Imported from previous forum
[ original email was from Bruce Garland - ]
The draft specification does not address two issues, although these might wait until use of these messages becomes more widespread:
First, there are often three custodians involved in the settlement chain. For example, an institution manages funds for a pension fund, which has a Swiss bank as custodian. That bank uses a UK bank as global custodian for settlements outside Switzerland. The UK bank uses a US bank as sub-custodian for settlements in Mexico. Settlement instructions need to go through the chain to authorize settlement. Iin the case of US equities, this is often shortened via the use of DTC’s ID system.
However, the second issue has to do with the way in which the ID system codes entities. There are about 150 banks which are direct members at DTC, and only these can authorized settlements. In the ID system, these banks are coded as "agents" (custodians), even though they are often the clearers or sub-custodians (these terms have the same meaning, though the former is used for domestic relationships, and the latter for foreign) for other custodians. The many institutional custodians around the world which are not DTC participants are coded in ID as the "institiution" or as an "interested party". The specifications will need to define a standard method for identifying enitities involved in the trade settlement, whether based on actual roles or on the ID practice.