What is an Autocharge Agreement? A Comprehensive Legal Overview
Definition & Meaning
An autocharge agreement is a formal arrangement between a submitter or clearing corporation and a depository institution. This agreement allows the Treasury to:
- Deliver awarded securities to the designated depository institution's book-entry securities account.
- Charge the funds account of the designated depository institution for the total settlement amount of the securities.
This agreement is essential for the smooth operation of transactions involving marketable securities, ensuring that both the transfer of securities and the corresponding financial settlement occur efficiently.
Legal Use & context
Autocharge agreements are primarily used in financial and securities law. They facilitate the settlement process for transactions involving Treasury securities, which are critical for government financing and investment. Legal professionals may encounter these agreements in contexts such as:
- Public finance transactions
- Investment banking
- Securities regulation
Users can often manage the associated forms and procedures themselves with the right tools, such as templates provided by US Legal Forms.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A clearing corporation enters into an autocharge agreement with a bank to facilitate the delivery and settlement of Treasury bonds. Upon winning a bid for the bonds, the bank receives them directly into its book-entry account, and the corresponding funds are automatically deducted from its account.
Example 2: A financial institution uses an autocharge agreement to streamline the process of purchasing Treasury notes, ensuring that securities are transferred and funds are settled without manual intervention. (hypothetical example)