Corporate action events
DTCH: Dutch Auction
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DTCH is a Dutch auction offer: a party that wants to buy a security, often the issuer, sets a price range and invites holders to say how much they would sell and at what price within that range. The buyer accepts the lowest offers first until it has bought what it wants.
- Code
- DTCH
- Usually announced as
- VOLU
What DTCH means
Instead of fixing one price, the buyer announces a minimum and maximum price. Holders tender their securities with a price in the range, or without a price to accept whatever price is set. The buyer then works up from the lowest prices offered until it reaches the quantity it wants.
In the common form of the auction, everyone whose offer is accepted is paid the same final price, the highest price needed to fill the quantity. Offers above that price are not accepted, and if too many securities are offered at or below it, acceptances are prorated.
When you see it
- An MT564 with
:22F::CAEV//DTCHand:22F::CAMV//VOLU, optionsCASH(tender) andNOAC, with the maximum and minimum price (:90a::MAXP,:90a::MINP), the market deadline and a proration date. In ISO 20022 the auction type and a reverse Dutch auction flag can be given inCorpActnDtls/DtchAuctnTpandCorpActnDtls/RvsDtchAuctnInd. - DTCH vs BIDS: a buy-back at a fixed price is BIDS; a buy-back by auction within a range is DTCH. DTCH vs TEND: a takeover or acquisition offer by a third party at a set price is TEND.
What to do next
- Collect the client’s quantity and price. Instruct with an MT565 before the deadline, giving the tender price in the cash price field of sequence D where the client names a price.
- When the results come, check the final purchase price and proration factor. Reconcile the MT566: securities debited at the accepted quantity, cash at the final price, and return of any unaccepted securities.