HomeMy WebLinkAbout1997-035 Report - Dep Trust Co
.0
THE DEPOSITORY TRUST COMPANY
IMPORTANT
EXECUTIVE IMPORTANT NOTICE
B#:
0634-97
DATE:
April 10, 1997
TO:
Transfer Agents, Paying Agents, Redemption Agents and Issuers
ROM:
Joseph 1. Bellantoni, Senior Vice President
TTENTION:
Senior Operations Managers and Administrators
UBJECT:
Year 2000 Compliancy Progress Report;
Includes Answers to the Most Frequently Asked Questions
Regarding DTC's Year 2000 Effort
Ll
rr
1
r-
O\CKGROUND
a
r
the new millennium approaches, the financial services and securities industries are being advised
by industry groups and regulators to assess their own Year 2000 readiness, as well as that of their
suppliers. This assessment is being urged in order to help avoid any interruption in services on and
after January 1,2000. In anticipation cfthe challenges associated with the Year 2000 problem, in
early 1996 the financial services industry initiated the formation of ad-hoc committees to identify
and resolve the multifaceted problems associated with changing their computer systems to avoid any
disruption in processing. Initiatives have been addressed by the nation's securities processing
utilities including DTC, the National Securities Clearing Corporation (NSCC), and the Securities
Industry Automation Corporation (SIAC).
Recently, the Comptroller of the Currency, Administrator of National Banks! and the Federal
acc Advisory Letter - June 17, 1996 (AL 96-4) - Comptroller of the Currency, Administrator of
National Banks, The Honorable Jimmy F. Barton, Chief National Bank Examiner
.'
Reserve Bank of New York2 distributed copies of an interagency statement issued by the Federal
Financial Institutions Examination Council designed to alert, "...financial institutions to the
substantial risks to the industry represented by the programming code in existing computer systems
as the industry enters the new millennium...." Regulators have expressed their concern that many
financial institutions, servicers, and vendors have not adequately addressed the risks associated with
the Year 2000. Moreover, these regulators have recommended that their regulatees conduct risk
assessments, develop detailed action plans and adhere to their suggested schedules to complete Year
2000 required programming enhancements.
FINANCIAL SERVICES INDUSTRY EFFORTS
The Securities Industry Association's Data Management Division (DMD) established the Year 2000
Committee in January 1996. The committee's mission is to spearhead an industry-wide effort to
address and resolve Year 2000 issues. This committee in turn established four sub-committees to
focus specifically on separate but interdependent aspects of the Year 2000 problem. They are:
Exchange and Utilities Sub-Committee
Third Party Vendor Sub-Committee
Participants Street-Wide Testing Sub-Committee
Data Providers Sub-Committee
The DMD Year 2000 Committee and the four Sub-Committees are now conducting ongoing
meetings to determine what actions should be taken to address the issues that affect their particular
objectives. Along with NSCC and SIAC, DTC actively participates in each of these committees.
Merrill Lynch's Arthur L. Thomas, Senior Vice President and Director, is chairman of the SIA
Oversight Committee which is providing senior level guidance to the DMD Year 2000 Committee
and the four Sub-Committees on the issues to be addressed to ready the industry for the Year 2000.
Recently, the New York Clearing House asked DTC to join their Year 2000 Clearing House
Committee. DTC expects to actively participate and contribute in the deliberations of this banking
industry committee as well.
DTC EFFORTS TO DATE
DTC began examining and addressing systems and coding issues in 1994. In the spring of 1996
DTC enhanced this effort by establishing programs to raise the awareness of the "Year 2000
problem" both internally as well as with our Participants, agents, vendors and other interested
parties. To publicize our Year 2000 Compliance plan, we distributed an Important Notice on
October 18, 1996 (ref: B1863-96).
2
Effect ofthe Year 2000 on Computer Systems - September 27, 1996 (Circular Number 10878) -
Federal Reserve Bank of New York, The Honorable George R. Junker, Vice President
Page Number 2
RESPONSE TO PARTICIPANTS' INQUIRIES
DTC has received many inquiries as to its plans for Year 2000 Compliance. This Important Notice
addresses those inquiries as follows:
Ouestion:
Is DTC Year 2000 Compliant?
DTC is not currently Year 2000 Compliant but is working diligently to become so. To become
compliant, we established an organization-wide initiative with participation from every area ofDTC.
The DTC internal Year 2000 Task Force has been formed under Joseph J. Bellantoni, Senior Vice
President - Information Services.
Question:
What is the Current Status ofDTC's Year 2000 Project?
DTC's IS Director Mildred Goldczer heads DTC's Year 2000 project. Under her direction, an outside
consulting firm, Keane, Inc. has completed a review of all of DTC's 15,000 production programs
which contain 28 million lines of code. Keane, Inc. consultants identified specific programs with
date references that require review. DTC's IS staff is reviewing the individual programs to determine
which have to be changed and are now estimating the amount of work required. This review should
be completed early in the second quarter 1997 at which time DTC plans to publish a list of all input
and output files which require changes. DTC plans to change only files which contain date fields
that must be modified in order to be compliant.
Ouestion:
What is the DTC Definition of Year 2000 Compliance?
