New Implementation Plan for the Automated Claim Adjustment Process Enhancements

January 18, 2022

The Federal Reserve Banks are pleased to announce a new implementation plan for enhancements to the Fedwire® Securities Service’s Automated Claim Adjustment Process (ACAP). The ACAP enhancements include adding securities lending as a transaction type, expanding ACAP tracking to all coupon paying securities issued over the Fedwire Securities Service and shifting the timing of settling claim adjustments from late day via the National Settlement Service to promptly after the relevant principal and interest (P&I) payments are fully paid out to record holders via the Fedwire Securities Service.1 Please refer to the October 2018 ACAP Enhancements Announcement for detailed enhanced ACAP business requirements, and technical and operational implementation implications.

To avoid adding additional transfer volume to the 8:30 a.m. ET opening of the Fedwire Securities Service for processing book-entry securities transfers, the Reserve Banks are making one change to the previously announced enhancements. The Reserve Banks will release claim adjustments associated with P&I payments paid on or before the settlement date of a fail transaction at approximately 8:45 a.m. ET on the business day following settlement of the fail transaction. This change will override the 8:30 a.m. ET release time outlined in the October 2018 ACAP Enhancement Announcement.

Phased Implementation

Based on input from market participants, the Reserve Banks will launch the ACAP enhancements in 2023 through three implementation phases. These phases are designed to provide market participants with sufficient time to prepare for the new functionality associated with each phase.

Phase 1

Implement the shift in timing and method of settling claim adjustments. With this implementation, ACAP claim adjustments will settle throughout the day over the Fedwire Securities Service at security/CUSIP® level using the new type code 8908 and 8909 messages. In addition, the new Unprocessed Claim Notification and existing ACAP statements with the new reporting format will also be implemented through this phase.

The expansion of transaction types and security types will occur in subsequent phases. Phase 1 will continue fail, interim accounting and repo tracking only for coupon paying agency mortgage-backed securities (agency MBS) currently eligible for ACAP. Implementation of Phase 1 is scheduled for January 28, 2023.

Phase 2

Expand fail and repo tracking to all coupon paying securities issued over the service.2

Phase 3

Expand ACAP tracking to securities lending transactions across all coupon paying securities issued over the service (i.e., coupon paying agency MBS and debt securities). The new Securities Lending Balance Statement and Claim Adjustment Notification for Securities Lending will be implemented through this phase.

The implementation dates for Phases 2 and 3 are still being determined. The specific dates and details will be shared in future communications.

New Implementation Date and the Enhanced ACAP DIT Testing

Participants and service providers will have approximately six months to test all ACAP-related changes encompassing all three phases in the Depository Institution Testing (DIT) followed by Phase 1 production implementation on Saturday, January 28, 2023.3 We expect the Phase 1 DIT testing to begin in late June, early July 2022. The Reserve Banks will consider additional testing opportunities for participants and service providers to validate the software deployment of subsequent phases. However, we expect that participants and service providers will complete a full validation of the enhanced ACAP-related software changes and back-office operational changes for all three phases during the six-month testing timeframe leading to Phase 1 implementation.

As the Reserve Banks advance the ACAP enhancement project, we will inform you of additional implementation and testing guidelines through announcements, webinars, clearing memos, and other communications at appropriate times throughout the project.

Questions regarding this communication should be directed to the Fedwire Securities Service contact at the East Rutherford Operations Center: (800) 390-2788.

Footnotes:

1The current ACAP tracking eligibility is limited to fail, interim accounting, and repo transaction types in connection with coupon paying agency mortgage-backed securities. ACAP adjustments are currently effected through the National Settlement Service at approximately 4:30 p.m. ET on P&I payment dates.

2In addition to agency MBS, Phase 2 will expand fail and repo tracking to all coupon paying debt securities. These are marketable debt securities issued by the U.S. Department of the Treasury and debt securities issued by other governmental agencies, government-sponsored enterprises, and international organizations.

3ACAP tracking for additional transaction and asset types that will go live through Phase 2 and Phase 3 implementation will be enabled in the DIT during the six-month ACAP testing. Upon Phase 1 production implementation, ACAP tracking will only be available for current transaction and asset types as described under Phase 1.

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