Automated Claim Adjustment Process (ACAP) Frequently Asked Questions

Enhancements and Implementation Plan

1. What changes are included in the ACAP enhancement project?
   • Expanding ACAP tracking to all coupon-paying securities issued over the Fedwire^® Securities Service.
   • Adding securities lending as a transaction type.
   • 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.
   • Modifying existing ACAP statements and introducing new ACAP statements, including Securities Lending Balance Statement, Claim Adjustment Notification for Securities Lending, and Unprocessed Claim Notification.
2. What has changed since the project was announced in October 2018?

   The Federal Reserve Banks will make the following changes to the ACAP enhancements that were announced in the October 2018 communication.

   • The project will be implemented via three phases beginning in 2023. Phase 1 will be active for participants beginning Monday, January 30, 2023, preceded by the initial ACAP Depository Institution Testing (DIT), which is from July 7, 2022, to December 29, 2022. Phases 2 and 3 implementation guidelines will be announced in future communications.
   • Fail tracking claim adjustments associated with P&I payments distributed on or before the settlement date of a fail transaction will be released for settlement at approximately 8:45 a.m. ET, not 8:30 a.m. ET, on the next business day after the fail transaction is settled over the Service.
3. What new functionality will be rolled out in each of the three phases?

   Phase 1 implementation will change the timing and method of settling claim adjustments from late day via the National Settlement Service to promptly after the relevant P&I payments are fully paid out to record holders via the Fedwire^® Securities Service using the new type code 8908 and 8909 securities messages. Claim adjustments will be settled at security/CUSIP^® level.

   The transaction and security types that will be enabled through Phase 1 implementation are unchanged from what is currently eligible: fail, interim accounting, and repo tracking for coupon-paying agency mortgage-based securities (agency MBS).

   The new ACAP report Unprocessed Claim Notification and all existing ACAP statements (i.e., Repo Balance Statement, Claim Adjustment Notifications for Fail, Interim Accounting, Repo) with a new reporting format will also be implemented via Phase 1. Any existing online inquires (e.g., Clearing Summary, Endpoint Grand Totals) and end-of-day reports (e.g., Detailed Activity Statement) that contain total cash debit/credit made to a participant’s master account for the Cycle Date will also include debits and credits effected through claim adjustments.

   Phase 2 will expand fail and repo tracking to all coupon-paying securities issued over the Service.

   Phase 3 will add securities lending tracking for all coupon-paying securities issued over the Fedwire Securities Service (i.e., coupon-paying agency MBS and debt securities). The new Securities Lending Balance Statement and Claim Adjustment Notification for Securities Lending will also be implemented via this phase.

4. Will ACAP tracking expand to non-coupon-paying securities in connection with repo and securities lending/borrowing balances?

   No, non-coupon-paying securities will not be included in the ACAP enhancement project in 2023. However, the Federal Reserve Banks will consider adding non-coupon-paying securities to ACAP tracking for repo and securities lending balances as a future service enhancement.

5. Did the implementation date of Phase 1 change?
   The announcement on January 18, 2022, New Implementation Plan for the Automated Claim Adjustment Process Enhancements, indicated Phase 1 will be implemented on Saturday, January 28, 2023. The Federal Reserve Banks will deploy code into production on that date; however, the Phase 1 will not be effective for use until Monday, January 30, 2023.

Technical and Operational Inquiries

1. Will there be a new clearing memo, or will previous clearing memos be updated with the technical and operational information related to ACAP enhancements?

   The Federal Reserve Banks issued a new Clearing Memo #278 on April 4, 2022. Fedwire Securities Service participants should refer to the new Clearing Memo #278 for the technical and operational information related to the enhanced ACAP service. Clearing Memo #278 will supersede all previously published clearing memos relating to ACAP (#219, #220, #221, #226, #236, #240, #243, #246, and #251) on January 30, 2023, when Phase 1 goes into effect.

