[Federal Register Volume 87, Number 247 (Tuesday, December 27, 2022)]
[Notices]
[Pages 79331-79332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28095]


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FEDERAL RESERVE SYSTEM

[Docket No. OP-1796]


Modifications to the Federal Reserve Policy on Payment System 
Risk To Accommodate Enhancement to the Automated Claim Adjustment 
Process

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is revising part II of the Federal Reserve Policy on Payment System 
Risk (PSR policy) to add a posting rule to facilitate the 
implementation of enhancements to the Automated Claim Adjustment 
Process (ACAP).

DATES: Applicability Date: January 30, 2023.

FOR FURTHER INFORMATION CONTACT: Jason A. Hinkle, Deputy Associate 
Director (202-912-7805) or Benjamin J. Hobbs, Senior Financial 
Institution Policy Analyst (202-872-7549), Division of Reserve Bank 
Operations and Payment Systems. Cody Gaffney (202-452-2633), Senior 
Attorney, Legal Division, Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Avenue, Washington, DC 20551. For 
users of TTY-TRS, please call 711 from any telephone, anywhere in the 
United States.

SUPPLEMENTARY INFORMATION:

I. Background

    Part II of the PSR policy governs the provision of intraday credit 
(also known as daylight overdrafts) in accounts at the Reserve 
Banks.\1\ The PSR policy includes procedures, referred to as posting 
rules, that are used to measure account balances. The posting rules 
establish settlement times for debits and credits at Federal Reserve 
accounts for different payment types.
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    \1\ The Board's PSR policy is available at: https://www.federalreserve.gov/paymentsystems/psr_about.htm.
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    The ACAP is a feature of the Fedwire[supreg] Securities Service 
(``Fedwire Securities'' or ``Service'') that offers Fedwire Securities 
participants (participants) the option to automate principal and 
interest (P&I) tracking and claim adjustments related to transactions 
between participants that settle over Fedwire Securities.\2\ The 
Reserve Banks, in their capacity as fiscal agents for issuers of 
securities issued over Fedwire Securities, make P&I payments to record-
date holders of the securities.\3\ For some types of transactions 
between participants, such as repurchase agreements (repos), the 
participant identified as the record-date holder by the Service may not 
be entitled to the P&I payment pursuant to a separate agreement between 
the transaction participants. The ACAP offers an automated way for the 
record-date holder to transfer a P&I payment from its master account to 
the master account of the designated participant.
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    \2\ An ACAP claim adjustment is a transfer of funds from one 
Fedwire Securities participant to another participant over the 
Service.
    \3\ Issuers provide securities record dates and payment dates 
information to the Fedwire Securities Service. As an operational 
matter, a participant who is identified by the Service as the holder 
of a security after the Service closes on the business day prior to 
the security's record date is a record-date holder of the security. 
A record-date holder of a security is entitled to payment of P&I on 
that security, and the P&I payment is distributed to record-date 
holders on the payment date associated with the record date 
regardless of whether the participant still holds the security on 
the payment date.
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    In January 2022 the Federal Reserve Banks announced phased 
enhancements to the Service that will expand ACAP tracking to all 
coupon-paying securities issued over Fedwire Securities, add securities 
lending as a transaction type, and shift the timing of settling claim 
adjustments.\4\ Currently, ACAP adjustments are settled at 
approximately 4:30 p.m. ET via the National Settlement Service (NSS). 
Most, but not all claim adjustments are associated with that day's P&I 
payment which are generally made earlier in the day. The shift in the 
timing of settling claim adjustments is designed to narrow the timing 
gap between P&I payments and the associated claim adjustments. To 
effect this shift in timing, the ACAP enhancements include a design 
change to utilize new Fedwire Securities messages to settle claims, 
which result in claim adjustments being effected promptly after the 
associated P&I payments are made. This design change will be 
implemented January 30, 2023.
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    \4\ See FRBServices.org, New Implementation Plan for the 
Automated Claim Adjustment Process Enhancements (Jan. 18, 2022), 
https://www.frbservices.org/news/communications/011822-fedwire-securities-participants-service-providers. For the most recent 
information regarding the ACAP enhancements, see https://www.frbservices.org/resources/financial-services/securities/acap.
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II. New Posting Rule To Accommodate the ACAP Enhancements

