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

In 2004 DTCC processed over $2.3 trillion worth of reorganization, redemption, dividend and interest payments. We processed over 1.3 trillion separate dividend and interest payments alone.

However, our current corporate actions systems were designed years ago as integrated but stand-alone systems using technologies and programming languages that are now outdated. Over time, we have had to make numerous updates and additions to the systems to accommodate the new types of securities and corporate action events that have emerged, and to handle the expanding asset servicing requirements associated with theses new kinds of securities. Making such piecemeal changes is increasingly difficult and expensive.

In addition, even as the corporate action world has become more global and the demands of processing corporate actions more complicated, it has become increasingly difficult for DTCC's current corporate action system to keep pace. Implementing new and expanded functionality for participants—such as pledging tendered positions, expanding instruction cutoff dates and times, and eliminating contra-CUSIPs—are difficult and expensive to implement. The new system will provide this functionality and will be able to more easily support future demands of global corporate actions.

Consequently, the purpose of our reengineering is to modernize these systems while integrating corporate actions and underwriting into a single platform with new functionality. We are also using this as an opportunity to enhance our Securities and Entity Masterfile databases. We want to consolidate and streamline processing, generate further efficiencies, reduce costs and build in greater flexibility.

Q. How long have you been planning this reengineering initiative?

We originally identified the need to reengineer the Depository's corporate action systems in 2002. However given other significant initiatives we needed to focus upon, we progressed on our corporate action reengineering initiative in measured steps.

In light of heightened concerns about business continuity planning, we delayed modernizing our Asset Servicing infrastructure so that in 2003 we could establish our Remote Data Centers (RDCs). Our systems focus was then shifted to completing the re-write of the CNS system to a real time platform. 2004 saw the successful migration of the CNS system in mid-year and the launch of the second leg of the business continuity plans with the opening of our Southern Business Center.

Q. When did you actually begin?

In 2004 we began working closely with Tata Consultancy Services (TCS) to define our business requirements. We have since been working with our customers and advisory groups to hone the requirements and focus on what the industry needs to have completed.

Q. What will be the major differences between this new platform and DTC's existing systems?

We will combine what are now more than 60 separate legacy systems for dividends and reorganization into a single, integrated platform that can service even very complex securities from "cradle to grave" — from their inception at offering through the time the securities mature or are recalled or retired. It will support international messaging standards and best practices, including multi-currency processing and international identifying numbers such as ISINs, in addition to CUSIPs.

The new platform will capture comprehensive corporate action information during the underwriting process to support automated announcements, thus allowing for the straight-through processing 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.

Q. What will be the benefits to the industry?

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 offer types, 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. How does this new platform bring DTCC into compliance with the G30 report?

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 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?

For global firms that already regularly use international approaches, including ISO messaging standards, the programming impact should be limited. For domestic U.S. firms who haven't already adopted those standards, however, the impact could be more significant. It's likely they'll need to reprogram for new interfaces, including ISO messaging formats and new end-of-day file formats. Costs will vary from firm to firm, depending on their business needs, the flexibility of their systems and age of their legacy platforms.

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

Development of the new platform will be a multi-year effort, with features introduced in major phases as they are ready for industry testing. Preliminary testing of the underwriting component is planned in late 2006, with launch set for 2007. The corporate actions component is planned for launch in 2009, with testing the prior year.

Interested parties can keep appraised of the project schedule and planned rollout on our web site http://www.dtcc.com/reengineering

Q. How have you been working with the industry to gather requirements?

Corporate Actions Focus groups were held in the first quarter of 2005 with follow-up sessions in the 4th quarter of 2005 to review the project status, requirements gathered to date and new feedback. We have reached out to the Securities Industry Association's Dividend Divisions and Corporate Actions Divisions as well as the Asset Services Advisory Board to obtain their "wish lists" for the new system. This process is ongoing and will continue well into 2006.

Q. How will you be communicating with the industry on your progress and the status of the project?

In several ways. In 2005, we held a number of communication forums with participants in New York and Chicago. At these sessions we presented to current status of our project, engaged in detailed Q&A with attendees, and presented project timelines. (See project timelines on this site.)

We will expand the frequency of these meetings in 2006. We will be communicating through this focused reengineering web site, http://www.dtcc.com/reengineering. We will also reaching out to the Securities Industry Association, the Bond Marketing Association, the American Bankers Association and other industry group to arrange speaking presentations throughout the year. Additionally we will be conducting sessions specific to agents, vendors and service bureaus. The calendar of events will be posted to our Reengineering site as we define them.

This is a work in progress and is being made available by DTCC for information purposes only. Because it is a work in progress, it may periodically be updated or revised, and all information contained herein is subject to change. Please refer to the Important Legal Information portion of this site for further information.