accounts more closely intraday for
insufficient collateral, especially if presentments exceed issuances in an Acronym for which they act as IPA
on a particular day.

Risk Management Controls Contact Number
For more information on Risk Management Controls, call DTC's Customer Support Center at (888) 382-2721.

Extension Requests
DTC cannot grant a Participant an extension of the foregoing deadlines unless a substantial volume oftransactions is involved. Please notify DTC as early in the processing day as possible if there is a need torequest an input extension. This will allow DTC to discuss alternative methods of input.
To request an extension call DTC's Settlement Hotline at 212-855-5800.

Associated Functions
The Short Position Inquiry function is used in association with the Settlement Processing Schedule andallows Participants to view the detail of their respective short position penalty charges.

75Sub-Accounting Service (Segregation of Securities)
About the Product
The Sub-Accounting Service allows you to protect securities on deposit at DTC by moving them from yourgeneral free account to your segregated account. The securities remain segregated and unavailable for any
transactions until you authorize DTC to release them and return them to your general free account.
On payment day, DTC will automatically allocate cash merger and mandatory put payments as well as
municipal and corporate redemption payments for securities segregated on DTC's books. In addition, DTC
will allocate property and rights such as interest payments, dividend distributions and voting rights forsegregated securities. Segregation transactions are subject to your collateral monitor control, and do notrecycle for position or insufficient collateral.
These allocations were previously based on a position capture done the prior night. Now, DTC will perform areal time position capture immediately prior to the allocation to account for any adjustments Participants
made prior to allocation. You should release on or before the payment date certain segregated positions forsecurities being reorganized. If you fail to release these positions, they will be automatically decremented to
avoid driving your general free accounts into short (negative) positions when proceeds are allocated. You
can avoid this automatic decrease of your segregated position by releasing the segregated securities on or
before the payment date.

Seg-100 Account
You may deposit certain foreign-owned shares of communications, maritime, and specialized ownershipissues, as specified in the Corporate Eligible Securities Book, into a special account at DTC identified as
segregation account#100 (seg-100). You can move securities back and forth between your general freeaccount and your seg-100 account, as appropriate, to reflect changes in the amount of certain foreignowned and specialized ownership issues on deposit at DTC.
IMPORTANT: These shares must be deposited and maintained in the seg-100 account until acquired by aU. S. citizen.
Use the Account Segregation Releases functions to segregate and release foreign-owned or specialized
ownership issues. When you enter F in the Serial Number field for these securities on your Participant Daily
Activity Statement, these securities will appear with the serial number "100.” You can process thesetransactions exactly as you would any other transaction for segregated securities.
DTC will report to the transfer agents (TAs) for communications, maritime and specialized ownership issues
the holdings in each Participant's seg-100 accounts for each security, and the TAs will note their records
accordingly. In the rare instance in which total alien holdings in an issue may exceed statutory limitations,and the increase in foreign-owned shares registered in the name of Cede &Co. caused the statutory
limitation to be exceeded, a TA will advise DTC of the amount by which those foreign-owned shares must be
reduced.
According to the seg-100 procedures, you are required to immediately withdraw from your general freeaccount any foreign-owned shares that cannot be credited to your seg-100 account because of foreign
ownership limitations. DTC will cooperate with the issuer and its TA to facilitate the withdrawal and will
disclose to the issuer your name and the number of shares to be withdrawn. You should be aware thatissuers may place restrictions on such shares.
At the request of the issuer or its TA, DTC provides periodic reports that list individual Participant names andtheir positions that are segregated in the seg-100 account.
Warning! Under DTC's Rules and Procedures you are responsible for verifying the accuracy of theParticipant Daily Activity Statement.

76

Associated PTS Functions
The following PTS functions are used in association with Sub-Accounting Service.

Use this function

To

RSEG

Release securities.

SEG

Segregate securities.

Note- You can also perform these functions via MQ or CCF.

