New rule sets settlement times for daylight overdrafts

A new rule establishing settlement times for debits and credits to banks’ Federal Reserve accounts for certain transactions was issued Wednesday by the agency, it said in a release.

The Federal Reserve said the rule was included in technical updates it issued to its policy governing the provision of intraday credit (or daylight overdrafts) in accounts at the reserve banks. According to the Fed, the updates streamline the settlement process and shorten the time needed for debits and credits to settle. They are effective Jan. 30, the Fed said.

More specifically, in its final rule, the agency said the regulation is intended to accommodate enhancements to the Automated Claim Adjustment Process (ACAP), a feature of the Fedwire Securities Service that offers participants the option to automate principal and interest (P&I) tracking and claim adjustments related to transactions between participants that settle over Fedwire Securities. The reserve banks, the Fed noted, as fiscal agents for issuers of securities issued over Fedwire Securities, make P&I payments to record- date holders of the securities.

“Currently, ACAP adjustments are not explicitly mentioned in the posting rules of the PSR (payment system risk) policy because ACAP adjustments are settled using NSS (National Settlement Service), which has its own posting rule,” the Fed wrote. “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. “

Federal Reserve Board issues technical updates to its policy governing the provision of intraday credit in accounts at Federal Reserve Banks