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Overview of DTCC

The Depository Trust and Clearing Corporation (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 is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks.

DTCC's depository provides custody and asset servicing for 3.5 million securities issues from the United States and 110 other countries and territories, valued at $28 trillion. In 2008, DTCC settled more than $1.88 quadrillion in securities transactions.

DTCC Board of Directors

  • Donald F. Donahue, Chairman & Chief Executive Officer, DTCC
  • William B. Aimetti, President and Chief Operating Officer, DTCC
  • Mark Alexander, Head of Global Wealth and Investment Management Technology & Operations, Merrill Lynch
  • Gerald A. Beeson, Senior Managing Director & Chief Operating Officer, Citadel Investment Group, LLC
  • Art Certosimo, Senior Executive Vice President, Bank of New York Mellon
  • Stephen C. Daffron, Managing Director and Global Head of Institutional Securities Group (ISG) Operations, Morgan Stanley
  • Bernard W. Dan, Chief Executive Officer, MF Global Ltd.
  • Norman Eaker, Chief Administrative Officer, Edward Jones
  • Robert Kaplan, Executive Vice President, State Street Bank & Trust Co.
  • Gerard LaRocca, Managing Director, Chief Administrative Officer of the Americas, Barclays Capital
  • Stephen Luparello, Senior Executive Vice President, Regulatory Operations, FINRA
  • Louis G. Pastina, Executive Vice President of NYSE Operations, NYSE Euronext
  • Neeraj Sahai, Managing Director, Global Business Head, Citi
  • Richard G. Taggart, Executive Vice President and Head of Global Operations, AllianceBernstein L.P.
  • Timothy J. Theriault, President of Corporate and Institutional Services, Northern Trust Corporation
  • Michele Trogni, Group Chief Information Officer, UBS Investment Bank
  • Robin A. Vince, Managing Director and Global Head of Operations, Goldman Sachs
  • David A. Weisbrod, Managing Director, JPMorgan Chase & Company


DTCC operates through seven subsidiaries - each of which serves a specific segment and risk profile within the securities industry:

DTCC services

Clearance and Settlement

  • Automated Customer Account Transfer Service (ACATS)
  • Custom Index Share Processing
  • Money Market Instrument Processing
  • Trade Reporting and Confirmation
  • Underwriting Services

Fixed Income

  • Real-Time Trade Matching/RTTM Web
  • Government Securities Net Settlement Services
  • Mortgage-Backed Securities Clearing Services
  • GCF Repo Services
  • Electronic Pool Notification Services

Asset Services

  • Custody & Safekeeping Services
  • Deposit & Withdrawal Services
  • Direct Registration Service
  • Dividend & Reorganization Services
  • Restricted Securities Family of Services

Mutual Funds

  • Defined Contribution Clearance & Settlement
  • Fund/SERV®
  • Fund/SPEEDSM
  • Mutual Fund Profile Service
  • Networking


  • Annuity Applications
  • Financial Activity Reporting
  • Licensing and Appointments
  • Positions and Valuations
  • Subsequent Premiums

Information-Based Services

  • Cost-Basis Reporting Service
  • Global Corporate Action
  • Validation Service
  • SMART/Search for Archived Reports
  • SMART/Source
  • SMART/Track for Stock Loan Recalls

OTC Derivatives

  • Credit Default Swaps
  • Matching and Confirmation
  • Equity Derivatives Matching and Confirmation
  • Interest Rate Derivatives Matching and Confirmation
  • Payments Matching, Netting and Settlement
  • Portfolio Reconciliation


DTCC's joint venture company, Omgeo, has over 6,000 customers in 45 countries and plays a critical role in institutional post-trade processing, acting as a central information management and processing hub for brokers, investment managers and custodian banks.

Trade settlement

T+3 Settlement Cycle

What happens on the Trade Date (T)

The clearance and settlement cycle begins on the date the trade is executed. On this date, trade details are electronically transmitted to NSCC for processing, the majority of which are in real-time. Of equity transactions, 99.9% are sent as “locked-in” trades, which means that the marketplace has already compared them at the time of execution, confirming all details, including share quantity, price and security. National Securities Clearing Corporation(NSCC) sends to participants automated reports, which are legally binding documents that show trade details. These reports confirm that transactions have entered the clearance and settlement processing stream.

What happens on Trade Date plus one day (T+1)

NSCC’s guarantee of settlement generally begins midnight between T+1 and T+2. At this point, NSCC steps into the middle of a trade and assumes the role of central counterparty, taking on the buyer’s credit risk and the seller’s delivery risk. This guarantee eliminates uncertainty for market participants and inspires public confidence.

