Depository Trust & Clearing Corporation
|READ: The $639 Trillion Question: Who Owns the Data? by Douglas Ashburn, on MarketsReformWiki.com (January 2013)|
|READ: Five Minutes with Michael Bodson, CEO, DTCC (April 2012)|
|Depository Trust & Clearing Corporation|
|Key People||Michael Bodson, President and CEO; Robert Druskin, Executive Chairman|
Depository Trust & Clearing Corporation (DTCC) is a U.S. holding company formed in 1999 to combine the Depository Trust Company (DTC), the National Securities Clearing Corp. (NSCC) and three other units providing post-trade services to exchange-traded and over-the-counter (OTC) securities. All units include:
- National Securities Clearing Corporation (NSCC)
- Depository Trust Company (DTC)
- Fixed Income Clearing Corporation (FICC)
- DTCC Deriv/SERV LLC
- DTCC Solutions LLC
- EuroCCP Ltd
DTCC, through its subsidiaries, provides clearing, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC processes mutual funds and insurance transactions, linking funds and carriers with their distribution networks.
DTCC's depository provides custody and asset servicing for 2.8 million securities issues from the U.S. and 107 other countries and territories, valued at $36 trillion.
The DTCC was appraised at a Capability Maturity Model Integration Level 3 by the Software Engineering Institute (SEI) of Carnegie Mellon University. DTCC is currently the only U.S. financial services organization to have achieved this rating across its entire enterprise.
The depository, DTC, and the oldest of the DTCC's clearing subsidiaries, NSCC, were both created in response to the paperwork crisis that developed in the securities industry in the late 1960s and early 1970s. At that time, brokers still exchanged paper certificates and checks for each trade, sending hundreds of messengers scurrying throughout Wall Street clutching bags of checks and securities.
On July 24 of 2012, it was announced that DTCC and SWIFT announced had been named by the Commodity Futures Trading Commission (CFTC) to provide the CFTC Interim Compliant Identifier (CICI) for legal entities involved in over-the-counter (OTC) derivatives trading.
- Michael Bodson, President and CEO
- Robert Druskin, Executive Chairman
- Bari Jane Wolfe, Head of Regulatory Relations
Wall Street's "Paperwork Crisis"
The crisis became so severe that, to help reduce the backlog, the exchanges closed every Wednesday, shortened trading hours on the other days, and extended settlement to T+5 from T+4. Eventually the industry developed two separate and distinct approaches to solve the paperwork problem.
The first solution was to immobilize physical stock certificates by maintaining them in a central location or depository, and to record changes of ownership using "book-entry" accounting methods where no certificates actually change hands. Initially, this was done by the NYSE and its Central Certificate Service. That led to the creation of DTCC's depository subsidiary in 1973.
The second approach to solving the paperwork crisis involved a concept called multilateral netting. If one broker does 100 trades in IBM, both buying and selling at different prices with a variety of different brokers, there are few opportunities for netting. By interposing a central organization as the counterparty to all trades, all of those broker's trades in IBM can settle to one net position, and all money for trades in all securities can settle to a single dollar figure owed to or from the central counterparty.
In mid-January 2008, DTCC announced that DTCC subsidiaries had reduced their fees for 2008, with a net savings impact for the industry valued at about $198 million for the year. According to DTCC, "This will be the organization’s largest-ever fee cut and comes on top of 2007 fee cuts that yielded customers approximately $88 million. The new fees, filed with the SEC, took effect January 2, 2008. The fees, which relate primarily to core services, cover National Securities Clearing Corporation (NSCC), The Depository Trust Company (DTC), Fixed Income Clearing Corporation’s (FICC) Mortgage-Backed Securities (MBS) Division and Deriv/SERV. Fees for several new services as well as select “disincentive” fees to discourage inefficient practices were also introduced.
In August 2010, DTCC announced the launch of its Equity Derivatives Reporting Repository (EDRR) and FSA approval of its DTCC Derivatives Repository Ltd subsidiary. The building of the EDRR repository, follows a competitive request for proposal process (RFP) led by the International Swaps and Derivatives Association last year, and represents the industry's efforts to strengthen its operational infrastructure and improve transparency across all major OTC derivatives asset classes. All of the 14 global market dealers are now live on EDRR.
Business Development and Ventures
In September 2009, the DTCC and Markit launched a joint venture called MarkitSERV, which combines the two organizations' electronic trade confirmation and workflow platforms to provide a single gateway for over-the-counter (OTC) derivative trade processing.
In July 2010, DTCC announced plans to establish a new subsidiary called DTCC Derivatives Repository Ltd., which will maintain global credit default swap data identical to that maintained in its New York based Trade Information Warehouse. This move is intended to help ensure that regulators globally have secure and unfettered access to global data on credit default swaps (CDS) by establishing identical CDS data sets on two different continents.
In late August 2010, a Bloomberg report said DTCC was in talks to take a stake in European Multilateral Clearing Facility. DTCC and EMCF have held discussions for months, according to four people familiar with the situation who declined to be identified while talks were ongoing. Amsterdam-based EMCF is owned by ABN Amro Group NV, which has a 78 percent stake, and Nasdaq OMX Group Inc., with a 22 percent holding. Both clearinghouses are seeking to assure their future in Europe as trading fees and volumes decline.
- ↑ DTCC Appraised as a CMMI Level 3 Organization. DTCC.
- ↑ "Responding to Wall Street's Paperwork Crisis”. Depository Trust & Clearing Corporation.
- ↑ /2012/dtcc_swift_compliant_identifier.php Press Release. DTCC.
- ↑ "DTCC Implements Largest-Ever Fee Cuts". DTCC.
- ↑ Press Release: DTCC Launches Equity Derivatives Reporting Repository. DTCC.
- ↑ Markit and DTCC launch OTC derivatives trade processing JV. Finextra.
- ↑ U.S. DTCC Said to Be in Talks on EMCF Clearinghouse Stake. Bloomberg News.
- ↑ Press Release: DTCC to Establish European-Based Trade Reporting Repository. DTCC.