Finance & Loans

DTCC Change Rules on Cost Basic Reporting Data Transfers

Financial advisors who were concerned about the upcoming federally-mandated changes to the cost basis reporting system received some good news last month, as Investment News reports that the Depository Trust and Clearing Co. (DTCC) has announced changes to its Cost-Basis Reporting Service that should remove much of the burden from the advisors and brokers and free their IT departments to work on other issues such as implementing new collateral management software.

Previously, the DTCC had only allowed firms to transfer cost basis information on transactions that passed through the Automated Customer Account Transfer Service (ACATS), a service of the DTCC’s subsidiary company the National Securities Clearing Corp. (NSCC). Changes will allow firms’ data to be passed to transfer agents, issuers, mutual funds, custodian banks and broker-dealers on both ACATS and non-ACATS transactions. This should allow firms to concentrate less of their efforts on cost basis reporting and spend more time on other elements such as improving their margin systems.

The advantages of tax lot accounting

As people are looking for ways to maximize their capital and other assets, they frequently look to software to help them find new approaches or eliminate costly redundancies. One example is collateral management software, which helps financial service providers make the most out of their back office resources and devote staff to other, more important tasks.

But there is another sector of software that can provide benefits to the financial services industry. An effective tax lot accounting software program can help keep track of all of their purchases – even if they make more than one purchase of the same security. Doing this can save people taxes by minimizing their current net worth through the deferment of the realization of capital gains.

In addition, enhanced cost basis reporting through tax lots can also help you determine which shares to sell first. By having all of your most expensive shares in one tax lot, you can realize tax savings and maximize your investments.

Interchange fees inconclusive

Advocacy efforts over the prospect of credit card interchange regulation have led to a gridlocked debate between retailers and credit card companies, reports the National Journal. Interchange fees are the costs stores pay to banks when customers use credit cards. According to the article, points supporting retailers include:

• Total costs to accept credit card payments for merchants have risen over time as consumers use cards more.
• Part of these increased costs may be the result how Visa and MasterCard competed to attract and retain bank issuers to offer cards by increasing the number of interchange fee categories and the level of these rates.
• Consumers who do not use credit cards or internet credit card processing may be paying higher prices for goods and services, as merchants pass on their increasing card-acceptance costs to all of their customers.
• Proposals for reducing interchange fees would benefit merchants. Consumers would also benefit if total merchant service companies reduced prices for goods and services, but identifying such savings would be difficult.

The Depository Trust & Clearing Company develops cost basis reporting software

The Depository Trust & Clearing Company (DTCC) announced this week that it is developing a new software solution designed to help financial services firms deal with the enhanced cost basis reporting requirements of The Emergency Economic Stabilization Act due to take effect in January 2011.

“Many in the industry had approached us to help solve this impending reporting challenge because they recognized that DTCC has the proven infrastructure and technical expertise to meet the federal mandate under such a short timeframe,” said Michael C. Bodson, DTCC Executive Managing Director, Business Management and Strategy. Bodson added that the cost basis software is an ideal fit for the company’s existing line of securities processing software and services.

Along with providing custody and asset servicing for more than 3.5 million securities issues from the United States and around the world, the DTCC is also one of the leading financial services software companies, providing clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives.

American Express purchases Revolution Money

American Express Co. is purchasing Revolution Money for nearly $300 million to keep up with trends in electronic payments, where new security features and internet credit card processing transaction options are changing traditional models, reports the Associated Press.

According to the article, merchant services provider Revolution Money offers payments authorized at checkout counters with a PIN number, with about 1 million merchants participating in the service. In order to reduce possible identity theft issues, Revolution Cards have no name, signature of account number.

“Acquiring Revolution Money is one step in expanding our reach in emerging payments, and one of the many we expect to take, but an important one," American Express Chairman and CEO Kenneth Chenault said in a conference call.
Revolution Money founder Jason Hogg said the acquisition by New York-based American Express will allow his company "to scale our technology and business years faster than we ever could on our own."

The main point of this acquisition is introducing existing American Express customers to alternative payment systems such as ecommerce merchant accounts, rather than having them go outside the company’s payment network.

Cantor Fitzgerald completed UK rollout of security processing solution

Cantor Fitzgerald has reported that it has completed the implementation of the SunGard Phase3 multi-asset, multi-currency securities processing software solution in its United Kingdom locations. The company said it is part of their goal to integrate their US and UK operations to their global securities processing.

Tom Anzalone, senior managing director of global operations at Cantor Fitzgerald, said that the rollout will allow Cantor Fitzgerald to better assess their risks and exposure while streamlining their IT process and ensuring global regulatory compliance.

“With the one Phase3 platform managing our operational data and providing a single source of information to our risk systems, we are able to access risk and exposure information faster and without the need for additional IT resources to support multiple points of integration that tend to complicate and delay the process,” he said.

In addition, Cantor uses SunGard’s Stream Report Writer for generating consolidated reports used to gain a holistic view of trades and transactions, fails and exceptions, risk, and general ledger accounting.

Landmark Bank of Florida faces regulatory scrutiny

The Federal Reserve Bank of Atlanta and the Florida Office of Federal Regulation have ordered Landmark Bank of Florida to strengthen its loan practices and increase their loan capital in the next 60 days, according to a report in the Tampa Bay Business Journal.

The bank has until January 5, 2010 to deliver a written plan for improving its credit risk management systems and credit administration program. Until that time, the bank is barred from extending or renewing loans to high-risk customers and must recalculate the way it handles loan and lease losses. The bank’s collateral management system has been under scrutiny by regulators for several months after the bank reported a total risk-based capital ratio of 7.25 percent, which is considered “undercapitalized” by the FDIC.

There are several steps that Landmark Bank of Florida could take to alleviate its problems, including the implementation of new financial services software to adequately track its risk management processes along with its current assets and risks.