What happens on Trade Date plus two days (T+2)

NSCC issues broker/dealers summaries of all compared trades, including information on the net positions of each security due or owed for settlement.

What happens on Trade Date plus three days (T+3)

T+3 is settlement – the delivery of securities to net buyers and payments of money to net sellers. Broker/dealers instruct their settling banks to send or receive funds (through the Federal Reserve System) to/from DTC as NSCC’s agent. Securities generally do not change hands physically. DTC transfers ownership between broker/dealers’ accounts by book-entry electronic movements.

DTCC will provide more derivatives data to regulators

A transatlantic row that flared up in the wake of the Greek debt crisis over the lack of disclosure to regulators of credit market activity has pushed the new body in charge of collecting global trading data to provide more information to financial watchdogs.

Regulators from around the globe including the Securities and Exchange Commission will now be able to obtain breakdowns of trading activity in credit default swaps, including the identity of the investors.

This follows a U-turn by the DTCC Trade Information Warehouse, a body set up in the wake of the financial crisis to allow regulators to track positions and trading in over-the-counter credit derivatives.

Regulators involved in the dispute said the DTCC had initially resisted making available such details on Greek CDS, a type of insurance against the risk of debt default. Speculation in these instruments has been blamed by European politicians for heightening the Greek debt crisis.

Some European regulators were so concerned about being unable to obtain data to determine whether investors were manipulating markets that they were planning to call for a rival credit derivatives data collector in Europe, according to people involved in the discussions.

The DTCC said this was not an issue, however. ”It is a bedrock principle of the warehouse that all interested regulators should have unfettered access to warehouse information necessary in furtherance of their respective regulatory missions,” the letter said.

DTCC's Warehouse Trust to become a Fed member bank

We frequently receive calls from clients and readers asking about the likelihood of the passage by the Congress in Washington of reform legislation regarding over-the-counter (OTC) derivatives, financial regulation and/or mortgage securitization. Our answer is small to none given the political trends and the state of the lobbies in Washington, most specifically the large bank lobby that protects the Sell Side monopoly in OTC derivatives and securities. The fact that Senator Richard Shelby (R-AL) is still apparently not comfortable with the entirely watered down House proposal to reform OTC derivatives, for example, tells you all you need to know. Stick a fork in it.

Regarding OTC derivatives, for example, the proposed reforms already are so feeble and ineffectual that whether they pass the Congress or not hardly matters. Financial services reform, you see, is less important that innovation in today's global marketplace, innovations such as centralized clearing for OTC derivatives and quantitative easing for fixing the related problem of widespread global insolvency. And the pace of innovation in the world of OTC markets is accelerating with or without the consent of the Congress thanks to the hard work of the economists who populate the Federal Reserve Board's division of supervision and regulation.

The latest signs of "innovation" on Wall Street can be seen in the announcement last week by the Fed Board of Governors approving the application by something called The Warehouse Trust Company LLC to become a Fed member bank. Warehouse Trust proposes to operate a central trade registry for credit default swap (CDS) contracts and to offer related services, including the processing of lifecycle events for the contracts and facilitation of payments settlement. The membership status becomes effective when Warehouse Trust purchases shares in the Federal Reserve Bank of New York.

Warehouse Trust is a wholly owned subsidiary of DTCC Deriv/SERV LLC (Deriv/SERV), which in turn is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (DTCC). When it opens for business, Deriv/SERV's Trade Information Warehouse (TIW), which currently matches 95% of all CDS trades, will be transferred to Warehouse Trust.

DTCC, in case you are not familiar, clears most of the cash securities volume in the free world. DTC is a limited-purpose trust company organized under the New York banking law, and is a member of the Federal Reserve System. It is owned by the banks that it serves. DTC, and Fixed Income Clearing Corporation and National Securities Clearing Corporation are registered as clearing agencies with the Securities and Exchange Commission. Got it?

The creation of Warehouse Trust as a Fed member bank marks the latest attempt by the large dealer banks and the DTCC to cover the retrograde OTC derivatives market in the clothes of modern respectability. The solution to all things bad in the world of OTC derivatives, you see, is centralized clearing. DTCC has lent its considerable credibility to the large bank cause because, after all, its clients are large banks. Indeed, if you listen to the folks at the Fed, the DTCC and the large OTC dealer banks, the advent of centralized clearing is just barely less momentous than the second coming of the Messiah.