"Year 2000 Compliance" means that each application and systems product, program, file, data base
and functionality correctly performs processing which is dependent upon usage of calendar dates,
including dates before, on and after January 1, 2000.
Question:
What is DTC's Year 2000 Compliance Strategy?
DTC has developed a comprehensive approach that includes risk assessment, defined programming
standards and a tentative schedule to complete the required programming changes. The following
is a summary of each aspect of the plan.
A.
Risk Assessment
1. DTC's Management instituted an aggressive enterprise-wide project plan that
began during the summer of 1996, and will continue into the year 2000.
2. Steps have been taken towards ensuring that our external vendors are
Page Number 3
compliant. Each has been contacted in an effort to gather information
regarding the status of its products and whether they are currently Year 2000
Compliant. We are also in the process of developing contingency plans that
deal with "non- compliant" third party vendors.
3. An enterprise-wide inventory and impact assessment was performed and
completed in December 1996.
B.
Programming Standards
Internal Information Systems (IS) Year 2000 standards were established. Participants may find it
helpful to consider using the following guidelines in their own planning process.
1. External Electronic Information Exchange
DTC will enhance only files which contain date fields that must be changed.
Accordingly, only when necessary or when requested by Participants, DTC will
make changes to files that constitute external electronic exchanges of information
between DTC and Participants, vendors or service providers.
When deemed necessary, files will be modified as follows:
a. for Gregorian dates we will add an eight digit date (CCYYMMDD)
in addition to the current six digit date,
b. for Julian dates we will add a seven position date (CCYYNNN) in
addition to the current five digit date,
c. for International date formats we will add a nine digit date
(CCYYMMMDD - where MMM contains a three character descriptor
[e.g., JAN, FEB, MAR, etc.]) in addition to the current seven digit
date.
Where:
CC is the Century (e.g. 19,20, etc.)
YY is the Year (e.g., 99,00,01, etc.)
MM is the Month (e.g., 01 = January, 02 = February, etc.)
DD is the Day (e.g., 01, 02, 03, etc.)
NNN is the Day of the Year (e.g., 59 = February 28)
2. On-Line Inquiries
Page Number 4
F or existing software, all screen entries and displays for inquiry only screens will not
be changed fiom their current layouts. DTC feels confident that people using these
screens will understand the meaning of the two digit year.
3. On-Line Updates
a. Screen entries for programs that perform on-line updates will not be
changed unless necessary. Applications may introduce Windowing
logic if they are updating an expanded (i.e., four digit year) date field
on the database where the input screen uses a two digit year field.
Windowing is a technique that analyzes a two digit year and
compares it to a standard year base (e.g., '80'). It makes a two digit
year look like a four digit year. It ensures that the proper century is
used or assigned. lithe year is equal to or greater than the base year,
the century is deemed to be the twentieth century (i.e., 19XX), if
less, the century is deemed to be the twenty-first century (i.e., 20XX).
b. Where the database contains a date field with a four digit year and the
screen only allows for the display of a two digit year, logic to
eliminate the century fiom the four digit year field will be introduced
to allow the year to be displayed as a two digit year.
c. In those programs where the date year field on the screen mapping
and the database is the same, no changes will be made.
4. Reports Internal to DTC
No changes (either the display of data or the ordering of data) will be made to reports
unless specifically requested by Participants or DTC internal departments. DTC does
not plan to change reports which currently contain only two digits in the year field.
Print programs that order the data, or provide historical perspectives of dates will
probably require changes to the software.
5. Boolean Operations Changes
For those programs that do not qualify as Year 2000 Compliant, DTC plans to
change the code using one or more of the following strategies:
a. Field expansion (the expansion of date fields in the CCYYMMDD
format) may be introduced to restore the accuracy of arithmetic
calculations and/or to support logical operations.
b. "Windowing" may alternatively be used
Page Number 5
C.
Tentative Schedule
1. Early in the second quarter 1997, DTC expects to distribute to organizations
that have electronic interfaces with DTC initial information on file layouts
that will be modified.
2. DTC expects to be fully Year 2000 Compliant in mid 1998. Testing will
include Unit, Integrated and Regression testing as well as testing with other
industry organizations such as NSCC and SIAC. At that point, DTC will be
prepared to initiate testing with Participants who request it.
3. With the guidance of the SIA's Oversight Committee, industry-wide testing
is expected to begin in January 1999 and be completed prior to October 1999.
COMMUNICA TIONS WITH THE INDUSTRY
Rather than responding to individual requests concerning the status ofDTC's Year 2000 Compliance
effort, DTC has prepared this Important Notice. To ensure timely distribution of additional
information, a home page on the Internet has been established by DTC at www.dtc.org where all
Important Notices will be made available to Internet users. Other information will be made available
in the future.
For further information on DTC's Year 2000 plans look for future Corporate Trust Letter articles and
Important Notices. Also visit DTC's home page, or call Mildred Goldczer, Systems Director and
DTC Year 2000 Coordinator at (212) 558 - 8581, or Joseph F. Reale, Vice President at (212) 558-
8450 or Joseph J. Bellantoni, Senior Vice President at (212) 558 - 8585.
Page Number 6