[Federal Register Volume 65, Number 214 (Friday, November 3, 2000)]
[Notices]
[Pages 66249-66253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28228]


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FEDERAL RESERVE SYSTEM

[Docket No. R-1037]


Federal Reserve ACH Deposit Deadlines and Pricing Practices for 
Transactions Involving Private-Sector ACH Operators

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice.

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SUMMARY: The Board has approved a new approach to pricing automated 
clearing house transactions that the Federal Reserve Banks exchange 
with intermediaries that are defined as operators under the operating 
rules of the National Automated Clearing House Association. The Reserve 
Banks will initiate discussions with the private-sector ACH operators 
(PSOs) to negotiate the structure and level of fees that will be 
charged by the Reserve Banks for processing interoperator transactions 
as well as those fees that the Reserve Banks will pay the PSOs. The 
Reserve Banks will work collaboratively with the PSOs to establish 
deposit deadlines by which they would exchange interoperator 
transactions with each other and to address other operational issues. 
To permit time for necessary software modifications, the new 
interoperator deposit deadlines will be implemented by the Reserve 
Banks no later than June 2001 while the new fees will be implemented no 
later than September 2001.

FOR FURTHER INFORMATION CONTACT: Jack K. Walton II, Manager, Retail 
Payments Section (202/452-2660); Michele Braun, Project Leader, Retail 
Payments Section (202/452-2819); or Jeffrey S. H. Yeganeh, Senior 
Financial Services Analyst, Retail Payments Section, Division of 
Reserve Bank Operations and Payment Systems (202/728-5801); for the 
hearing impaired only, contact Janice Simms, Telecommunication Device 
for the Deaf (202/872-4984).

SUPPLEMENTARY INFORMATION:

I. Background

    The Federal Reserve Banks are collectively the nation's largest 
automated clearing house (ACH) operator and process more than 80 
percent of commercial interbank ACH transactions. PSOs process the 
remaining transactions and typically provide services, including 
processing and settling ACH transactions, similar to those offered by 
the Reserve Banks. PSOs and the Reserve Banks rely on each other for 
the processing of some transactions in which either the originating 
depository financial institution (ODFI) or receiving depository 
financial institution (RDFI) is not their customer. These interoperator 
transactions are settled by the Reserve Banks.
    Some industry representatives have expressed concerns that the 
Reserve Banks' price and service level policies have created barriers 
to open and vigorous competition among ACH operators because the 
policies do not recognize the role played by operators in the ACH 
system.\1\ Specifically, these representatives have maintained that the 
Reserve Banks' deposit deadlines and

[[Page 66250]]