One of the benefits of spending a lot of time talking and writing about centralized clearing as the solution to all known troubles and woes in the world of OTC derivatives and especially in CDS contracts is that it keeps the attention of the Big Media, the Congress and the regulators away from the front office and the process of creating and selling complex structured securities and derivatives. It is in the front office where the true problems reside, but notice that none of the OTC reform proposals nor the Volcker Rule go anywhere near the sales and trading desks at the large banks.

Based on our study of the Volcker Rule, which proposes to strip all of the largest banks of their proprietary trading arms, we know that solving the problem is not the real object of financial reform in Washington. Just as the Volcker Rule does no violence to the sales and syndicate function of the largest Sell Side banks, the proposed OTC derivatives reform legislation leaves the dealer monopoly in OTC intact and just barely improves the degree of regulatory oversight of these closed, private markets.

In technology terms, fixing the back office issues of OTC derivatives or securitizations with innovations like Warehouse Trust is akin to announcing a new venture to build cars with internal combustion engines. The evolution of DTCC into the de facto back office of an equally de facto market known as OTC is nothing more than recreating the wheel of multilateral exchanges and joint and several liability of clearing members, albeit one inch at a time.

The advantage of slow motion innovation is that the large dealer banks get to extend the date of true reform of OTC markets by years and pretend to be dealing with the systemic issues created by these unregulated, deliberately opaque OTC instruments, all the while harvesting supra-normal returns from these high-risk, high margin activities. Consider that all of the activities now conducted by TIW and that will be assumed by Warehouse Trust are considered routine at any of the multilateral exchanges, but at the Fed and among the large dealer banks, this is called innovation.

The sad fact is that a great deal of the "reforms" imposed on the OTC markets over the past several years have done nothing to improve price transparency or lessen the monopoly market power of the OTC dealers. To the contrary, under Tim Geithner, first at the Fed of New York and now the Treasury, the thrust of US policy has been to protect and enhance the monopoly position of the OTC dealers, all the while limiting "novation" or assignment of contracts (and thus secondary market trading) and price discovery.

None of the technical issues that drove the Geithner OTC reforms are even issues on a multilateral exchange. Indeed, since the Fed of New York began to focus attention on the back office issues surrounding OTC markets, the dealer grip on the OTC markets has arguably gotten tighter. When a customer faces a dealer instead of an open outcry market, the situation is unfair by definition and goes against basic American practice and experience, and the law, when it comes to the organization of financial markets.

To us, the whole object of the strategy pursued by the OTC dealers and abetted by the DTCC is to adopt enough of the operational attributes of a multilateral exchange to blunt criticisms of the OTC markets with respect to systemic risk issues, but leave in place the dealer monopoly and odious front office sales practices, the rape and pillage mentality that thrives today among Sell Side firms operating in the CDS markets. Just read the Sunday New York Times article by Louise Story and Gretchen Morgenson, "Testy Conflict With Goldman Helped Push AIG to Edge," to understand the relationship between American International Group (AIG) and its OTC dealer bank counterparties.

The aspects of the OTC markets which remain off the reform table includes the bilateral relationship between the client and dealer regarding credit and collateral, the lack of complete market price transparency and the lack of any significant secondary market trading, all to maintain the monopoly rents that the large OTC dealers earn from this activity. Today's OTC markets have all of the attributes of a 1920s bucket shop and now the hub of this closed monopoly market is the DTCC, especially as the clearing house evolves inevitably into a central counterparty for all OTC trades.

And now the DTCC, through OTC derivatives market evolutions such as the creation of Warehouse Trust, is become the single point of failure in the world's financial system by virtue of its role in the OTC derivatives market. Both DTCC and Warehouse Trust are Fed member banks, but the former is not considered a bank holding company because neither entity takes deposits and are thus not FDIC members.

However, in the approval order by the Fed, DTCC commits to submit to Warehouse Trust to Fed prudential supervision as though it were an FDIC insured bank. What a shame that the Fed did not instead require DTCC and Warehouse Trust to be FDIC members and thus subject them to the discipline of the joint and several liability of being federally insured depositories. That would put the entire banking industry on notice that they are on the hook for the OTC shell game rising atop the infrastructure of the DTCC. Duh!

The Fed does, after all, does have a legal responsibility to ensure the sound operation of member banks regardless of their status as deposit takers. The order states that "Warehouse Trust will be well capitalized at the time it commences operations, and it will maintain capital that is sufficient to allow for an orderly wind-down if confronted with the need to cease operations." This is what economists call a "living will" by the way. The only trouble with the Fed's thinking is that if Warehouse Trust ever had to be unwound, then the DTCC itself probably would be in trouble as well.

