Financial Update (January-March 1996)

Book-Entry Securities Update

Firm Closing Times Change

On Jan. 2, the Federal Reserve System implemented firm closing times of 3:15 p.m. Eastern Time (ET) for transfer origination and 3:30 p.m. ET for reversals for the Fedwire book-entry securities transfer system. The new schedule should reduce uncertainty about the closing times, enabling participants to manage resources more effectively.

The Federal Reserve may grant extensions to the closing time in response to significant problems at a major bank or dealer, a Federal Reserve system problem, or to prevent market disruptions. Depository institutions may request an extension of the 3:15 p.m. transfer origination deadline at two times, by 2:54 p.m. and by 3:09 p.m. The deadline for requesting an extension of the reversal/closing time is 3:24 p.m. If extensions are granted, the Federal Reserve will broadcast extension information to all on-line institutions by no later than 2:55 p.m. or 3:10 p.m. for transfer origination and 3:25 p.m. for the reversal closing time.

A supplement to the standard book-entry operating circular reflecting the new closing times will be distributed when available.

Atlanta to Begin National Book-Entry System in 1997

In April, the Federal Reserve System will begin a district-by-district schedule of replacing the current securities system with the National Book-Entry System (NBES), and the Atlanta Fed is scheduled for implementation in October 1997.

The NBES will offer several enhancements to securities processing, such as:

  • More flexible account structure. More accounts will be available in NBES than in the current securities system. The new account structure will add to the standard investment, customer, trust, and dealer accounts by providing the capability of opening additional accounts to support specific business needs.
  • All transactions by wire. Every transaction that affects account holdings will be handled as a wire transfer message, including maturities, account, and interbank transfers. Principal and interest payments will also be made by wire transfer. Real-time updates for these transactions will be posted to the Federal Reserve's account balance monitoring system, and immediate notification to on-line customers will be provided.
  • Enhanced reconciliation tools. NBES will offer a variety of innovative message, terminal, and account reconcilement tools that simplify the end-of-day reconciliation process.
  • Reposition window. NBES will support a new processing time after the close of the reversal period, which will allow depository institutions to reposition their securities holdings within their accounts.
Additional features will be improved contingency and disaster recovery capabilities. NBES will also continue to meet new needs as business demands change. Its highly flexible, modular design will allow new requirements to be incorporated with ease and speed.

Fedline users will receive new software for the NBES implementation. Computer interface protocol specifications (CIPS) are available to depository institutions and vendors with a computer interface link to the securities system. Hardware changes will not be required for Fedline or computer interface customers.

As the Atlanta Fed's implementation date approaches, a series of orientation sessions will be scheduled to introduce participating depository institutions, vendors, participating government agencies, and banking industry groups to the new system. Fedline training sessions will also be scheduled.

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