Settlement Services by The Depository Trust Company (DTC) reduce cost and risk, and increase efficiency and certainty of securities settlement in U.S. capital markets. Through cross endorsement between DTC and National Securities Clearing Corporation (NSCC), the DTC and NSCC settlement balances of a member of both clearing agencies may be further netted, reducing the volume of payments. DTC uses the Federal Reserve System's National Settlement Service (NSS) to process end-of-day net funds settlement, by processing through the Fed a single file transmission to debit and credit Fed accounts of settling banks acting on behalf of clients of the clearing agency.

DTC Asset Servicing also provides a broad range of services for underwriting, custody, corporate actions, dividend, proxy and reorganization activity, as well as the electronic registration and transfer of securities.

  • DTC achieved a significant milestone in its Corporate Actions Transformation initiative in 2013 when it published more than 100 million corporate action announcement messages in the ISO 20022 format – the global industry standard for financial messaging. With clients reporting improved timeliness and greater straight-through-processing rates, DTC is now in position to roll out ISO 20022 messages to support the entire lifecycle of a corporate action. DTC also exceeded its 2013 corporate goal of connecting a dozen new participants to ISO 20022 corporate actions announcement messaging practices.
  • DTC continued to improve automation and straight-through-processing rates of corporate actions by piloting the use of XBRL – Extensible Business Reporting Language – in conjunction with ISO 20022 messaging. XBRL allows issuers and agents to electronically tag key information on corporate actions in a standard format, reducing the chances of misinterpretation. As part of the pilot, DTC received notice of more than 400 events via XBRL and then processed them straight-through as outbound ISO 20022 messages – without having to undertake extensive re-documentation.
  • To promote settlement finality in the U.S. marketplace, DTC initiated a settlement matching system that will reduce reclaims. In 2013, DTCC distributed the Settlement Matching Service Guide and began working with the industry to prepare for the necessary changes. DTC changed certain rules and processes for money market instruments (MMIs) to begin to move the industry away from reversals associated with issuer failures. A related change to the application of the largest provisional net credit risk control was also implemented to enhance certainty of settlement through DTC.
  • DTCC issued a white paper in 2012 that outlined a comprehensive strategy to drive down risks attributable to MMI settlement processing. In December 2013, a service description paper titled "Increasing Certainty and Promoting Intraday Settlement Finality" was published. This detailed plan called for promoting intraday settlement finality to further reduce risk in the MMI market. The enhanced settlement model will eliminate risks associated with intraday reversals of transactions in DTC's MMI system that are the result of issuer failure.

SECURING
TODAY

DTC fully recovered from the devastating effects of Hurricane Sandy in October 2012 by completing the remediation of 99.9% of all securities certificates damaged by the flooding of its vault in lower Manhattan. In a multistep process that took nine months to complete, more than 1.7 million certificates valued at $1 trillion were boxed, freeze-dried and shipped away for irradiation and subsequently returned for brushing, vacuuming and cleaning. The certificates were then reconciled and finally re-shelved in new vault facilities.

SHAPING
TOMORROW

DTCC continued to make progress on an industry-wide goal of substantially eliminating physical securities certificates in the U.S. markets. In partnership with an industry working group, DTCC secured consensus to pursue the four main principles proposed in a 2012 white paper and develop a multiyear plan to move the industry closer to full dematerialization. The plan will support the expanded use of issuance and maintenance of securities in an electronic rather than paper format and work toward the dematerialization of other asset classes that rely solely on paper. Dematerialization of paper certificates is expected to reduce risks and save the industry and investors roughly $250 million annually. While the number of physical certificates held in DTCC's vault has dropped 86% since 2000, implementing the white paper's recommendations, subject to applicable regulatory approval, is expected to eliminate most of the remaining physical securities certificates in the U.S. within the next several years.