Since the Fed has allowed the Warehouse Trust application to be approved without imposing the de facto cross-guarantee of FDIC membership on DTCC and all of its affiliates, it seems reasonable to ask just how the Fed would unwind this new member bank without destroying the entire western financial system. More important, why has the Fed put the entity that clears every cash equity and bond trade in the civilized world at risk to also be the central nexus and perhaps eventually even the counterparty for all OTC derivatives?

As the DTCC evolves from a record-keeper today and into a central counterparty for OTC derivatives and particularly CDS in the future, the question seems to be begged: Is the Warehouse Trust and DTCC now "too big to fail?" In the DTCC and Warehouse Trust, have we arrived at the functional equivalent of a multilateral exchange, via unauthorized public bailouts and the monetization of debt by our independent central bank, but in a decidedly sloppy and haphazard fashion?

Or as one former Treasury official told The IRA: "You can't reiterate enough the point that DTCC is owned by the dealer firms and thus the NY Fed is actively and purposefully aiding and abetting the continued OTC monopoly at the expense of real reform."

DTCC proposed to enforce position limits by dealers

"A handful of companies, including high-frequency traders, have asked the U.S. stock clearinghouse to act as a market-wide monitor, to guard against the risk of a malfunctioning computer program spreading chaos.

The Depository Trust & Clearing Corp, which clears virtually all U.S. stock trading, said it has been approached in recent months to consider enforcing position limits on all market participants.

Both authorities and traders are concerned that a computer algorithm used to rapidly trade stocks could go haywire and spark chaos by building a massive position — setting off an adverse chain reaction in the blink of an eye.

The idea of involving DTCC has been presented as an alternative to proposals to crack down on direct market access, sometimes called DMA or “naked access.”

DMA is a controversial practice where high-frequency trading firms and others use a brokerage’s identification to submit orders directly to capital markets.

The monitor idea is still in a very early stage of thinking but is consistent with DTCC’s mission, Susan Cosgrove, the head of DTCC equities clearance and settlement, told Reuters.

“We’ve been hearing from a handful of firms. It certainly seems to be bubbling up,” Cosgrove said, adding that no plan has yet been defined or analyzed by the member-owned DTCC.

The plan would aggregate transactions from the more than 40 market centers, and make it instantly available to brokerages.

The DTCC, seen as a secure but bureaucratic entity, may have to convince regulators and the market it could effectively contain a major trading malfunction.

The U.S. Securities and Exchange Commission is looking into DMA and wants broad standards for the way brokers monitor the firms they sponsor. It has yet to formally propose rules.

Trading protections and position limits are already in place, but they vary among the brokers and between the venues.

Talks have so far centered on a proposal by Nasdaq OMX to adopt pre-trade surveillance rules for brokerages, which could slow DMA firms’ path to the markets. The DTCC would serve as backstop protection after the trade is executed, under the new plan.

“There’s increasing pressure (for) real time review of the trade before it gets sent in,” said Robert Colby, former deputy director of the SEC’s trading and markets division, who is now Washington-based counsel at law firm Davis Polk & Wardwell.

NSCC creates Universal Trade Capture utility


On August 30, 2010, the National Securities Clearing Corporation (“NSCC”) filed proposed rule change SR-NSCC-2010-09 with the Securities and Exchange Commission (“Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder.

On September 9, 2010, NSCC filed an amendment to the proposed rule change. The proposed rule change modifies NSCC’s rules and procedures to create a new Universal Trade Capture (“UTC”) application and an automated Special Representative facility.

The proposed rule change was published for comment in the Federal Register on September 20, 2010. No comment letters were received. This order approves the proposed rule change.

II. Description of the Proposal

A. Uniform Trade Capture

Pursuant to the proposed rule change, NSCC is replacing its trade capture applications, such as the Trade Comparison and Recording Operation, with the new UTC application that is designed to standardize, streamline, consolidate, and modernize NSCC’s system for capturing securities transaction information for clearance and settlement at NSCC.

The UTC application will accept and process a common input record from all securities marketplaces. It will receive and report data from members and self-regulatory organizations (“SROs”) in both real-time and intraday batch submissions to and. NSCC will convert the existing input format to the new UTC input record format, which will enable the UTC to provide members and SROs with their trade output in the format of their choice (new or old). UTC will also replace all current locked-in over-the-counter (“OTC”) and listed trade capture applications with one central, real-time validation and reporting process and will have the capability to accept,reject, validate, process, and send contract output to members in real-time. Members will only have to support one standardized input and output format.


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