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National Securities Clearing CorporationMutual Fund Services
A Presentation forBank Depository User Group
Mutual Funds UpdateOctober 25, 2005
Denise GrantDirector
Distribution Services
National Securities Clearing CorporationMutual Fund Services
A Presentation forBank Depository User Group
Mutual Funds UpdateOctober 25, 2005
Denise GrantDirector
Distribution ServicesNational Securities Clearing Corporation is a
subsidiary ofThe Depository Trust & Clearing Corporation
Mutual Fund Services5939-2
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•Enhancements Overview
•2005 Enhancements
•2006 Potential Enhancements
•New Initiatives
•Statistics
•Enhancements Overview
•2005 Enhancements
•2006 Potential Enhancements
•New Initiatives
•Statistics
Mutual Fund Services
Today’s Agenda
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•NSCC works with various industry groups and special task forces to discuss the need for enhancements
• Investment Company Institute (ICI)
• Broker Dealer Advisory Committee (BDAC)
• Bank and Trust Advisory Committee (BTAC)
• Transfer Agent Advisory Committee (TAAC)
• International Operations Advisory Committee (IOAC)
Mutual Fund Services Enhancements
Enhancements Overview
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•NSCC works with various industry groups and special task forces to discuss the need for enhancements
• National Association of Securities Dealers (NASD)
• Joint NASD/Industry Task Force on Breakpoints
• Securities Industry Association (SIA)
• SIA Operations Committee
Mutual Fund Services Enhancements
Enhancements Overview
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2005 Enhancements
Mutual Fund Services
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•Direct Accounts Through Networking• Important Notice A#5948
•Enhancements to Mutual Fund Profile Service II (MFPSII) for PCWeb Direct
2005 Enhancements
March Release
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•Enhancements to Mutual Fund Profile Service II (MFPSII) for PCWeb Direct• Important Notice A#6005
2005 Enhancements
May Release
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•Enhancements To Mutual Fund Profile Service II (MFPSII) for PCWeb Direct and Mainframe• Important Notice A#6062
2005 Enhancements
August Release
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•Short-Term Redemption Fees• Important Notice A#6035, A#6056, A#6064, A#6080
• New sequential record Fund/SERV records
• Allows for collection of short-term redemption fees at time of trade
• Networking Activity file modified
2005 Enhancements
September Release
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•Mutual Fund Profile Service – Daily Price & Rate• Important Notice A#6051
•Fund/SERV reject Codes• Important Notice A#6035 and A#6056
2005 Enhancements
September Release
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•Enhancements to Mutual Fund Profile Service II (MFPSII) For Mainframe and PCWeb Direct•Important Notice A#6084
•Enhancements to Mutual Fund Profile Service II (MFPSII) For Mainframe and PCWeb Direct
2005 Enhancements
November Release
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•Additional Social Security & Tax Identification Numbers• Important Notice A#6076
•Modifications To Social Codes On Mutual Fund Services• Important Notice A#6082
•Mutual Fund Commission Settlement Service Enhancements• Important Notice A#6092
2005 Enhancements
December Release
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•New Codes for Defined Contribution Clearance & Settlement (DCC&S) on Fund/SERV• Important Notice A#6081
• IRA/DCP/529 Indicator renamed Asset Type Indicator
• Ten new codes added
2005 Enhancements
December Release
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•New Codes for Defined Contribution Clearance & Settlement (DCC&S) on Fund/SERV• Settlement Override Reason Code Field
• 07 = Refer to Asset Type Indicator
• NAV Reason Code Field
• C = Refer to Asset Type Indicator
2005 Enhancements
December Release
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•New Codes for Defined Contribution Clearance & Settlement (DCC&S) on Fund/SERV• TPA Number Field
• Allowed only if Asset Type Indicator = B, F-O
• Short Registration Exception
2005 Enhancements
December Release
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2006 Enhancements
Mutual Fund Services
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•Networking SCRUB (Full & Partial) and Fund Acknowledgement Modifications• Reconcile static data discrepancies for client accounts
• Fund and firms should reflect identical account information
• Assist in resolving breaks of non-financial information
• Identify breaks as they occur
Potential 2006 Releases
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•Breakpoint Task Force – Client Data Share items• Allows a firm to provide customer related information in a standardized format on an account set-up
• “Reverse” Position files for Omnibus accounts
Potential 2006 Releases
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•Omnibus Task force Recommendations• Share Aging file modifications
• CDSC file name changed to Share Aging
• Broadens use of information on the file to include Short-Term Redemption Fee, Cost-basis, 12b-1 and other calculations based on holding period
• Five new fields and indicators will be added
Potential 2006 Releases
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•Mutual Fund Profile Service II (MFPSII) Task Force• Subcommittee of the Investment Company Institute (ICI) Broker/Dealer Advisory Committee (BDAC)
• Continued modifications of MFPSII to create consistency and clarify ambiguity of fields
Potential 2006 Releases
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•Tax Law – American Job Act Changes• Provide fields needed to accurately report the portion of the fund’s distribution subject to: American Jobs Creation Act of 2004 (AJCA) and Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
• Non-resident alien shareholders are subjected to the new tax laws with QII, short-term capital gains and withholding amounts affected
Potential 2006 Releases
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•Tax Law – American Job Act Changes• Information needs to be passed from fund to firm at time of distribution/declaration
• An automated process to allow firms to know the portion of the distribution that is attributable to gains as a result of U.S. real property interests
• Proposed system changes
• Networking Dividends
• Profile Distribution
Potential 2006 Releases
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•Standard Data Reporting• SEC Rule 22c-2
• Standard, automated facility for funds to request and retrieve shareholder trading information from intermediaries
• SEC Compliance date October 16, 2006
• NSCC Pilot date 3Q 2006
Potential 2006 Releases
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New Initiatives
Mutual Fund Services
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Alternative Investment Products
•Automate and standardize information for:• Hedge Funds
• Fund of Hedge Funds
• Managed Futures
• Commodity Pools
• REITs
•Advisory committee of more than 30 firms, funds, and service providers
•Centralized USD settlement
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Pilot launch (target June 2006) to include:
• Subscriptions
• Redemptions
• Tender Offers
• Account Maintenance
• Commission Settlement
• Account Maintenance
• Valuation Reporting
• Position Reporting
• Distribution Reporting
Alternative Investment Products
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•Support SMA industry defined information message and processing standards • Sponsors• Investment Managers• Custodians
•Provide a single conduit for data and message flows• Directly or via service provider• Utilize existing connectivity into DTCC
•Provide central Infrastructure• Insure integrity standards• Development• Operations
Separately Managed Accounts
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Separately Managed Accounts
•Progress to date• Data Standards Committee
• MMI Standards Version 1.1 complete
• Version 2 in progress
•Prototype HUB• Standard Message Flow
• XML Schemas
• Data repository and processing system
•DTCC Advisory Group being established
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Statistics
Mutual Fund Services
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Lower Costs as Volume Increases
Fund/SERV Statistics
666
442
652
437
-
200
400
600
800
1,000
1,200
Participants
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Funds Firms
341,434
412,000
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Average Daily Volume
Volume
$0.175
$0.25
$0.30
$0.35
$0.40
$0.50
$0.50
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Networking Statistics
1988 2004
Sub-Accounts 67,077 65,045,679 Users 15 979
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•Your Relationship Manager
• Mutual Fund Marketing 212-855-8877
• http://funds.dtcc.com• Important Notices
• Manuals
• User Guides
• Record Layouts
Resources
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Questions?
Mutual Fund Services