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G O L D M A N S A C H S P R E S E N T A T I O N 5593R- 1 Overview of DTCC’s Underwriting Department Presented by James Balbo.

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Presentation on theme: "G O L D M A N S A C H S P R E S E N T A T I O N 5593R- 1 Overview of DTCC’s Underwriting Department Presented by James Balbo."— Presentation transcript:

1 G O L D M A N S A C H S P R E S E N T A T I O N 5593R- 1 Overview of DTCC’s Underwriting Department Presented by James Balbo

2 5593R- 2 Agenda n DTC Eligible Security Types n Overview of the Underwriting Service n Underwriting Work Flow n Eligibility n OFAC n Processing n Quality Assurance n Packaging/ Closing n Verification n NUWS / NIIDS Reengineering n MMI Program n Older Issue Eligibility

3 5593R- 3 DTC Eligible Security Types Equities Corporate Debt Municipal Bonds and Notes Asset Backed Securities (ABS) Collateralized Mortgage Obligations (CMOs) Variable-Rate Demand Obligations Money Market Instruments (CP, Inst CDs, Bas) American / Global Depositary Receipts (ADRs/ GDRs) UIT, Insured Transactions and ETFs Certificates of Deposits 2006: Approximately 51,000 new issues underwritten worth nearly $4.4 Trillion

4 5593R- 4 Underwriting Work Flow Overview of the Underwriting Service

5 5593R- 5 Underwriting Work Flow Eligibility Requirements n Application for Eligibility n Paper Based Eligibility Questionnaire n WUN - Web Underwriting n PUND - Participant Underwriting n Offering Statement n Paper Based Prospectus/Official Statement n ELF- Electronic Filing System n Letter of Representations (For Book Entry Only) n BLOR, ILOR & Riders n Operational Arrangements (OA)

6 G O L D M A N S A C H S P R E S E N T A T I O N 5593R- 6 Electronic File ( ELF) Management System n Stores, retrieves, and manages offering documents n Reduces paper flow,improves efficiencies and reduces costs associated with delivery of hard copy n Provide inquiry capabilities to other DTCC areas including Dividends, Reorg and Legal.

7 Underwriting Work Flow Processing Input of Security Information n Issuer Name n Security Description n Settlement Date n Offering Amount n CUSIP # n Interest Rate n Maturity Date n Pricing n Interest Payment Structure n Puts / Calls n Transfer Agent # n DTC Participant #

8 5593R- 8 The Office of Foreign Assets Control (OFAC) The Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury administers and enforces a series of laws that impose economic sanctions designed to further U.S. foreign policy and national security objectives. Sanctions are imposed against targeted foreign countries and territories, as well as specially designated nationals (SDN’s) and blocked persons, which may include terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. All financial institutions, including U.S. banks and subsidiaries of U.S. banks, are required to comply with the economic sanctions and embargo programs administered under regulations issued by OFAC. Systemic Screening within Underwriting Database

9 5593R- 9 Underwriting Work Flow n Verifies “Critical” Data Prior to Closing n 144A n Portal Indicator n Interest Payment Structure n Record Dates n DTC Participant # n Required Documentation Received n Quality Assurance (QA)

10 5593R- 10 n Packaging Underwriting Work Flow n Custodian is DTC OR n Custodian is Transfer Agent (FAST) DTC’s FAST program allows the Depository to place its customers’ assets in the custody of participating FAST Transfer Agents. In doing so, the movement of physical securities is minimized, thus reducing the risks associated with lost securities, as well as the costs of insuring, handling, and shipping physical certificates.

11 5593R- 11 n Closing Underwriting Work Flow n Fast Reject Automated Confirmation (FRAC) n Cut off Time: 1:15 P.M n Late Credit Closing

12 5593R- 12 n Verification of Asset Servicing Details n To Ensure Data Quality n Vendor (Bloomberg) n Master File Maintenance n GWIZ Underwriting Work Flow

13 5593R- 13 Communications External n Lead Underwriters n Financial Advisors n Agents n Counsel n DTC Participants n Correspondents n Issuers n Industry Groups n Standard & Poors n NYSE, American & NASDAQ

14 5593R- 14 Communications Internal Underwriting Securities Valuation Deposits Vault Other DTC Depts. Reorg Recon Planning Legal Redemptions Dividends

15 5593R- 15 MMI Program n Eligible MMI Products n Institutional Certificates of Deposit n Medium-Term Notes n Deposit Notes n Bank Notes n Commercial Paper n Automated Processing vs. Underwriting Process n Issuing/Paying Agents (IPAs)

16 5593R- 16 Older Issue Eligibility  Eligibility Request Form Submitted by DTC Participant  Copy of Certificate  LOR for Book-Entry Only Issues  Legal Opinion Required for Certain Restricted Securities