price structure do not permit the PSOs to compete effectively in the 
provision of ACH services to depository institutions.
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    \1\ ACH Vision 2000 Task Force Recommendations, NACHA, 1997; The 
Role of the Federal Reserve and the Banking Industry in the Retail 
Electronic Payments Systems of the Future, The Bankers Roundtable, 
April 1998.
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    In response to the industry's concerns, the Board requested comment 
last year on the benefits and drawbacks of modifying the Reserve Banks' 
deposit deadlines and pricing practices for ACH transactions exchanged 
with PSOs (64 FR 27793, May 21, 1999). Specifically, the Board 
requested comment on whether the Reserve Banks should (1) modify their 
deposit deadlines and processing schedules, (2) modify their price 
structure for interoperator transactions, and (3) limit any 
modifications to PSOs only. Based on comments received, the Board 
concluded that adopting certain modifications to the Reserve Banks' 
deposit deadlines and price structure for ACH transactions exchanged 
with PSOs would enhance competition in the provision of ACH operator 
services to depository institutions.
    In May 2000, the Board requested comment on a proposal to modify 
the Reserve Banks' deadlines and pricing practices for ACH 
interoperator transactions that would promote competition in the 
provision of ACH services and address the concerns raised by some 
commenters (65 FR 34183, May 26, 2000). Specifically, the Board 
proposed the following modifications to the deadlines and price 
structure for ACH interoperator transactions that are processed by the 
Reserve Banks:
     Deposit deadlines: The Board proposed that the Reserve 
Banks work collaboratively with ACH operators to establish 
interoperator deposit deadlines by which the Reserve Banks and the PSOs 
would exchange interoperator transactions.
     Price structure: The Board proposed the following price 
structure for interoperator transactions processed by the Reserve Banks 
with price ranges based on preliminary cost analyses by the Reserve 
Banks.\2\ Further, the Reserve Banks indicated that they planned to 
maintain the current fee structure for their customers and did not 
anticipate any increases in fees resulting from this proposal.
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    \2\ In developing the proposed price structure for interoperator 
transactions, the Reserve Banks used a cost-based approach to set 
fees. The Reserve Banks attempted to identify costs related to 
network access, processing, and settlement and to price those 
components separately. Further, the Reserve Banks excluded certain 
costs that might not be incurred when services are provided to ACH 
operators so that the interoperator fee structure would reflect, as 
closely as possible, the cost structure for interoperator 
transactions.
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--First, the Reserve Banks would charge ACH operators a monthly network 
access fee of between $5 and $10 for each routing number they access on 
the Reserve Banks' ACH network.
    --Second, the Reserve Banks would charge ACH operators a per-item 
fee of between $0.002 and $0.004 for transactions they send through the 
Reserve Banks' ACH network.
    --Third, the Reserve Banks would charge depository institutions 
that send and receive all their transactions through PSOs a monthly 
settlement fee of about $20 rather than the current monthly account 
servicing fee of $25.\3\
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    \3\ The Reserve Banks would no longer provide customer service 
to depository institutions for transactions they send or receive 
through a PSO. These institutions would have to direct transaction 
and service-related inquiries to their PSOs. The Reserve Banks, 
however, would continue to provide customer service on settlement-
related questions.
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    --Fourth, the Reserve Banks would pay PSOs for commercial and 
government ACH transactions they send to depository institutions 
through those PSOs. Fees paid by the Reserve Banks to the PSOs would 
compensate the PSOs for the services they provide the Reserve Banks by 
delivering transactions to RDFIs. PSOs would not be required to adopt 
the Reserve Banks' price structure and fees for transactions sent to 
them by Reserve Banks but rather could establish their own price 
structure and fees.

     Eligibility: The Board proposed limiting the modified 
deadlines and price structure to intermediaries that are defined as ACH 
operators in the operating rules of the National Automated Clearing 
House Association (NACHA).

II. Summary and Analysis of Comments

    The Board received twenty-nine responses to its request for 
comment. The following table shows the number of comments received by 
category of commenter: \4\
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    \4\ Responses from trade associations were included with the 
organizations they present. Two trade associations (The American 
Bankers Association and The Association for Financial 
Professionals), however, did not fall into one specific category and 
are listed separately.

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                          Commenters                             Number
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Small banks, thrifts, and credit unions.......................         9
Large banks...................................................         6
ACH associations..............................................         3
Bankers' banks and corporate credit unions....................         3
Private-sector operators......................................         3
Federal Reserve Banks.........................................         2
Trade associations............................................         2
Clearing houses...............................................         1
    Total.....................................................        29
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    Overall, fifteen commenters supported and fourteen commenters 
opposed the Board's proposal. Those supporting the proposal generally 
tended to be smaller depository institutions; however, the American 
Bankers Association, two large banks, a bankers' bank, and the Reserve 
Banks supported the proposal as well. These commenters believed the 
proposal would enhance competition. They also believed that the 
proposal reflected a balanced approach towards addressing the 
competitive concerns of PSOs and the pricing concerns of small banks. 
Those opposing the proposal generally tended to be PSOs, ACH 
associations, and larger banks; however, two corporate credit unions, a 
clearing house, and the Association for Financial Professionals opposed 
the proposal as well. These commenters believed that the proposed 
modifications would not improve competition in the provision of ACH 
services and were primarily concerned that the proposed price structure 
would exacerbate current competitive imbalances.

