DTCC - The Outlook for 2007

Rich Lanning

BDUG

October 2006

2

Technology / Communication Plans for 2007

•PBS 2.0

•SMART Messages

•Multi Protocol Label Switching Upgrade (MPLS)

•Common Data Transfer Services

•Web Service Simplified Sign-on

•PBS 2.0

•SMART Messages

•Multi Protocol Label Switching Upgrade (MPLS)

•Common Data Transfer Services

•Web Service Simplified Sign-on

3

PBS Version 2 Update

• PBS 2.0 Launch

• Internal Pilot (8/7 – 9/30)

• External Beta

• 2 Firms (10/1 – 10/31)

• 10 Firms (11/1+)

• General Availability – Phased Rollout (2/15)

• Benefits

• Single sign-on between PBS and PBS 2.0 functions

• Applications re-platform

• Off the mainframe

• Enhanced security framework (seamless to users)

• PBS 2.0 Launch

• Internal Pilot (8/7 – 9/30)

• External Beta

• 2 Firms (10/1 – 10/31)

• 10 Firms (11/1+)

• General Availability – Phased Rollout (2/15)

• Benefits

• Single sign-on between PBS and PBS 2.0 functions

• Applications re-platform

• Off the mainframe

• Enhanced security framework (seamless to users)

4

Urban Legend ?!

•PBS Slowdown w/ Settlement between 1-3 PM

• Contact CSC (1 888 382 2721 - Option 1 PBS related problem) as they occur

• State that user is experiencing a "disruptively slow response time on PBS", the PBS function they are using, and the approximate time they first experienced the issue.

• Will not be able to immediately remedy the situation but that we plan to use the collected information to analyze and determine the cause and solutions.

•PBS Slowdown w/ Settlement between 1-3 PM

• Contact CSC (1 888 382 2721 - Option 1 PBS related problem) as they occur

• State that user is experiencing a "disruptively slow response time on PBS", the PBS function they are using, and the approximate time they first experienced the issue.

• Will not be able to immediately remedy the situation but that we plan to use the collected information to analyze and determine the cause and solutions.

5

PTS Screenscraping

•Uploads for DO, NDO, IPOS and PO to be handled as part of 2007 planning

•Investigating alternate delivery of PBS data

• CA Re-Engineering - Messages will be published and the on-line queries will be supported with the ability to export lists to Excel.

• CCF Files – • Projection files (CSHPRJ), • intra-day allocation files (CSHSTA - CSHSTJ), • EOD allocation files (CSHSET)• EOD unallocated files (CSHUNL)

•Please do not screenscrape PBS!!

•Uploads for DO, NDO, IPOS and PO to be handled as part of 2007 planning

•Investigating alternate delivery of PBS data

• CA Re-Engineering - Messages will be published and the on-line queries will be supported with the ability to export lists to Excel.

• CCF Files – • Projection files (CSHPRJ), • intra-day allocation files (CSHSTA - CSHSTJ), • EOD allocation files (CSHSET)• EOD unallocated files (CSHUNL)

•Please do not screenscrape PBS!!

6

SMART Messages

•Fact: 3270 printer support will be phased out over time

•SMART Messages is now generally available – Please try it!

•Deposit ticket options are still being reviewed and will be finalized shortly

•Fact: 3270 printer support will be phased out over time

•SMART Messages is now generally available – Please try it!

•Deposit ticket options are still being reviewed and will be finalized shortly

7

SMART/Messages

Short Term deliverables

•Home Page

•Display more than 5 days worth of available tickets - Max is 7 days.

•Update Replay button in order to be more intuitive

•Enhanced sorting capabilities

Short Term deliverables

•Home Page

•Display more than 5 days worth of available tickets - Max is 7 days.

