What's this all about?
DTCC is undertaking a comprehensive reengineering of the systems its depository uses to process underwriting distributions, and to store critical data about securities in its master file or "data library." The reengineering will also strengthen the prospectus repository and create a new service for disseminating real-time information about new issues. In addition, the project will link the depository's underwriting systems to its corporate actions systems by combining them on a shared platform. This is a multi-year project that will cut underwriting and other processing costs, lower risks and streamline processing for the industry. These fundamental changes to the system will also result in major changes in the business process for both DTCC's depository and its customers.

Why is DTCC doing this?
New classes of securities, more complex asset servicing requirements, evolving technology, changing business needs and regulatory concerns are all factors prompting DTCC to reappraise and redesign how it services the $30 trillion worth of assets it holds in custody for investors worldwide. The depository's current platform for processing the underwriting of securities serves the industry well, but it consists of several distinct customized sub-systems. Many of these were implemented a decade or more ago and are now difficult and expensive to maintain, update and adapt for new kinds of securities or securities that will be issued internationally and paid for in multiple currencies.

Is it important?
Underwriting is where new issues are "introduced" into the securities industry's systems. Through DTCC's underwriting services, underwriters can distribute both primary and secondary offerings of securities quickly and economically. But capturing the right information about a security during the underwriting phase is critical, because the information is used to automate and speed the processing of subsequent actions involving the security, including taxes, dividend payments, stock splits, mergers and many other activities.

What does it do for customers?
The goal is reduce costs, streamline current processing procedures, provide more flexibility and capture more critical data early on in the underwriting process. The reengineered underwriting system will also be able to accommodate the new types of securities instruments coming to market and to retain data about them in ways that will be more useful during subsequent corporate actions that affect the securities. Another goal is to give customers more immediate information on the status of a security going through the underwriting process—and ultimately—more control over the process itself. The new, real-time information dissemination service for new issues, for example, will keep the industry more readily and widely informed about securities coming to market.

Will customers have to do anything?
Yes. Eventually, customers will need to modify their systems, or their vendor system(s), in order to make sure they mesh with DTCC's new systems. DTCC will require electronic transmission of both securities offering data and offering documentation, such as the prospectus, the official statement, and the offering memorandum or "circular". Customers will be able to choose a number of different transmission options for offering data. They can, for example, enter the data on a web-based screen, provide an electronic file, or have a vendor provide an electronic file. Customers will be able to upload offering documentation directly into the new system (and, for a limited time after implementation of the new system, customers will be able to continue sending email with the document attached). DTCC will let customers know about any new specifications well in advance of when they will have to be implemented. The new system, once built, will also undergo extensive testing, including customer testing.

Anticipated Improvements
The improvements to the underwriting process DTCC is aiming to achieve as a result of its reengineering initiative are to:

• Capture more comprehensive information on securities during the eligibility step.

• Enhance the Security Master File and make it mesh more closely with the underwriting process.

• Build a processing engine that functions with common rules and supports both underwriting and corporate actions as well as the Security Master File.

• Establish a single announcement processor for all underwriting events.

• Improve both internal and customer operational review and controls.

• Support third-party feeds, e.g., from customers, vendors, and service bureaus.

• Create links to the DTC Prospectus Library and other DTCC systems.

• Provide preliminary validations for new issues that include the security's identification number (e.g., CUSIP), participant identification and agent identification.

• Capture information for pre-settlement or "when-issued" trading.