A. Deposit Deadlines

    Summary of Comments--In its May 2000 request for comment, the Board 
proposed that the Reserve Banks work collaboratively with ACH operators 
to establish interoperator deposit deadlines by which the Reserve Banks 
and the PSOs would exchange interoperator transactions. The Reserve 
Banks' preliminary recommendation was that one interoperator deposit 
deadline be established at 2:30 p.m. eastern time for immediate 
settlement items and that another interoperator deposit deadline for 
next-day settlement items be established at 3 a.m. eastern time.\5\ 
Under the proposal, PSOs would continue to be free to establish other 
deadlines by which they would exchange interoperator transactions among 
themselves. Further, all ACH operators, including the Reserve Banks, 
would be free to establish deposit and delivery deadlines for their 
customers.
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    \5\ Immediate settlement items are settled on the same banking 
day as they are received while next-day settlement items are settled 
one or two banking days after they are received. The Reserve Banks' 
banking day for the receipt of ACH items is from 3 a.m. eastern time 
to 2:59 a.m. eastern time on the next calendar day. Only return 
items and National Association of Check Safekeeping items are 
eligible for immediate settlement.
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    Almost all commenters supported the Board's proposal to modify 
deposit deadlines. Commenters indicated that

[[Page 66251]]

the proposal provided an excellent starting point for discussions 
between the Reserve Banks and PSOs to establish deposit deadlines for 
interoperator transactions. These commenters believed that the 
preliminary recommendation would help level the playing field between 
Reserve Banks and PSOs and thus improve competition. Further, they 
believed that because the Reserve Banks currently receive almost all of 
their next-day item deposits well in advance of the 3 a.m. deposit 
deadline, most Reserve Bank customers would not be adversely affected. 
Most commenters believed that the deposit deadline modifications could 
be implemented independent of the remainder of the proposed 
modifications and that the Reserve Banks and PSOs would have to address 
a number of technical issues, such as how to handle requests for 
deadline extensions.
    One commenter, however, indicated that it would not be in favor of 
modifications that would shorten current deposit deadlines for Reserve 
Bank customers. Wachovia Bank noted that while the adverse impact of 
changes in deposit deadlines on Reserve Bank customers might be 
minimal, the Board should avoid any adverse impact. Another commenter, 
ABN AMRO, also voiced concerns about the potential earlier Reserve Bank 
customer deposit deadline for next-day items and suggested that the 
Board's long-term goal should be to make the deadline later than it is 
today.
    When it requested comment, the Board noted the problems posed by 
transactions that involve three operators. Currently, some of the 
transactions that PSOs deposit with the Reserve Banks are destined to 
other PSOs, which results in some transactions being processed by three 
operators.\6\ With interoperator deposit deadlines, however, if an 
operator receives a transaction from another operator at the 
interoperator deposit deadline that is destined to a third operator, 
the middle operator would be unable to forward the transaction timely 
because the deadline to deposit transactions with the third operator 
would have already passed. To address this issue, the Board suggested 
that NACHA evaluate whether its ACH operator definition should be 
revisited to require operators to exchange interoperator transactions 
directly with the operator serving the RDFI. In any case, to ensure 
that the Reserve Banks are able to forward the transactions to the 
RDFI's operator by the interoperator deposit deadline, the Board 
proposed that the Reserve Banks require all ACH transactions that need 
to be forwarded to another operator, including transactions deposited 
by a PSO, be deposited by the Reserve Banks' customer deposit deadline.
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    \6\ The Board understands that some depository institutions that 
use a PSO prefer to minimize the number of settlement entries they 
receive for their ACH transactions. Most of these institutions 
already receive and reconcile two settlements--one from their PSO, 
another from the Reserve Banks--and do not want to receive a third 
settlement for ACH transactions that PSOs exchange directly using 
