DTCC Implements Largest-Ever Fee Cuts
DTCC subsidiaries have reduced their fees for 2008, which will result in a net savings to the industry of approximately $198 million for the year. This will be the organization’s largest-ever fee cut and comes on top of 2007 fee cuts that yielded customers approximately $88 million. The new fees took effect January 2.
“We are committed to driving down our customers’ costs through tight fiscal controls and productivity improvements throughout the organization,” said William Aimetti, DTCC’s chief operating officer. “We are pleased to extend these benefits to customers globally in the over-the-counter derivatives space via Deriv/SERV and we are now focusing on bringing similar cost-efficiencies to Europe through our EuroCCP subsidiary.”
The new fees, which relate primarily to core services, cover National Securities Clearing Corporation (NSCC), The Depository Trust Company (DTC), Fixed Income Clearing Corporation’s (FICC) Mortgage-Backed Securities (MBS) Division and Deriv/SERV. Fees for several new services as well as select “disincentive” fees to discourage inefficient practices were also introduced.
All changes have been filed with the Securities and Exchange Commission.
Making it possible
The subsidiaries of DTCC price their services to ensure full cost recovery – and continually reassess their fees to reflect the organization’s progress in lowering internal costs.
“We have a sustained focus on metrics-based initiatives to help us drive productivity, cost-efficient technology development and rigorous infrastructure management,” said Aimetti. “These techniques include Six Sigma, CMMI [Capability Maturity Model Integration] and ITIL [Infor-mation Tech-nology Infra-structure Library], which enhance the level of quality we deliver and create greater efficiencies that result in reduced costs.”
The 2008 fee changes also further simplify the subsidiaries’ billing state-ments, making it easier for customers to understand and track their costs.
- NSCC Clearing Services. These fees will be reduced by $88 million. The reduction reflects a shift in the clearing fee schedule from the current solely transaction-based structure toward a methodology that combines transaction volume and value. Other contributors are lower fees for Automated Customer Account Transfer Services (ACATS), which will result in $1.3 million in savings.
- FICC’s MBS Division. These fees will decrease by approx-imately $6.8 million as a result of reductions in trade-for-trade processing fees for specified pool trades, which is a component of the MBS central counterparty implementation.
- DTC. Fees for core services will be reduced by $55.8 million, which includes reductions for Settlement services, Underwriting service fees and the elimination of certain participant output fees.
- Wealth Management Services. Fees for Fund/SERV and Networking will be reduced by $18.4 million.
- Insurance Services. File transmission fees will be eliminated, resulting in $6.1 million in savings.
- Deriv/SERV. Fees for this business will decrease an estimated $29 million.
Fee increases and disincentives for 2008
Certain areas of DTC will increase fees to recoup costs associated with processing complexity, resulting in a $7.7 million rise in 2008 revenues. Product lines impacted are Asset Services, Withdrawals by Transfer (consistent with commitments to the industry and regulators), Dividends, Reorganization, Deposits and Custody.
The depository’s Asset Services business also announced 2008 disincentive fees to discourage practices that prevent the industry from achieving peak efficiency. These fees are expected to generate an estimated $20 million in revenue for 2008.
This year, new fees will be implemented relating to underwritings of securities issues with “structural elements” that prevent agents from making timely announcements; new or higher fees to encourage the elimination of physical movements of paper certificates; underwriters that submit incomplete information; rejects and exceptions for Custody and Deposits (offset by the reduction in Withdrawals).
What’s new?
The 2008 fee schedule includes several new services, which will result in approximately $11 million in revenue. These services include the New Issue Information Dissemination Service, a new service to automate the reconciliation of syndicated loans, the Managed Accounts Service, new tax and securities processing capabilities, and new Insurance Services.@
[For details on 2008 fee changes for NSCC, DTC, FICC and Deriv/SERV, see the respective Important Notices on www.dtcc.com.]