What Is the Automated Customer Account Transfer Service (ACATS)?

**ACATS stands for Automated Clearing and Settlement System.** It is a United States federal law that establishes the procedures for clearing and settling securities transactions in the United States. The ACATS was enacted in 1970 and applies to all securities transactions, including those involving stocks, bonds, and other financial instruments.

1. **Overview of ACATS**: The ACATS is a critical component of the U.S. securities market, facilitating the efficient clearing and settlement of transactions between buyers and sellers. It ensures that securities transactions are executed, recorded, and settled in a timely and secure manner, thereby reducing the risk of fraud and promoting market integrity.
2. **Key Features of ACATS**:
- **Automated Clearing**: ACATS automates the process of clearing securities transactions, which involves the netting of opposing positions between buyers and sellers.
- **Settlement**: It also handles the settlement of transactions, which involves the transfer of securities and funds between the buyer and seller.
- **Centralized System**: ACATS operates as a centralized system, providing a single point of contact for all securities transactions in the U.S.
- **Regulatory Oversight**: The ACATS is overseen by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), ensuring compliance with federal securities laws and regulations.
3. **Impact of ACATS**:
- **Market Efficiency**: ACATS has significantly improved the efficiency of the securities market by streamlining the clearing and settlement process.
- **Risk Reduction**: By automating and centralizing the process, ACATS helps reduce the risk of errors, fraud, and settlement failures.
- **Industry Standards**: The ACATS sets industry standards for clearing and settlement practices, which are adopted by both broker-dealers and custodians.

In summary, the ACATS is a vital component of the U.S. financial infrastructure, ensuring the smooth operation of the securities market through its automated clearing and settlement services while providing regulatory oversight to maintain market integrity.