the Private ACH Exchange (PAX) system. Thus, PSOs use the Reserve 
Banks to send some transactions destined to other PSOs, which 
minimizes the number of settlement entries for a given institution 
but results in three-operator transactions.
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    Commenters believed that the three-operator transaction issue could 
be addressed through NACHA operating rules but were careful to note 
that any NACHA operating rule modifications should not result in a 
degradation of service to RDFIs. The Chicago Reserve Bank, however, 
suggested that files deposited with the Reserve Banks by a PSO that 
contain transactions destined to a third operator should not be 
eligible for modified deadlines and pricing.
    Board Analysis--The Board has concluded that the Reserve Banks 
should work collaboratively with ACH operators to establish 
interoperator deposit deadlines by which the Reserve Banks and the PSOs 
would exchange interoperator transactions. The PSOs would continue to 
be free to establish other deadlines by which they would exchange 
interoperator transactions among themselves. Further, the Reserve Banks 
and the PSOs would be free to establish deposit and delivery deadlines 
for their customers.
    Based on the comments received in response to its request for 
comment, the Board believes that establishing interoperator deposit 
deadlines by which Reserve Banks and the PSOs would exchange 
transactions would enhance the competitive environment with minimal 
operational impact on Reserve Bank customers. Preliminary discussions 
between the Reserve Banks and the PSOs suggest that the interoperator 
deposit deadline for immediate settlement items would likely be set at 
2:30 p.m. eastern time and the interoperator deposit deadline for next-
day settlement items would be set at 3:00 a.m. eastern time. As a 
result, PSOs should be able to deliver transactions to RDFIs earlier 
than they do today, which should result in competitive RDFI delivery 
schedules between the Reserve Banks and PSOs. Assuming these deadlines 
are adopted, the Reserve Banks' customer deposit deadline for next-day 
items will be adjusted to permit the Reserve Banks to forward 
interoperator transactions to PSOs by the 3:00 a.m. deadline. Reserve 
Bank customer deposit deadlines will be finalized after the Reserve 
Banks and the PSOs set the interoperator deposit deadlines. In 
addition, the Reserve Banks and the PSOs will work together to address 
technical operational issues to ensure that the ACH system operates as 
efficiently and effectively as possible. The new interoperator exchange 
deadlines will be implemented no later than June 2001.
    The Board agrees with commenters that the three-operator 
transaction issue should be addressed through NACHA operating rules. 
Accordingly, the Board recommends that NACHA revisit its ACH operator 
definition and require operators to exchange interoperator transactions 
directly with the operator serving the RDFI. Further, to ensure that 
the Reserve Banks are able to forward interoperator transactions by the 
interoperator deposit deadline, the Reserve Banks will require all ACH 
transactions that need to be forwarded to another operator, including 
transactions deposited by a PSO, be deposited by the Reserve Banks' 
regular customer deposit deadline. The Board anticipates that the 
adoption of interoperator exchange deadlines will enable the Reserve 
Banks and PSOs to offer RDFIs competitive delivery schedules and 
believes that ODFIs will be able to modify their deadlines or 
operational procedures to meet an earlier Reserve Bank customer deposit 
deadline for next-day items.

B. Price Structure for Interoperator Transactions

    Summary of Comments.--Commenters were split on the appropriateness 
of the proposed price structure for interoperator transactions 
processed by the Reserve Banks. Supporters believed that the proposed 
price structure would promote competition in the provision of ACH 
operator services. Some supporters of the proposal, however, indicated 
that their support was premised on the assumption that these pricing 
changes would not result in higher fees to Reserve Bank customers, a 
result they would oppose.
    Commenters opposing the proposed price structure believed that it 
would not correct the current competitive inequities and could possibly 
harm competition. These commenters suggested that the proposed price 
structure would permit the Reserve Banks to continue to dominate the 
market for ACH operator services. These commenters believed that the 
proposal's use of network access fees based on the