•Update Replay button in order to be more intuitive

•Enhanced sorting capabilities

8

SMART/Messages

•Ticket Display Page

• When viewing group of actual tickets be able to:• Provide better delineation between

tickets• Allow users to search for ticket specific

information• Allow users to print individual/specific

tickets w/in all shown and not just the entire range

• Enhanced search capabilities:• Account #• $ amount• Status• Other ticket specific information

•Ticket Display Page

• When viewing group of actual tickets be able to:• Provide better delineation between

tickets• Allow users to search for ticket specific

information• Allow users to print individual/specific

tickets w/in all shown and not just the entire range

• Enhanced search capabilities:• Account #• $ amount• Status• Other ticket specific information

9

SMART/Messages

•Message List Page•Display more than 30 tickets at a time

(however, we need to keep a limit on the total number displayed as that could increase response times)

•Allow users to move between groups of 30 tickets instead of using the back and forth buttons (e.g. 1-30, 31-60, 61-90, etc.)

•Message List Page•Display more than 30 tickets at a time

(however, we need to keep a limit on the total number displayed as that could increase response times)

•Allow users to move between groups of 30 tickets instead of using the back and forth buttons (e.g. 1-30, 31-60, 61-90, etc.)

10

SMART/Messages

Long Term Enhancements

•Home Page

•Enhanced sorting capabilities• Ticket type• Use of filters/ticket specific information

•Alerts• Notify users when something new has come. • Allow users to define alert

parameters.

• Parameters to include: Time, Ticket Type, Other Ticket Specific Information.

Long Term Enhancements

•Home Page

•Enhanced sorting capabilities• Ticket type• Use of filters/ticket specific information

•Alerts• Notify users when something new has come. • Allow users to define alert

parameters.

• Parameters to include: Time, Ticket Type, Other Ticket Specific Information.

11

SMART/Messages

•Home Page (cont.)

•Allow users to create a profile (i.e. define which ticket types should go to which destination – 00, 01, 02, xx)

•Indicate which tickets in a range of tickets have already been printed

•Message List Page•Display ticket specific information in the message text field.

•Home Page (cont.)

•Allow users to create a profile (i.e. define which ticket types should go to which destination – 00, 01, 02, xx)

•Indicate which tickets in a range of tickets have already been printed

•Message List Page•Display ticket specific information in the message text field.

12

SMART/Messages

•Ticket Display Page

•Identify when a ticket has already been printed, especially when a range of tickets has been printed.

•Allow tickets to be downloaded either individually or in groups so users can archive

•Ticket Display Page

•Identify when a ticket has already been printed, especially when a range of tickets has been printed.

•Allow tickets to be downloaded either individually or in groups so users can archive

13

MPLS Network Upgrade

•A technology “refresh” which requires swapping out the “old” frame relay circuits & routers

• The new MPLS routers & circuits will offer optional features such as encryption

•It is not a small effort & we hope to have it significantly completed in 2007

• We ask for your assistance with the coordination with this task

•A technology “refresh” which requires swapping out the “old” frame relay circuits & routers

• The new MPLS routers & circuits will offer optional features such as encryption

•It is not a small effort & we hope to have it significantly completed in 2007

• We ask for your assistance with the coordination with this task

14

Common Data Transfer Service

•An effort to re-engineer our message & file systems onto a single enterprise-wide architecture

•Meeting with participants between now & the end of 2006 to examine message & file interfaces

•Results will be published in Q2 2007

•An effort to re-engineer our message & file systems onto a single enterprise-wide architecture

•Meeting with participants between now & the end of 2006 to examine message & file interfaces

•Results will be published in Q2 2007

15

Web Service Simplified Sign On

•Will be swapping out existing PC Web Direct digital certificates with new DTCC Web Direct certs

•Piloted in October with 10 firms. November general migration of ACATS & MF services

•Will work with each firm’s Access Coordinator to review & authenticate each user’s existing access

•Will be swapping out existing PC Web Direct digital certificates with new DTCC Web Direct certs

•Piloted in October with 10 firms. November general migration of ACATS & MF services

•Will work with each firm’s Access Coordinator to review & authenticate each user’s existing access

DEMATERIALIZATION

17

Direct Registration System (DRS)

•July 2006:

