American commercial banks began offering automated transfer service accounts in the late 1970s, building off of the success of earlier telephone transfer services. The National Securities Clearing Corporation (NSCC) was founded in 1976 and has since served the financial sector as a settlement, risk management, information, and settlement services provider.

After that, the NSCC built and unveiled the Automated and Standardized Asset Transfer method (CATS), which ultimately replaced the prior method of manual asset transfers. The ACATS system will initiate and promptly deliver the necessary asset transfer document to the former asset depositing firm after the customer has signed and submitted it to the new receiving company.

When a client's basic customer information matches that of the receiving party, the receiving party and the transferring party can immediately record the transfer of the client's assets out of their systems and into theirs. The customer is not required to take any action related to the transfer-out or transfer-in accounts during this time, allowing for a smooth transition of assets.

What is Automated Customer Account Transfer Service?

A customer's ability to move their different financial instruments from one institution's Trading Account to another is facilitated by the ACATS (Automated Customer Account Transfer Service), an electronic mechanism. Financial or stock-brokerage institutions are typical examples.

Many different investments and assets can be transferred with the aid of ACATS. ACATS links to the SERV system or NDCC's funds to facilitate the transfer and transaction of mutual funds. In the event of an account transfer, the system expedites the re-registration of money.

ACATS also integrates with IPS to provide the information and details required for re-registering between the two firms as part of the insurance asset transfer. ACATS transfers typically take between four and six business days to complete.

However, if any party looks to be in transfer default, the ACATS transaction can be undone because it is not guaranteed. This infrastructure was created by the NSCC (National Securities Clearing Corporation), which later merged with the Depository Trust and Clearing Corporation (DTCC) to form NSCC.

How does ACATS work?

The ACATS is a digital system for exchanging the ownership of stocks, bonds, mutual funds, and other securities between brokerage accounts. This approach renders using multiple brokerage firms to complete an asset transfer unnecessary. Compared to the time-consuming and inefficient reciprocal technique, this new system facilitates the transfer of assets between companies.

The ACATS program normalizes the steps involved in moving funds between trading accounts. After the client holding the receiving account has obtained the client's consent or signature on the transfer paperwork, the ACATS system will authorize the transfer.

Benefits of ACATS

The ACATS system makes moving clients' funds between financial institutions easier. To be more specific, the ACATS system provides four benefits over the standard transfer method:

1. Save precious minutes with ACATS. ACATS facilitates the efficient and timely transfer of assets in client accounts through standardization, centralization, and automation.
2. The ACATS technology ensures compliance with the standards set by the US Financial Regulatory Authority (FINRA) during the transfer procedure, all while cutting down on regulatory expenses.
3. The ACATS service may accommodate numerous transfer needs simultaneously to maximize processing capacity per unit of time and minimize transfer costs.
4. ACATS uses a dependable and secure Internet connection module to guarantee the safety of monetary transactions.

Features of ACATS

• Using ACATS, investors and traders may buy and sell various financial instruments, including stocks, bonds, trusts, and options.
• With ACATS, companies and banks may more easily and quickly trade securities with one another.
• The NSCC's Insurance Processing Service is another service that ACATS communicates with. IPS provides the relevant data to insurance companies to record the transfer of insurance assets between two brokerage firms.
• The NSCC's Fund/SERV system is linked to ACATS. Mutual fund transactions are cleared and settled using the NSCC's Fund/SERV system. When clients switch financial institutions, this tool facilitates the speedy re-registration of their fund positions.
• The system reduces settlement fees for transactions. Also, settlements may be processed fast because of ACATS' uniform procedures.

Eligibility for ACATS

Members in good standing of the NSCC and DTC bank customers who meet the requirements may use ACATS. To re-register a mutual fund position to or from them directly, NSCC Mutual Fund Service Members are authorized to use the service on a limited basis but only as the counterparty to a transfer started by a broker-dealer or bank.

All equities, ETFs, cash, bonds, and most mutual funds are available for client transfers via the ACATS platform. If an institution participates in ACATS and the NSCC, the ACATS system can transfer CDs issued by that institution. In addition to taxable accounts, trusts, IRAs, and brokerage 401(k)s, ACATS is compatible with any account.

Using the ACATS system to trade in certain securities is impossible. Because an insurance provider keeps an annuity, it cannot be transferred. The customer must complete the proper paperwork and commence the process to change the annuity's agent of record.

ACATS's Potential Field of Use

According to the trading regulations of the NSCC, any qualified or certified NSCC full-service members and bank members of the American Deposit Trust and Clearing Corporation (DTCC) are eligible to utilize the ACATS system. As a bonus, NSCC mutual fund service members can also make restricted use of the service.

Currently, the ACATS system allows contractual clients to transfer the majority of asset types, including but not limited to equities, ETFs, options, bonds, cash, and most mutual funds. Additionally, the ACATS system allows users to move CDs across financial institutions.

There are many other kinds of accounts, and ACATS applies to the vast majority of them, including taxable accounts, individual retirement accounts (IRA), basic investment accounts (Brokerage accounts), retirement benefit plans 401(k), etc. While ACATS applies to most investment accounts, it does not include those owned by insurance companies and some professional organizations.

Conclusion:

Eligible participants in ACATS can quickly and easily enter, evaluate, and settle client account transfers with one another using automated processes. The solution streamlines transfer processes, lowers operational costs, and quickens settlement times. Assets such as stocks, bonds (both corporate and municipal), mutual funds, options, annuities, and cash are all eligible to be transferred with the help of ACATS.