[[Page 66252]]

number of RDFI routing numbers accessed and per-item fees based on the 
volume of transactions processed did not accurately reflect the Reserve 
Banks' cost structure. As a result, these commenters believed that the 
proposed structure would threaten the viability of PSOs and would 
result in PSO customers subsidizing Reserve Bank customers. These 
commenters recommended that the Reserve Banks and the PSOs exchange 
interoperator transactions at par, i.e., with no fees being assessed. 
If par exchange were not possible, commenters suggested recovering the 
network access costs through per-item fees.\7\
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    \7\ Several commenters appeared to have misconceptions about the 
proposed price structure. For example, Visa USA misunderstood the 
Board's proposed network access fee as applying to all routing 
numbers on the Reserve Banks' ACH network. The Board's proposal, 
however, stated that the Reserve Banks would charge PSOs a network 
access fee only for those routing numbers to which they actually 
sent transactions. Due to this misinterpretation, Visa significantly 
overestimated the fees that PSOs would pay for access to the Reserve 
Banks' ACH network under the proposed price structure. Similarly, 
the American Clearing House Association (ACHA) misinterpreted the 
Board's proposal as restricting how PSOs could establish fees they 
would charge Reserve Banks for interoperator transactions and as 
requiring PSOs to adopt a price structure that was based on the 
Reserve Banks' ACH cost structure. The Board's proposal indicated 
that the proposed price structure was how the Reserve Banks would 
charge PSOs for accessing the Reserve Banks' ACH network. The 
proposal did not require, as suggested in ACHA's response, that the 
PSOs adopt the proposed price structure when they set fees for 
Reserve Bank access to the PSOs' ACH networks. Indeed, the Board's 
concern about a potential escalation in the fees that operators 
might charge each other indicates that the Board recognized that 
operators would likely charge each other different fees under 
different price structures.
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    The Board also requested comment on how the fees that operators 
would charge each other might be restrained. The Board was concerned 
that an operator might be able to charge other operators excessive fees 
for access to RDFIs on its network if RDFIs were unwilling to accept 
the delivery of ACH transactions directly from multiple operators. The 
Board was also concerned about fee increases to Reserve Bank and PSO 
customers that could result from potentially spiraling interoperator 
fees as the Reserve Banks and PSOs attempted to cover the costs of 
interoperator transactions by charging each other higher fees. The 
Board noted that it believed that maintaining low, cost-based 
interoperator fees would enhance the continued growth of the ACH 
network.
    Commenters stated that the Federal Reserve does not have the legal 
authority to restrain or impose the fees that PSOs charge the Reserve 
Banks. These commenters noted that the potential need for fee 
restraints suggested that the proposed price structure was not 
economically viable. These commenters believed that the only restraints 
on interoperator pricing should be market-based. If interoperator fees 
become unreasonable, operators could establish direct connections to 
its competitors' customers thereby bypassing the operator assessing the 
unreasonable fees. These commenters, nevertheless, believed that 
restraints would not be necessary because it is likely that PSOs would 
charge Reserve Banks the same fees they are charged by the Reserve 
Banks. Other commenters, however, suggested that the Reserve Banks 
should negotiate interoperator fees with the PSOs and that Reserve 
Banks should not pay PSOs a higher fee than they charge the PSOs. By 
adopting these approaches, these commenters indicated that the Reserve 
Banks could ensure that their customers are not subsidizing the PSOs' 
operations.
    Board Analysis--The Board has approved a new approach to pricing 
interoperator transactions. As the Board noted in its request for 
comment, the Reserve Banks expend resources when they receive, process, 
and deliver interoperator transactions. Thus, exchanging interoperator 
transactions at no charge, as suggested by some commenters, could lead 
to inefficiencies in the processing of ACH transactions. The Board, 
however, has determined that the proposal to recover network costs 
through a network access fee based on the number of routing numbers 
accessed by PSOs would not be an appropriate component of a price 
structure for interoperator transactions.
    Based on its analysis of comments, the Board has concluded that the 
Reserve Banks should initiate discussions with the PSOs to negotiate 
the structure and level of fees that would be charged by the Reserve 
Banks for interoperator transactions as well as those fees that the 
Reserve Banks would pay the PSOs. The Board believes that negotiations 
between the Reserve Banks and PSOs should result in interoperator fees 
that would enhance competition in the provision of ACH operator 
services.\8\
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    \8\ The negotiated fees would apply to both commercial and 
government ACH transactions that the Reserve Banks send to 
depository institutions through PSOs.
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    The Board has also approved, as originally proposed, the settlement 
fee that would be assessed to depository institutions that send and 
receive all their transactions that are processed by the Reserve Banks 
through PSOs. Specifically, the Reserve Banks would charge a monthly 
settlement fee of about $20 per routing number, rather than the current 
monthly account servicing fee of $25, to settle interoperator 
transactions processed by the Reserve Banks for institutions that do 
not send ACH transactions directly to or receive ACH transactions 
directly from the Reserve Banks. This fee would enable Reserve Banks to 
recover the costs associated with settling interoperator transactions 
processed by the Reserve Banks.
    In addition, the Board has determined that PSOs should pay a 
reduced electronic connection fee. PSOs are currently charged 
electronic connection fees in accordance with the Reserve Banks' fee 
schedules. PSOs use their electronic connections to send interoperator 
transactions to the Reserve Banks. The Reserve Banks, however, also use 
these electronic connections to send interoperator transactions to the 
PSOs. As a result, Reserve Banks derive benefits from these electronic 
connections similar to those derived by the PSOs. Thus, the Board 
believes that the Reserve Banks should charge the PSOs only half the 
electronic connection fees they are being charged currently.
    The Board anticipates that the new price structure would be 
implemented no later than September 2001. The specific implementation 
date of prices for interoperator transactions will be announced well in 
advance of the effective date.

