DTC Establishes New Settlement Link with Canadian Depository
The Depository Trust Company (DTC), a DTCC subsidiary, plans to establish a link with The Canadian Depository for Securities, Ltd. (CDS), the national central securities depository of Canada, that for the first time will support the processing and settlement of Canadian dollar transactions at DTC. The new link, which is subject to regulatory approval, is scheduled to be implemented for select pilot participants in the third quarter of 2005 and available to all DTC customers in the fourth quarter or early in 2006.
The proposed link, the first DTC link to support settlement in a foreign currency, will provide participants with a single depository interface for U.S. and Canadian dollar transactions. This will reduce cross-border processing costs and inefficiencies by eliminating problems associated with maintaining split inventories in Canadian issues. In split inventories, some portion of a position in a dually listed issue is maintained in CDS for Canadian dollar settlement and the remainder is with DTC for U.S. dollar settlement. The new link will permit DTCC customers to concentrate all U.S. and Canadian security positions in their DTC accounts.
“Since the early 1980s, DTCC subsidiaries and CDS have developed linkages and close working relationships,” said John Abel, DTCC vice president, Product Development. “The existing links between CDS and DTCC are among the most robust inter-market links in the world, processing more than a million transactions each month. But up until now, these links only supported transactions involving U.S. dollars.”
The new link, which will be implemented using a DTC omnibus account at CDS, will support transactions sent by a DTC participant to a CDS broker or custodian as well as those sent by CDS brokers and custodians to DTC part-icipants. It will also support Canadian dollar transactions between DTC participants.
As with U.S. dollar transactions, partici-pants’ security positions received via Canadian dollars will immediately be available for redelivery in DTC. DTC has also developed an end-of-day settlement process to settle Canadian dollar obligations; these obligations will be calculated and displayed to participants via new DTC display screens.
Editor’s Note: For more information on the new settlement link with The Canadian Depository for Securities, Ltd., contact John Abel at (212) 855-8434 or jabel@dtcc.com. @