Segregation of Securities Contact Number
For more information about Segregation of Securities, call DTC's Customer Support Center at (888) 3822721.

U.S. Government Securities
About the Product
DTC allows Participants to move Fed eligible securities from their accounts on the Federal Reserve’s (the“Fed’s) book-entry system to accounts at DTC and visa versa. To move Fed eligible securities from the Fed
to DTC, Participants must transfer the securities to DTC’s Fed account via the Fed’s security transfer system(the Fed’s system).
Securities eligible for DTC's U.S. Government Securities processing can be identified by transfer agent 400(TA-400) or accessed through the GWIZ function.

Depositing U.S. Government Securities
You can deposit U.S. government securities in your DTC account by moving the securities through theFederal Reserve book-entry securities transfer system from your custodian account to DTC's account at the
FRBNY using the following instructions:
In this fieldEnter

Receiving ABA

DTC's American Banking Association (ABA) number: 026002066.

Receiving Name

DTC's telegraphic name: DTC SDFS.

Receiving Account

The account type: CUST

Receiving Bank Info

FDO/Your Participant number.

Cash Value

The cash value: 0.00.

Par AmountThe quantity of securities to be transferred.

77

When DTC receives a security transaction into its Fed account on behalf of a DTC Participant who has
elected to receive its Fed eligible securities at DTC, a deliver order will be processed from DTC’s Fed
inventory account (6072) to the DTC Participant designated as the receiving Participant in the account fieldon the Fed transaction. Incoming FDOs will appear as deliver orders from the DTC’s Fed inventory account(6072) in the ART function.
The cutoff to receive incoming Fed transactions is DTC’s free DO input cutoff which is normally 6:15 p.m.,
ET. However, Participants will only receive incoming FDOs after 3:30 p.m. if the Fed extends its securities
input cutoff. Incoming FDOs are not subject to DTC’s Receive Authorized Deliver (RAD) procedures.
Note–All U.S. Government securities must be delivered FREE through the Fedwire system to DTC's accountat FRBNY.

Delivery and Settlement
Once your eligible U.S. government securities have been credited to your account, you can deliver them toanother Participant via the Deliver Order function or pledge them via the Collateral Loan Service. Internaldeliveries cannot be processed through the Federal Reserve Deliver Order option because this option isreserved for outgoing Fed deliveries in which the contra is DTC’s Fed inventory account (6072).
Internal deliveries of Fed eligible securities are subject to all existing DTC risk management controls, reclaim
rules, cutoffs, and RAD procedures.

Withdrawing U.S. Government Securities
In order to process deliveries to a Fed member (withdraw them from your DTC account) Participants must
use the Federal Reserve Deliver Order function. This function will require Participants to enter additional
information (ABA number, ABA sub-account, 3rd party information) in addition to the standard deliver orderfields (quantity, CUSIP, reason code, etc.). Federal Reserve Deliver Orders entered through this option withoriginal or reclaim reason codes will be processed as original securities transfers (Type code 2000) in the
Fed’s system. Outgoing Federal Reserve Deliver Orders, which pass DTC’s edits, will appear as deliver orders
to DTC’s Fed inventory account (6072) in the Activity Inquiry function.
Reclaims are not permitted through the Federal Reserve Deliver Order option. Participants must use theActivity Inquiry function or the Deliver Order function reclaim option in order to process Federal Reserve
Deliver Order reclaims. Reclaims will be processed as reversals (Type code 2002) in the Fed’s system.
Since all outgoing Federal Reserve Deliver Orders will be free transactions, they will recycle until DTC’s freerecycle cutoff (normally 6:35 p.m., ET). To coincide with the Fed’s cutoffs, DTC will open the Federal
Reserve Deliver Order function at 8:30 a.m., ET and will allow input of Federal Reserve Deliver Orderreversals (reclaims) until 3:30 p.m., ET.

