The Federal Reserve recently released a request for comment on potential changes to its National Settlement Service (NSS) and Fedwire Funds Service. It has also asked for feedback on a possible new posting time for transactions and an increased daylight overdraft fee.

The National Settlement Service is a multilateral settlement service owned and operated by the Federal Reserve Banks. According to the Federal Reserve, the service is offered to depository institutions that settle for participants in private-sector clearing and/or settlement arrangements.

The benefits for financial institutions reduces the duration of settlement risk for participants by providing same-day finality. It also improves operational efficiency by eliminating the need to send individual Fedwire funds transfers. Now, the federal reserve is pushing for amendments.

“On Sept. 13, 2018, NACHA, the rules and standards body for the ACH network, announced that its voting members had approved amendments to the NACHA Operating Rules & Guidelines to establish a third Same Day ACH processing and settlement window,” the Federal Reserve wrote in the announcement.”

“Currently, there is a morning window with a submission deadline of 10:30 a.m. ET and settlement at 1:00 p.m. ET, and an afternoon window with a submission deadline of 2:45 p.m. ET and settlement at 5:00 p.m. ET.”

The announcement went on to explain that, “The new window, with a submission deadline of 4:45 p.m. ET and settlement at 6:00 p.m. ET, would allow originating depository financial institutions to submit same-day items later in the business day.

The Automated Clearing House Network

The ACH Network is at the center of commerce in the U.S. It moves money and information from one bank account to another through Direct Deposit and Direct Payment via ACH transactions, including: ACH credit and debit transactions, recurring and one-time payments, government consumer and business to business transactions, international payments, etc.

According the Federal Reserve, “A third Same Day ACH window aligns with the Federal Reserve’s ongoing objective to support improvements in the safety and efficiency of payment systems in the United States, as well as public interest in greater availability of payment services.”

“In particular, the later Same Day ACH window would allow more institutions to use Same Day ACH services during a greater portion of their business day, and may promote greater adoption of Same Day ACH, and availability of the service to originators and end users.”

These changes would lead to adjustments in the central bank’s services; this would ensure the Clearing House (TCH) would be able to settle same-day transactions later in the day, via the NSS.

The changes would include:
• Extending the closing of NSS by one hour (to 6:30 p.m. ET),
• Changing the cutoff time for Reserve Bank account holders to initiate transfers on behalf of third parties via the Fedwire Funds Service (Fedwire Funds third-party cutoff) by 45 minutes to 6:45 p.m. ET.
• And extending the closing of the Fedwire Funds Service by 30 minutes (to 7:00 p.m. ET).

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