General

Q. Why is DTCC rebuilding its underwriting and corporate actions systems? Is there a problem with the existing systems?

A. Our underwriting and corporate actions systems, built and operated by DTCC's depository, continue to serve our current needs. They were, however, designed years ago as related but stand-alone systems. Over time, we have had to make numerous updates and additions to the systems to accommodate the new types of securities and asset classes that have been emerging, as well as to handle the expanding asset servicing requirements associated with these new kinds of securities. Making such changes is increasingly difficult and expensive. Consequently, the purpose of our reengineering is to modernize these systems while integrating corporate actions and underwriting into a combined platform with new functionality. We're also using this as an opportunity to enhance our Securities and Entity Masterfile databases. Ultimately, we want to consolidate and streamline processing, generate further efficiencies, reduce costs and build in greater flexibility.

Q. What will be the benefits to the industry?

A. Better data capture early on in the process, reduced risk, more functions, more embedding of straight-through processing (STP), more transparency, faster turnaround and more time to respond to notifications, far more flexibility and operational control to accommodate new instruments and expanded types of securities offerings, the capacity to link related corporate action events, better notification methods and ultimately, lower cost. In short, it will be faster, more comprehensive, more coherent, more flexible, more efficient and more structured to serve customer needs.

Q. What will be the major differences between this new platform and DTC's existing systems for handling underwriting and corporate actions?

A. We will combine what are now more than 60 separate legacy systems for underwriting, dividends and reorganization into a single, integrated platform that can service even very complex securities from "cradle to grave" —from their inception at offering until the time the securities mature, or are recalled or retired. The new platform will support international messaging standards and best practices, including multi-currency processing and international identifying numbers such as ISINs, in addition to CUSIPs. It will support straight-through processing by capturing comprehensive corporate action information during the underwriting process to support automated announcements, thus allowing the automation of subsequent corporate actions. Two other objectives are to improve operational controls and eliminate redundancies, while upgrading customer service by providing greater operational flexibility, such as giving users Web access to the status of a security at any time.

Implementation

Q. Do you intend to implement this new platform all at once or in phases?

A. A project this large and complex needs to be implemented in phases. In 2008, we will begin to transition our customers to the new underwriting system over a three month period. The redesign and development of the corporate actions will take longer, with at least six-months allocated for phase-in, which is scheduled to begin in 2009.

Q. Will this system require major reprogramming efforts by your customers? If so, can you quantify how much the reprogramming will cost for an average firm? For the industry as a whole?

A. All firms will need to reprogram for new interfaces, including either ISO or XML messaging formats as well as a new browser interface. Costs will vary from firm to firm and vendor to vendor, depending on their business needs, the flexibility of their systems and age of their legacy platforms.

Q. In 2003, DTCC and the Canadian Depository for Securities (CDS) announced a feasibility study to explore additional collaboration on technology platforms and other areas. Does DTCC intend to share the new platform with CDS in the long term?

A. No. The feasibility study concluded that the advantages of sharing certain platforms were very limited. However, we continue to keep the door open for opportunities where we can work with CDS in the future.

Q. Will the new platform support the Global Corporate Action (GCA) Validation Service? Is there a tie between the two systems?

A. Yes, the system currently being used by DTCC's GCA Validation Service designed to capture, cleanse and verify at source corporate actions information will be used as the announcement capture component for the new system. As a result, the GCA VS and DTC announcements will be published using the same event structure and utilize the same event identifier.

Q. How does this new platform bring DTCC into compliance with the G30 report?

A. Among other things, it will use international ISO 15022 messaging standards; it includes currency convertibility; and it is capable of tracking securities via the ISIN international securities numbering system. It will also increase straight-through processing and mitigate risk by automating numerous manual processes.

Q. Will this platform still have the fully redundant capabilities DTCC supplies through its multiple sites?

A. Yes. It is being developed to ensure redundancy of data and processing capacity, and we will have the flexibility to run it from DTCC's back-up data systems and facilities to ensure business continuity.

Q. Will the new platform use international standards for outputting information, or DTCC's proprietary standard?

A. The thrust of the new platform, and all of DTCC's new systems work for that matter, is to support best practices and international standards where they make sense, and to move away from proprietary standards. The platform will be fully compatible with ISO 15022 messaging standards. It will handle multiple currencies. And it will support international and local securities numbering systems, in addition to the U.S. market CUSIP system.