Introducing smart-sequencing functionality for Fedwire® Securities Service transfer messages sent during the pre-open window by participants using the FedLine Direct® Solution

January 21, 2021

On Monday, May 10, 2021, the Federal Reserve Banks will introduce a smart-sequencing functionality to the Fedwire Securities Service for transfer messages sent during the pre-open window1. The functionality is designed to shorten processing times during the first several minutes after the service opens for processing transfer messages. Upon implementation of the smart-sequencing functionality, the Federal Reserve Banks may reorder transfer messages queued by participants through the FedLine Direct Solution during the service’s pre-open window to allow the service to better manage large volumes of transfer messages concentrated on the same security CUSIP® number and sender’s securities account.

Fedwire Securities Service participants and their service providers that queue transfer messages during the pre-open window through FedLine Direct may already know that the service processes some messages in an order that differs from the order the messages were sent by the participant. With the introduction of smart-sequencing functionality, the Federal Reserve Banks expect to more routinely reorder transfer messages queued during the service’s pre-open window, which means:

  • Transfer messages may process and settle in a different order than they would today
  • Sending participants will be more likely to receive corresponding acknowledgements in a non-sequential order.

As announced in December 2020, beginning on Monday, May 10, 2021, the Federal Reserve Banks will shift the time the service begins to process transfers from 8:25 a.m. to 8:30 a.m. ET to align the service’s operations with its published schedule (see Appendix B to Operating Circular 7 (PDF)). After the changes, the pre-open window will still begin at 8:00 a.m. ET, but it will close at 8:30 a.m. ET as the service opens to process transfers. The smart-sequencing functionality will only apply to transfer messages sent during the pre-open window through the FedLine Direct Solution.

The Federal Reserve Banks highly recommend that participants and their service providers that access the service through FedLine Direct take steps to help ensure that they are able to handle smart sequencing and the shift in the service’s transfer open, including by testing in the Federal Reserve Banks’ Depository Institution Test (DIT) environment. DIT testing will be designed to aid your institution in assessing its ability to handle reordered transfer messages and acknowledgements. The Federal Reserve Banks will conduct performance testing separately in the internal environments.

The Federal Reserve Banks will schedule testing events in the DIT beginning in February 2021, with the first set of tests occurring on February 12, February 17, and February 19. Additional test dates will be communicated by our Wholesale Testing Unit. To participate, you are required to register by completing and submitting the Test Request Form (Off-site). Please indicate in the comments section of the Test Request Form that your testing request is related to Securities Smart Sequencing. Once you have registered for the test, your designated Wholesale Testing Unit will contact you and provide you with testing instructions, including the testing schedule and test script.

Questions regarding this communication should be directed to your designated Wholesale Testing Unit.

Footnote

1The Service provides Fedwire Securities Service participants and service providers the opportunity to queue transfer messages beginning at 8:00 a.m. ET on each business day.

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