Validation of Activity
Your activities involving U.S. government securities are recorded on your Participant Daily Activity
Statement. You can also verify activities via the Activity Inquiry function.
Check your statement or the applicable screen in the Activity Inquiry function to ensure that yourtransactions were properly processed and recorded. Report discrepancies between your records and DTC's to
the Reconciliation division via the PINS function as soon as possible.
Warning! Under DTC's Rules and Procedures, you are responsible for verifying the accuracy of yourParticipant Daily Activity Statement.
For more information about the U.S. Government Securities book-entry system, call DTC's Settlement
Hotline at 212-855-5800.

78ANNEX A
Memo Segregation Supplement
DO Reason Code Description Reference
The following is a listing of descriptions of the reason codes referred to in the “Memo Segregation” section
above.
•

10 (Stock Loan)•

11 (Stock Loan Reclaim-DK)•

12 (Stock Loan Reclaim-Wrong Quantity)•

13 (Stock Loan Reclaim-Wrong Security)•

14 (Stock Loan Reclaim-Wrong Money)•

15 (Stock Loan Reclaim-Partial)•

16 (Stock Loan Reclaim-Needs Account Information)•

17 (Stock Loan Reclaim-Needs Due Bill)•

18 (Stock Loan Partial Reclaim/Partial Return)•

19 (Stock Loan Recall)•

20 (Stock Loan Return)•21 (Stock Loan Reclaim-DK)•

22 (Stock Loan Return Reclaim-DK)•

23 (Stock Loan Return Reclaim-Wrong Security)•

24 (Stock Loan Return Reclaim-Wrong Money)•

25 (Stock Loan Return Reclaim-Partial)•

26 (Stock Loan Return Reclaim-Needs Account Information)•

27 (Stock Loan Return Reclaim-Needs Due Bill)•

28 (Stock Loan Return Partial Reclaim-Partial Return),•

29 (Stock Loan Recall Reclaim)•

30 (Delivery Versus Payment)•

40 (Transfer of Customer Document)•

41 (Transfer Customer Account Reclaim-DK)•

42 (Transfer Customer Account Reclaim-Wrong Quantity)•

43 (Transfer Customer Account Reclaim-Wrong Security)•

44 (Transfer Customer Account Reclaim-Wrong Money)•

45 (Transfer Customer Account Reclaim-Partial)•

46 (Transfer Customer Account Reclaim-Needs Account Information)•

47 (Transfer Customer Account Reclaim-Due Bill)•48 (Transfer Customer Account-Partial Reclaim/Partial Return)•

90 (ADR Stock Loan Return-Untracked)•

95 (ACATS Value With Memo Seg)•

97 (Delivery Versus Payment With Memo Seg)•

98 (Transfer of Account Without Memo Seg)79•

99 (Bulk Transfer of Account)•

100 (Account Transfer Without Memo Seg Reclaim)•

197 (Account Transfer With Memo Seg Reclaim)•

200 (SFT Stock Loan)•

201 (SFT Stock Loan Return)•220 (Repo Tracking)•260 (OCC Stock Loan)•

261 (OCC Stock Loan Reclaim-DK)•

262 (OCC Stock Loan Reclaim-Wrong Quantity)•

263 (OCC Stock Loan Reclaim-Wrong Security)•

264 (OCC Stock Loan Reclaim-Wrong Money)•

265 (OCC Stock Loan Reclaim -Partial)•

266 (OCC Stock Loan Reclaim-Needs Account Information)•

267 (OCC Stock Loan Return-Untracked)•

268 (OCC Stock Loan- Partial Reclaim/Partial Return)•270 (OCC Stock Loan Return)•271 (OCC Stock Loan Return Reclaim-DK)•

272 (OCC Stock Loan Return Reclaim-Wrong Quantity)•

273 (OCC Stock Loan Return Reclaim-Wrong Security)•

274 (OCC Stock Loan Return Reclaim-Wrong Money)•

275 (OCC Stock Loan Return Reclaim-Partial)•

276 (OCC Stock Loan Return Reclaim-Missing Account Information)•

277 (OCC Stock Loan Return-Untracked)•

278 (OCC Stock Loan Return-Partial Reclaim/Partial Return)•280 (ADR Stock Loan-Untracked)•

