Fund firms are getting a new anti-market-timing toolset from the Depository Trust & Clearing Corporation (DTCC). The Kansas City-based back-office specialist said Thursday that it has launched a service intended to help firms comply with the SEC's Rule 22c-2. The service is called Networking for Standardized Data Reporting and was created with input from the Investment Company Institute (ICI).

The planned adoption of Rule 22c-2 has caused concern among fund firms and distributors who worry that current systems are not ready to provide the information required by the rule. Rule 22c-2 requires fund companies to create agreements with intermediaries in order to access shareholder data within omnibus accounts and evaluate trading patterns for possible market-timing activity.

"With close collaboration from a working group of the Investment Company Institute, we've been able to deliver a solution two months ahead of schedule and provide the industry with ample time to program and test prior to the SEC's October 16 deadline," said Barbara Simon, DTCC vice president, Relationship Management.

DTCC officials said their service will leverage technology in NSCC's Networking service for fund firms to more accurately track and record instances of frequent trading in omnibus accounts, and then use that information to impose short-term redemption fees when they apply. The DTCC is the parent organization to the National Securities Clearing Corporation (NSCC).

The NSCC has added a data stream to the service needed to support the industry's compliance requirements that will provide fund companies with an automated, standardized and centralized method of requesting and receiving information through DTCC. According to DTCC officials, Fund firms will be able to request information at two levels from distributors:

• the summary level for super omnibus accounts (comprising multiple plans, trusts and/or investor omnibus accounts). Data can include account numbers, dollar amounts and numbers of buys and sells
  
  
• the detail level, where a fund company uses summary level data to request more specific information, such as details on shareholders in a 401(k) or retirement plan

The service will also be made open to secondary intermediaries in the distribution chain. Secondary intermediaries can include third-party administrators and recordkeepers in defined contribution plans.

DTCC is also making an additional service -- Data Services Only or DSO -- to firms in the chain who are not Networking participants. A DSO member would be able to use Networking to pass information directly to the funds requesting it, or to their transfer agents. 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE