TA;DR – DTCC is no longer allowing participants to make manual adjustments to payments on stock loans and repo positions. EFFECTIVE JULY 9, 2021.
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Purpose:
So what does this mean?
Right now, the Participants (Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations) are able to make manual adjustments through DTC’s Adjustment Payment Order (APO).
But what is so wrong with that you ask?
Just read that highlighted text.. if that doesn’t scream market manipulation, idk what does.
“WHICH CAN UNEXPECTEDLY SUBJECT THE RECEIVING PARTY TO THE VALUE OF THE ADJUSTMENT.”
So a Participant can make an adjustment without the consent of the contra party. hmmm. this smells fishy.
Footnotes on 6 & 7. IN THE EVENT OF A PARTICIPANT DEFAULT – debit settlement obligations to be FULLY collateralized.
So NOW, DTCC is not letting this happen anymore, but directing all participants to use ClaimConnect to make manual adjustments.
Even better, APO has NO validation and matching process.
In conclusion:
I think DTCC is doing everything they can to make sure no one can cheat the system anymore while keeping everyone accountable. This is just a very rough summary; I know there are smarter apes out there who can connect wayyy more dots than I can.