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Treatment of shortfalls - CASS Provision: Difference between revisions
Treatment of shortfalls - CASS Provision (view source)
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{{fullanat|cass|6.6.54|}} | |||
''Here is {{ps14/9}}, which explains much of the [[great CASS rewrite]].'' | ''Here is {{ps14/9}}, which explains much of the [[great CASS rewrite]].'' | ||
The following is being introduced to the CASS rules as of 1 June 2015 - essentially, upon a shortfall arising a custodian or prime broker must set aside “{{fcaprov|applicable assets}}” in a custody account to cover the potential loss each client would suffer if it were to go insolvent before resolving the shortfall. | The following is being introduced to the CASS rules as of 1 June 2015 - essentially, upon a shortfall arising a custodian or prime broker must set aside “{{fcaprov|applicable assets}}” in a custody account to cover the potential loss each client would suffer if it were to go insolvent before resolving the shortfall. | ||
Given typical omnibus segregation, where counterparty to a prime brokerage customer fails to settle into the {{tag|prime broker}} while simultaneously the {{tag|prime broker}} delivers a quantity of the same security out on behalf of a different customer, but in reliance on the purchased asset coming in, a shortfall will happen. Usually it will be quickly remediated, but where not (probably 3-5 business days) the PB will, under the new rules, need to take some action to mitigate the credit exposure its customers have to it as a result of the shortfall. | Given typical [[omnibus]] [[segregation]], where counterparty to a [[prime brokerage]] customer fails to settle into the {{tag|prime broker}} while simultaneously the {{tag|prime broker}} delivers a quantity of the same security out on behalf of a different customer, but in reliance on the purchased asset coming in, a [[shortfall]] will happen. Usually it will be quickly remediated, but where not (probably 3-5 business days) the [[PB]] will, under the new rules, need to take some action to mitigate the credit exposure its customers have to it as a result of the shortfall. | ||
{{nuts|CASS|6.6.54}} | {{nuts|CASS|6.6.54}} | ||
{{ | {{seealso}} | ||
*The [[great CASS rewrite]] | *The [[great CASS rewrite]] | ||
*{{ps14/9}} | *{{ps14/9}} | ||