17 5593R- 17 Reengineering Objectives Strategic goal: implement a unified end-to-end platform from issuance through entire asset servicing life cycle –Provide more accurate and timely servicing information –Replace legacy sub-systems with newly architected platform –Automate and streamline redundant processes and data storage –Increase flexibility with rules-based system –Enhance functionality: ISO15022, multi-currency, international numbering systems –Reduce ongoing technology support costs –Support New Issue Information Dissemination

18 5593R- 18 New Issue Information Dissemination –Syndicate Desk Communicate to members of the underwriting syndicate, vendors, and non-syndicate members – partially automated/Manual Trading of New Issue –Middle Office (Trade support) Receipt and Set up of New Security Master Data - Manual or from vendor DTC Eligibility, Closing and Distribution –Syndicate Operations – Communication to DTC - Manual Current State of New Issue Processing

19 5593R- 19 Current State of New Issue Processing

20 5593R- 20 Future State of New Issue Processing New Issue Information Dissemination –Syndicate Desk Communication to members of the underwriting syndicate – Automated/Manual Communication to the Vendors/non syndicate members – Automated by DTC Trading of New Issue –Middle Office (Trade support) – Procurement/Receipt and Set up of New Security Master Data - Manual at firm or vendor – Automated by DTC DTC Eligibility, Closing and Distribution –Syndicate Operations – Communication to DTC and other industry utilities - Automated by DTC

21 5593R- 21 Future State of New Issue Processing New Issue Information Dissemination – How will DTC automate? –DTC is linking with Major Book Building/Running Services (Bondesk Syndicate, Dealogic, i-Deal, Marketpipe, NAPA, Bloomberg Deal, ZIA) –DTC has flexibility to link with underwriter’s proprietary Book Building/Running, trade processing, security master system(s) or service bureau –DTC is linking to information service providers, service bureaus, participants, and regulators Trading of New Issue – How will DTC automate? –DTC will provide for real time distribution of new issue information required for security master set up for DTC Participants and Bank Custodians. DTC Eligibility, Closing and Distribution – How will DTC automate? –Syndicate Operations – DTC will store new issue information for the purposes of eligibility closing and distribution

22 5593R- 22 Future State of New Issue Processing “The Real Time New Issue Electronic Pipeline”

23 5593R- 23 Future State Benefits New Issue Information Dissemination –Avoids re-keying – STP from bookbuilding/running systems –Automated regulatory compliance of MSRB rule G34 and NASD rule 6260 –Automated dissemination to vendors in real time – Bloomberg, Interactive, S&P, ect –Facilitates faster processing of secondary market trades - Automated receipt of security data in real time

24 5593R- 24 Future State Benefits Underwriting Eligibility, Closing and Distribution –Facilitates more timely and efficient eligibility process – No rework for institutional customer trade processing –Ability to view real times status of eligibility and closing process and take action –Facilitates better control of disincentive fees through an alarm clock warning system –Facilitates better control of the correspondent/clearing firm relationship –Enhanced audit trail - ability to view field(s) change history on web based screens –Greater ability to capture asset serving information and pass to DTC Corporate Actions System

25 5593R- 25 Future State Benefits Underwriting Eligibility, Closing and Distribution –Enhanced Functionality – Supports more complicated asset types Supports issues with multiple underwriters Supports streamlined over-allotment processing Supports issue queries Will support electronic agent confirmation of issue details Will support links to other industry utilities (e.g. CUSIP, PORTAL, Euroclear and Clearstream)

26 5593R- 26 Future State Practical Implications - “Out with the Old” –Hard Copy, Faxed, and ed information and offering documents will no longer be accepted by DTC –Discontinue separate s/fax’s/phone calls to information service providers, DTC, and other industry utilities –Web Underwriting System (WUN) - Retired –Participant Underwriting System (PUND) - Retired –DTC Prospectus box - Retired –Paper DTC Eligibility Questionnaire - Retired –Manual status of issue eligibility and closing process

27 5593R- 27 Future State -- “In with the new” –Web-based system with enhanced functionality Accessible through DTC SMART Network, or internet utilizing digital certificates Three factor authentication – User ID, Password, and location (via network or digital certificate) –User Access - Each Participant will have an access coordinator Each firms access coordinator can assign an access coordinator for the Underwriting system The access coordinator for the Underwriting system will be able to add, modify and delete users.

28 5593R- 28 Future State -- In with the new” –Electronic path into DTC for each asset class resulting in earlier delivery of information to DTC –e-Eligibility form –Correspondent underwriters must use system or utilize clearing firms – facilitates closer communication and coordination –Deal offering documentation must be uploaded into the system –Real time message based data distribution for each Asset Class –Real time deal status via an electronic “Dashboard”

29 5593R- 29 Questions


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