C. Eligibility

    Summary of Comments--The primary distinction between ACH operators, 
as defined by NACHA rules, and other intermediaries is that operators 
provide clearing, delivery, and settlement services for intraoperator 
transactions and exchange interoperator transactions with other 
operators.\9\ Third-party

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processors typically do not provide settlement services for 
transactions they process while correspondent banks typically do not 
provide the comprehensive clearing and delivery services provided by 
operators. Thus, the Reserve Banks tend to compete with PSOs, and not 
third-party processors or correspondent banks, in providing services to 
depository institutions.
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    \9\ NACHA recently adopted modifications to its definition of an 
ACH operator (NACHA Operating Rules, section 13.1.1). To qualify as 
a private-sector ACH operator, an entity must execute an agreement 
with NACHA to comply with or perform all of the following: adhere to 
NACHA operating rules and other applicable laws and regulations; 
execute agreements with a minimum of twenty independent depository 
institutions that bind the depository institutions to NACHA 
operating rules and the ACH operator's rules; provide clearing, 
delivery, and settlement services for intraoperator transactions; 
exchange interoperator transactions with other ACH operators; 
process and edit files based on the requirements of NACHA operating 
rules; evaluate the creditworthiness of and apply risk control 
measures to their customers; adhere to the Federal Reserve's Policy 
Statement on Privately Operated Multilateral Settlement Systems; and 
adhere to any NACHA performance standards for ACH operators. Under 
this definition, Electronic Payments Network, Visa, and American 
Clearing House Association are considered to be private-sector ACH 
operators. The Reserve Banks reserve the right to establish their 
own operator definition should they object to any future 
modifications to NACHA's definition of an ACH operator.
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    Commenters strongly supported the use of NACHA's operator 
definition to determine eligibility for deadline and price structure 
modifications. The Federal Reserve Banks of Chicago and Richmond, 
however, opposed the use of NACHA's operator definition. The Chicago 
Reserve Bank believed that, given some of the arbitrary aspects of 
NACHA's operator definition, limiting eligibility for deadline and 
price structure modifications to intermediaries that meet NACHA's 
operator definition could worsen the competitive position of other ACH 
intermediaries vis-a-vis operators and the Reserve Banks. The Richmond 
Reserve Bank believed that limiting eligibility to only a certain group 
of intermediaries that provide all of components of the bundle of 
services that comprise ACH operator services would be inconsistent with 
the spirit of the proposal, which recognizes the improved competitive 
environment associated with unbundling services.
    Board Analysis--The Board has concluded that the Reserve Banks' 
deadline and price structure modifications be limited to any 
intermediary that is defined as an operator under NACHA rules. The 
Board believes that the role of Reserve Banks in the ACH system is 
analogous to the role played by PSOs. ACH operators play a significant 
role in protecting the integrity of the overall ACH network and 
ensuring its interoperability and efficiency, a role that is separate 
and distinct from the role of other ACH intermediaries. Further, while 
the Board believes that certain aspects of NACHA's operator definition 
could be strengthened, the current definition does not preclude other 
entities from becoming new operators and competing with established 
operators.