2. Where can I find the technical specifications for enhanced ACAP?

   Fedwire Securities Service participants should refer to the Fedwire Application Interface Manual (FAIM) version 2.0.2 for Fedwire Securities Service for the technical layouts for the new claim adjustment messages and ACAP statements. Participants’ End User Authorization Contacts (EUAC) can request a copy of the technical document, FAIM version 2.0.2 from the Customer Contact Center. The FedPayments-Manager for Securities Export File layout (i.e., FedPayments_Securities_File_Export_Specification_FLA_Customer_v1.0) was also modified to incorporate the technical layout for the new incoming claim adjustment messages.

3. My firm would like to use enhanced ACAP for outstanding repo balances that currently are not tracked by ACAP. How can my firm convert these outstanding repo balances so that they are tracked by enhanced ACAP?

   To convert outstanding repo balances in connection with Treasury and non-Treasury debt securities to the enhanced ACAP, the participant with the Repo-Out balance will need to initiate a type code 2090 service message with the Repo Balance Only Adjustment field tag (i.e., {22F:ADRP}) in a free text line of the message. Once the Fedwire Securities Service processes this service message, it will record and maintain sender and receiver’s Repo-Out and Repo-In balances, respectively, without transferring the securities. The same approach applies to converting outstanding securities lending balances in connection with any securities issued over the Fedwire Securities Service to the enhanced ACAP by using the Securities Lending Balance Only Adjustment field tag (i.e., {23F:ADSL}) in a free text line of the service message.

   Participants can convert outstanding repo balances for coupon-paying Treasury and non-Treasury debt securities after Phase 2 goes into effect. Similarly, outstanding securities lending balances can be converted after Phase 3 goes into effect.

4. My firm currently uses repo tracking to track MBS securities lending transactions. How can my firm convert these to securities lending tracking?

   Participants who currently use repo tracking to track MBS securities lending balances can convert those repo balances to securities lending balances by taking the following two steps after Phase 3 goes into effect.

   • Step 1 – The participant with the Repo-In balance must first adjust the repo balance by initiating a type code 2090 service message with the Repo Balance Only Adjustment Reversal field tag (i.e., {22F:ADRV}) in a free text line of the message.
   • Step 2 – To establish the securities lending balance in the enhanced ACAP, the participant with the Securities-Lent balance must initiate a type code 2090 service message with the Securities Lending Balance Only Adjustment field tag (i.e., {23F:ADSL}) in a free text line of the message. Once the Service processes this service message, it will record and maintain sender’s and receiver’s Securities-Lent and Securities-Borrowed balances, respectively, without transferring the security.

    

   Once both steps are taken, the MBS repo balance will no longer be reported on the participants’ Repo Balance Statement and will instead be reported on the participants’ Securities Lending Balance Statement.

Depository Institution Testing (DIT)

1. When will ACAP DIT testing begin and what is the scope of testing given the phased implementation approach?

   The first ACAP DIT period is to begin July 7, 2022, and end December 29, 2022, followed by the implementation of Phase 1. There will be subsequent shorter DIT periods prior to the implementation of Phases 2 and 3.

   We expect participants and service providers to complete a comprehensive end-to-end testing for all ACAP enhancements. Participants and service providers will need to test the enhancements of each phase in the DIT prior to the implementation of the phase. Those who choose to will be able to test all three phases in the initial six-month DIT period.

2. How do I prepare for testing of Phase 1 testing?

   Successful testing of Phase 1 functionality is dependent on a number of factors that should be reviewed and considered.

   Do you hold MBS in your account in the DIT environment? Enhancements made in Phase 1 will only apply to MBS. Therefore, it is essential to hold MBS in the securities account(s) you are testing as claim adjustments will only be made on MBS.

   What are the record dates and payment dates of the MBS on which you are expecting to see a claim adjustment? Record dates and payments dates of the MBS in the DIT environment will be the same as they would be in the production environment.

   Whether you have any repo positions open in the DIT that were replicated from production environment data? Claim adjustments will be effected on any repo positions open including repo positions that were replicated from the production environment.

   Have you requested statements? Statements will not be automatically sent and need to be requested each time.

3. What if there are no MBS holdings in our account in the DIT environment?

   Enhancements occurring in Phase 1 only apply to MBS and therefore testing of Phase 1 functionality in the DIT is dependent on MBS holdings.