•SEC rule approved - all exchange listed issues must be DRS eligible

• 1/1/2007: new issues coming to market must be DRS eligible

• 1/1/2008: all listed issues must migrate to DRS

•SIA approaches regional exchanges

•July 2006:

•SEC rule approved - all exchange listed issues must be DRS eligible

• 1/1/2007: new issues coming to market must be DRS eligible

• 1/1/2008: all listed issues must migrate to DRS

•SIA approaches regional exchanges

18

DRS – Jan 2007 – New Issues

• Underwriter awareness

• Information flow to Syndicate Operations Division

• Letters to all underwriters

• @ DTCC article

• US Facilities shut down

• Eliminate Hold and Bust function

• Minimal transaction volumes

• 2 “Bust” per day.

• Certificate transactions continue to decline

• Underwriter awareness

• Information flow to Syndicate Operations Division

• Letters to all underwriters

• @ DTCC article

• US Facilities shut down

• Eliminate Hold and Bust function

• Minimal transaction volumes

• 2 “Bust” per day.

• Certificate transactions continue to decline

19

DRS

• Mid 2007:

• Begin analysis of eliminating cert. for DRS eligible issues

• Info exchange with DTCC Board, SIA, and industry

• 3Q 07: Implement DRS processing enhancements

• Move “all” shares

• Move “all”, sell fractions

• Move “all”, terminate account, sell fractions

• Mid 2007:

• Begin analysis of eliminating cert. for DRS eligible issues

• Info exchange with DTCC Board, SIA, and industry

• 3Q 07: Implement DRS processing enhancements

• Move “all” shares

• Move “all”, sell fractions

• Move “all”, terminate account, sell fractions

20

DRS

•Jan 2008:

• All NYSE, NYSE Arca, Nasdaq, and Amex issues must be DRS eligible

• Expand DRS to other exchanges

•2Q 08:

• Default to “statement only” for DRS eligible issues

• Currently: 80% of WTs are for DRS eligible issues

•Jan 2008:

• All NYSE, NYSE Arca, Nasdaq, and Amex issues must be DRS eligible

• Expand DRS to other exchanges

•2Q 08:

• Default to “statement only” for DRS eligible issues

• Currently: 80% of WTs are for DRS eligible issues

21

WTs

•2007:

• Avg. daily WT cert. volumes decline by 22%

• WT DRS statement volumes increase by 50%

•2Q 07:

• Explore limited processing days each week for WTs

•2007:

• Avg. daily WT cert. volumes decline by 22%

• WT DRS statement volumes increase by 50%

•2Q 07:

• Explore limited processing days each week for WTs

22

WTs

•Mid 2008:

• WT processing truncates to 2X a week

• Prepare to eliminate DMD processing

•4Q 08:

• Sunset DMD functionality

•Mid 2008:

• WT processing truncates to 2X a week

• Prepare to eliminate DMD processing

•4Q 08:

• Sunset DMD functionality

23

Deposits

• 2Q 06: Efforts continue to expand Paperless Legal program• Letters and flyers to agents

• @DTCC articles

• One-on-one contact with agents and participants

• Jan 2007:

• “No paper” processed for legals

• Six month break-in period / paper stripped & returned for PLAs

• Presentments outside of DTC for non-participating agents in July 2007

• 2Q 06: Efforts continue to expand Paperless Legal program• Letters and flyers to agents

• @DTCC articles

• One-on-one contact with agents and participants

• Jan 2007:

• “No paper” processed for legals

• Six month break-in period / paper stripped & returned for PLAs

• Presentments outside of DTC for non-participating agents in July 2007

24

Deposits

•July 2007:

• No paper legal transactions accepted by DTC

•Sept 2007:

• DTC begins to charge for paper legal transaction rejects

•4Q 2007:

• Explore limited processing days each week for deposits

•July 2007:

• No paper legal transactions accepted by DTC

•Sept 2007:

• DTC begins to charge for paper legal transaction rejects

•4Q 2007:

• Explore limited processing days each week for deposits

25

Deposits

•2Q 08:

• Truncate deposit processing to 2X each week

• Consider sun-setting BDS

• Exceptions:

