Depository Trust & Clearing Corporation

From MarketsWiki

(Redirected from DTCC)

Depository Trust & Clearing Corporation

Founded	1999
Headquarters	New York
Key People	Donald Donahue, chairman and CEO; William Aimetti, president and COO
Web site	http://www.dtcc.com/

Depository Trust & Clearing Corporation (DTCC) is a US 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 securities. All units include:

This page is sponsored by...

National Securities Clearing Corporation (NSCC)
The 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 United States and 107 other countries and territories, valued at $36 trillion. In 2006, DTCC settled more than $1.5 quadrillion in securities transactions.

1 History
- 1.1 Wall Street's "Paperwork Crisis"
- 1.2 Approaches and Solutions
2 News
3 References

History

The depository, DTC, and the oldest of the Depository Trust & Clearing Corporation'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.^[1]

Wall Street's "Paperwork Crisis"

With the New York Stock Exchange (NYSE) handling 10 to 12 million shares daily, brokers were literally buried in paperwork, and concern about risk was growing in Congress, the SEC, and elsewhere.

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.

Approaches and Solutions

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.

Today, with net money settlement, only a single money transfer is required, reducing the dollar amount of financial obligations by as much as 98%.

News

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.^[2]

In mid-January 2008, DTCC announced that DTCC subsidiaries had reduced their fees for 2008^[3] , 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.