   During testing, the Wholesale Testing Service will not be able to send incoming securities transfer wires to your institution if you do not hold MBS and will require working with another institution to test. By coordinating with another institution testing in the DIT, that other institution can send your institution a securities transfer wire of a MBS to test with.

4. What is a “refresh” in the DIT?

   The data in the DIT environment will be “refreshed” or reset periodically to replicate the production environment as of the last business day of the prior month. Therefore, any securities holdings and repo positions that are open in the production environment on the last business day of the prior month to the refresh will be replicated in the DIT environment, and any positions created in the DIT environment prior to the refresh will be overwritten.

   For Phase 1 testing in the DIT refreshes will occur at the beginning of July, September, and November 2022 replicating the production environment as of June 30, August 31, and October 31, 2022, respectively.

5. Why were subsequent ACAP DIT testing opportunities provided for Phases 2 and 3?

   The Federal Reserve Banks acknowledge that some participants and service providers will need additional time to complete testing of all phases. As such additional testing opportunities will be provided prior to Phase 2 and Phase 3 for participants and service providers to complete and validate the software.

6. Will the functionality for Phases 2 and 3 be available for enhanced ACAP testing in the DIT during the six-month testing period prior to the Phase 1 implementation?

   Yes. ACAP tracking for additional transaction and security types that will be implemented through Phases 2 and 3 will be available in the DIT during the initial six-month testing period. The Federal Reserve Banks are looking for participants and service providers to volunteer to complete the testing of ACAP-related changes for all three phases in the six-month period if they are ready. Be advised, however, enabling of Phases 2 and 3 functionalities in the DIT will occur on dates TBD and after the Phase 1 DIT testing has occurred.

7. When will the Federal Reserve Banks provide participants with the ACAP DIT testing guidelines and schedule for the ACAP enhancement project?

   The Federal Reserve Banks plan to communicate the ACAP DIT testing guidelines and schedule in the second quarter of 2022.

8. Will there be any changes to the original ACAP DIT testing requirements communicated to participants in April 2019?

   The Federal Reserve Banks are in the process of reassessing the original ACAP DIT testing approach and testing requirements to determine if there is an opportunity to enhance the ACAP DIT customer testing experience. We will communicate any the changes to participants and service providers in the above-mentioned ACAP DIT testing communication.

9. How does my organization register for testing in the DIT?
   To register participants and service providers need to submit the Test Request Form (Off-site). On the form, please select “Other Testing” under Testing Type and provide in the comments section “ACAP Enhancements Testing.”
10. Who should I contact if I have questions related to the ACAP DIT testing?
    For ACAP testing-related questions, you should contact your designated Wholesale Testing Units service team.

General Questions

1. If my firm does not plan to use ACAP or is not ready to use enhanced ACAP, can we “opt out”?

   There is no “opt in” or “opt out” feature for ACAP.
   
   Fail, repo, and securities lending tracking is automatically enabled for a receiver of a securities transfer by the sender of the securities transfer message initiating a fail, repo, or securities lending transaction, respectively. Interim accounting tracking is automatically enabled with respect to both sender and receiver when a sender sends a securities transfer message to transfer an MBS that has a different Record Date and Beneficiary Date. Therefore, even if a participant does not intend to use the enhanced ACAP or decides to start using it at a later date, that participant could still receive ACAP transactions (i.e., fail, interim accounting, repo or securities lending transactions) originated by other participants. Those ACAP transactions trigger ACAP tracking and result in the receiving participant receiving ACAP statements and claim adjustments regardless of whether the receiver of the message elects to use ACAP services. Given this, we encourage all participants to add controls to their Fedwire Securities Service interface applications and/or internal applications to properly handle any unanticipated ACAP transactions, the new claim adjustment messages, and ACAP statements to avoid technical or operational disruptions resulting from receiving those unanticipated messages and statements.

2. As my organization prepares for the implementation of the ACAP enhancements, what should I do if I have questions related to the ACAP enhancement project?

   For general ACAP-related questions, you can reach out to the Fedwire Securities Service contact at the East Rutherford Operations Center: (800) 390-2788. For ACAP testing-related questions, you should contact your designated Wholesale Testing Units service team.

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