• Reorg deposits

• Custody deposits

• Restricted deposits

•2Q 08:

• Truncate deposit processing to 2X each week

• Consider sun-setting BDS

• Exceptions:

• Reorg deposits

• Custody deposits

• Restricted deposits

26

Non-Transferables

•2007:• Over 1 million cert. in vault

• PREM and Destruction process continues

• As cert. decline, economies of scale diminish

•Jan 2007:• Fees increase

•3Q 2007:• Explore eliminating new deposits

• Fee increases considered

•2007:• Over 1 million cert. in vault

• PREM and Destruction process continues

• As cert. decline, economies of scale diminish

•Jan 2007:• Fees increase

•3Q 2007:• Explore eliminating new deposits

• Fee increases considered

27

Custody

•2007:• Growth continues as less fungible cert. in

circulation

• Vault houses over half million cert. and growing

• All manual processes, with no economies of scale

•1Q 08:• Recommend “right sizing” fees

•3Q 08:• Plan for sun-setting of ESS service

•2007:• Growth continues as less fungible cert. in

circulation

• Vault houses over half million cert. and growing

• All manual processes, with no economies of scale

•1Q 08:• Recommend “right sizing” fees

•3Q 08:• Plan for sun-setting of ESS service

28

Custody

•1Q 09:

• Evaluate options for processing efficiencies and cost cutting

•1Q 09:

• Evaluate options for processing efficiencies and cost cutting

OTHER 2006 / 2007 NEWS

30

Other News You Can Use!

•Settlement Hotline Established – 212 855 5800

•2007 Fee Impact Analysis will be available in late November

•Real time link between Omgeo’s Tradesuite & DTC in November – Late Affirm Processing

•DTCC Learning – Review certification opportunities & new e-learning offerings

•2007 BCP Testing & Out of Region Recovery Planning

•Settlement Hotline Established – 212 855 5800

•2007 Fee Impact Analysis will be available in late November

•Real time link between Omgeo’s Tradesuite & DTC in November – Late Affirm Processing

•DTCC Learning – Review certification opportunities & new e-learning offerings

•2007 BCP Testing & Out of Region Recovery Planning

Annual Meeting Recap

32

ATP Re-Design

•Feedback on handout describing the holiday processing proposal

•ISO 15022 Message Formats Feasibility

•Real-time 24x6

•Feedback on handout describing the holiday processing proposal

•ISO 15022 Message Formats Feasibility

•Real-time 24x6

33

DTC Operational Metrics

•Like you, we have hundreds of internal operational performance metrics.

•We always tell you how we are doing... after we do it.

•This year we selected 17 metrics from our catalog that we thought clients would be most interested in. We vetted those with the OAC and ASAB in 2005.

•We set targets and are monitoring performance with the OAC and ASAB. We are planning to distribute more broadly in 2007.

•We hope this adds additional transparency and accountability.

•Are there other metrics you would be interested in for next year?

•Like you, we have hundreds of internal operational performance metrics.

•We always tell you how we are doing... after we do it.

•This year we selected 17 metrics from our catalog that we thought clients would be most interested in. We vetted those with the OAC and ASAB in 2005.

•We set targets and are monitoring performance with the OAC and ASAB. We are planning to distribute more broadly in 2007.

•We hope this adds additional transparency and accountability.

•Are there other metrics you would be interested in for next year?

34

Structured Securities

•Be mad as hell and pledge not to take it anymore.

•White papers are nice but it's time for action.

•Paying agents are not the problem - the structure of many deals is.

•The community is together trying to separate the bad from the good deals and make recommendations for each.

•We do not want to harm to the investor with our actions.

•BDUG is welcome to the table!

•Be mad as hell and pledge not to take it anymore.

•White papers are nice but it's time for action.

•Paying agents are not the problem - the structure of many deals is.

•The community is together trying to separate the bad from the good deals and make recommendations for each.

•We do not want to harm to the investor with our actions.

•BDUG is welcome to the table!

QUESTIONS?