    Currently, ACAP adjustments are not explicitly mentioned in the 
posting rules of the PSR policy because ACAP adjustments are settled 
using NSS, which has its own posting rule.\5\ The Board is adding a new 
posting rule to part II of the PSR policy to reflect the fact that ACAP 
adjustments will be made on a gross basis through Fedwire Securities 
throughout the business day.
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    \5\ NSS entries settle throughout the business day as the 
Reserve Banks process NSS files.
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    The ACAP enhancements and the new posting rule are not expected to 
increase risk to the Reserve Banks or the payment system, even as the 
ACAP expands to additional security and transaction claim types and as 
claim adjustment volume increases. ACAP debit adjustments are small 
compared to the participants' aggregate P&I credits on a given day and 
analysis shows that they are not expected to significantly impact 
participants' master account balances. In addition, all participants 
will be notified of all claim adjustments before the adjustments are 
processed.

III. Technical Changes to Text of the PSR Policy

    In addition to the new posting rule to accommodate the ACAP 
enhancements, the Board is modifying footnote 37 of the PSR policy by 
adding a hyperlink to a frequently updated document containing a list 
of securities issuers, including GSEs, rather than listing the 
securities issuers directly in the footnote. This change is not 
substantive in nature and reflects current practices that the Reserve 
Banks use to administer the PSR policy.

IV. Federal Reserve Policy on Payment System Risk

    [The following portion titled ``Federal Reserve Policy on Payment 
System Risk'' will not publish in the Code of Federal Regulations.]

Federal Reserve Policy on Payment System Risk

Part II. Federal Reserve Intraday Credit Policies

    Under ``Procedures for Measuring Daylight Overdrafts'', revise 
``Opening balance (previous day's closing

[[Page 79332]]

balance)'', ``Post throughout business day'' as follows:

    A. Daylight overdraft definition and measurement
* * * * *
    Procedures for measuring daylight overdrafts \34\
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    \34\ This schedule of posting rules does not affect the 
overdraft restrictions and overdraft measurement provisions for 
nonbanks established by the Competitive Equality Banking Act of 1987 
and the Board's Regulation Y (12 CFR 225.52).
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    Opening balance (previous business day's closing balance)

    Post throughout the business day:

+/- FedNow funds transfers
+/- Fedwire funds transfers \35\
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    \35\ Funds transfers that the Reserve Banks function for certain 
international organizations using internal systems other than 
payment processing systems such as Fedwire will be posted throughout 
the business day for purposes of measuring daylight overdrafts.
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+/- Fedwire book-entry securities transfers
+/- Fedwire book-entry automated claim adjustments \36\
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    \36\ Claim adjustments are debits and credits associated with 
the Fedwire Securities Service's Automated Claim Adjustment Process 
(ACAP).
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+/- National Settlement Service entries.
+ Fedwire book-entry interest and redemption payments on securities 
that are not obligations of, or fully guaranteed as to principal and 
interest by, the United States \37\
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    \37\ For a complete list of securities issuers, including GSEs, 
please visit https://www.frbservices.org/resources/financial-services/securities/user-guide.html.
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+ Electronic payments for matured coupons and definitive securities 
that are not obligations of, or fully guaranteed as to principal and 
interest by, the United States.\38\
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    \38\ Electronic payments for credits on these securities will 
post according to the posting rules for the mechanism through which 
they are processed, as outlined in this policy. However, the 
majority of these payments are made by check and will be posted 
according to the established check posting rules as set forth in 
this policy.
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    The term ``interest and redemption payments'' refers to payments of 
principal, interest, and redemption on securities maintained on the 
Fedwire Securities Service.
    The Reserve Banks will post these transactions, as directed by the 
issuer, provided that the issuer's Federal Reserve account contains 
funds equal to or in excess of the amount of the interest and 
redemption payments to be made. In the normal course, if a Reserve Bank 
does not receive funding from an issuer for the issuer's interest and 
redemption payments by the established cut-off hour of 4:00 p.m. 
eastern time on the Fedwire Securities Service, the issuer's payments 
will not be processed on that day.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Director of the Division of Reserve Bank 
Operations and Payment Systems under delegated authority.
Ann E. Misback,
Secretary of the Board.
[FR Doc. 2022-28095 Filed 12-23-22; 8:45 am]
BILLING CODE P