II. Competitive Impact

    The Board conducts a competitive impact analysis when it considers 
a major operational change, such as that being proposed for ACH 
interoperator transactions. \10\ Specifically, in its analysis, the 
Board has assessed whether the interoperator deadlines and price 
structure would have a direct and material adverse effect on the 
ability of other service providers to compete effectively with the 
Reserve Banks in providing similar services, and if so, whether the 
adverse effect on competition is due to differing legal powers or 
constraints, or due to a dominant market position deriving from such 
legal differences.
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    \10\ Federal Reserve Regulatory Service, 7-145.2.
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    The purpose of the deadline and price structure modifications 
discussed above is to further enhance the competitive environment for 
ACH operator services. These modifications should enhance the ability 
of PSOs to compete with the Reserve Banks in providing ACH operator 
services to depository institutions. Specifically, PSOs will be able to 
establish customer deposit deadlines similar to those of Reserve Banks. 
Further, the Reserve Banks and PSOs will have the same ability to 
charge each other for the processing and delivery of ACH transactions 
to RDFIs that they serve. Moreover, depository institutions and other 
intermediaries might benefit from lower ACH transaction fees that could 
result from a more competitive market for the provision of ACH operator 
services. Thus, the Board does not anticipate any adverse effects on 
competition resulting from this proposal.

IV. Conclusion

    The Board has decided on the following modifications to the Reserve 
Banks' deposit deadlines and price structure for interoperator 
transactions that the Reserve Banks exchange with PSOs.
     First, the Board has decided that the Reserve Banks should 
work collaboratively with ACH operators to establish interoperator 
deposit deadlines by which the Reserve Banks and the PSOs would 
exchange interoperator transactions. The PSOs would continue to be free 
to establish other deadlines by which they would exchange interoperator 
transactions among themselves. The interoperator deposit deadlines will 
be implemented no later than June 2001.
     Second, the Board has approved a new approach to pricing 
interoperator transactions that PSOs send to RDFIs on the Reserve 
Banks' ACH network.

--The Reserve Banks will charge depository institutions that send and 
receive all their transactions through PSOs a monthly settlement fee of 
$20 per routing number, rather than the monthly account servicing fee 
(currently set at $25), to settle interoperator transactions processed 
by the Reserve Banks.
--The Reserve Banks will initiate discussions with the PSOs to 
negotiate the structure and level of fees that will be charged by the 
Reserve Banks as well as those fees that the Reserve Banks will pay the 
PSOs.
--The Reserve Banks will charge ACH operators half the published 
electronic connection fee to reflect the use of the connection by both 
ACH operators and the Reserve Banks to send each other interoperator 
transactions.

    The new prices for interoperator transactions will be implemented 
by the Reserve Banks no later than September 2001.
     Third, the Board has decided that the Reserve Banks' 
deadline and price structure modifications be limited to any 
intermediary that is defined as an operator under NACHA rules.
    The specific implementation date for each of the modifications 
outlined above will be announced well in advance of the effective 
dates.

    By order of the Board of Governors of the Federal Reserve 
System, October 30, 2000.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 00-28228 Filed 11-2-00; 8:45 am]
BILLING CODE 6210-01-P