281 (ADR Stock Loan Reclaim-DK)•

282 (ADR Stock Loan Reclaim-Wrong Quantity)•

283 (ADR Stock Loan Reclaim-Wrong Security)•

284 (ADR Stock Loan Reclaim-Wrong Money)•

285 (ADR Stock Loan Reclaim-Partial)•

286 (ADR Stock Loan Reclaim-Needs Account Information)•

287 (ADR Stock Loan Reclaim (Needs Due Bill)•

288 (ADR Stock Loan Partial Reclaim/Partial Return)•

290 (ADR Stock Loan Return-Untracked)•

291 (ADR Stock Loan Return Reclaim-DK)•

330 (Direct Rollover to IRA)•

331 (Direct Rollover to IRA Reclaim-DK)•

332 (Direct Rollover to IRA Reclaim-Wrong Quantity)•

333 (Direct Rollover to IRA Reclaim-Wrong Security)•

334 (Direct Rollover to IRA Reclaim-Wrong Money)•

335 (Direct Rollover to IRA Reclaim-Partial)•

336 (Direct Rollover to IRA Reclaim-Needs Account Information)80•

337 (Direct Rollover to IRA Reclaim-Needs Due Bill)•

338 (Direct Rollover to IRA Partial Reclaim/Partial Return)•340 (Direct Rollover to Qualified Plan)•

341 (Direct Rollover to Qualified Plan Reclaim-DK)•

342 (Direct Rollover to Qualified Plan Reclaim-Wrong Quantity)•

343 (Direct Rollover to Qualified Plan Reclaim-Wrong Security)•

344 (Direct Rollover to Qualified Plan Reclaim-Wrong Money)•

345 (Direct Rollover to Qualified Plan Reclaim-Partial)•

346 (Direct Rollover to Qualified Plan Reclaim-Needs Account Information)•

347 (Direct Rollover to Qualified Plan Reclaim-Needs Due Bill)•

348 (Direct Roller to Qualified Plan Partial Reclaim/Partial Return)•390 (Direct Registration Transfer)•391 (Direct Registration Reversal)•

396 (Direct Registration Reclaim DK-Without Memo Seg)•

600 (Collateral DO Return)•

601 (Collateral DO Reclaim-DK)•

602 (Collateral DO Reclaim-Wrong Quantity)•

603 (Collateral DO Reclaim-Wrong Security)•

605 (Collateral DO Reclaim-Partial)•

606 (Collateral DO Reclaim-Needs Account Information)•

607 (Collateral DO Reclaim-Needs Due Bill)•

608 (Collateral DO-Partial Reclaim/Partial Return)•609 (Collateral DO Recall)•

610 (Collateral DO Return)•

611 (Collateral DO Return Reclaim-DK)•

612 (Collateral DO Return Reclaim-Wrong Quantity)•

613 (Collateral DO Return Reclaim-Wrong Security)•

615 (Collateral DO Return Reclaim-Partial)•

616 (Collateral DO Return Reclaim-Needs Account Information)•

617 (Collateral DO Return Reclaim-Needs Due Bill)•

618 (Collateral DO Return-Partial/Reclaim-Partial Return)•

619 (Collateral DO Recall Reclaim)•

630 (Repo With Memo Decrease)•631 (Repo Reclaim With Memo Decrease)•640 (Repo Return With Memo Decrease)•641 (Repo Return Reclaim With Memo Decrease)•704 (OCC Stock Loan-Untracked)•

705 (OCC Stock Loan Reclaim-Untracked)•

706 (OCC Stock Loan Return-Untracked)•

707 (OCC Stock Loan Return RCL-Untracked)•

708 (EuroCCP Net Obligation)81