News from the DTCC Complex

DTCC Settles Record $1.8 Quadrillion in 2007

DTCC announced in late March that it cleared and settled more than $1.86 quadrillion in securities transactions in 2007.

DTCC’s $1.69 billion in revenues last year was up 24% from $1.36 billion in 2006. Record-high volumes and tight fiscal management helped reduce costs in some of DTCC’s traditional market segments and resulted in record rebates and discounts of $984 million. Because DTCC operates on an at-cost basis, excess revenue beyond that required to fund the business is returned to customer firms on a pro-rata basis.

In addition to the rebates, the company announced the largest fee cuts in its history for 2008, driven by the economies of scale and frugal cost management provided by DTCC’s operations. These changes are expected to result in a combined total of $198 million in fee reductions to customers for the coming year. That followed fee revisions resulting in almost $90 million in reductions for 2007.

“All in all, we had a very successful year at DTCC in handling high transaction volumes, helping to reduce risk and lowering costs for customers across asset classes we support – and we continued to expand our services globally. DTCC recognizes that we are facing a new trading environment where customers require ever-greater levels of efficiency and stronger risk management,” said Donald F. Donahue, DTCC chairman and chief executive officer. “We are facing new venues for trading, new and complex instruments and risk transfer vehicles that demand new solutions to reducing risk and implementing technology to reduce costs, and we are responding to that challenge.”

Volume Growth

NSCC processed 13.5 billion transactions versus 8.5 billion in 2006, up 59%. On an average daily basis, transaction volume jumped to 53.9 million in 2007 from 34 million transactions daily in 2006, an increase of almost 20 million transactions a day. The average cost for clearing one side of an equity trade through NSCC dropped to $.006 (six-tenths of a cent), down 45% from the $.011 cost in 2006 and a fourth of the cost four years ago.

DTCC’s depository, DTC, provides custody and asset services for about 3.5 million securities issues from the U.S. and 110 other countries and territories, worth more than $40 trillion. Of that $40 trillion, $7.6 trillion represents non-U.S.issues.

Transactions processed through the Government Securities Division (GSD) of FICC rose to 30.4 million in 2007 from 24.9 million in 2006, a 22% increase. GSD netted down the value of its U.S. government securities transactions from $4 trillion in average daily transaction value to just under $1 trillion, a 75% netting factor. The Mortgage-Backed Securities Division of FICC saw volume increase to 2.1 million transactions from 1.7 million a 22% increase, and reduced the total $61.9 trillion in par value to $3.3 trillion requiring bilateral settlement, a 94.5% netting factor.

DTCC Deriv/SERV LLC, which matches and confirms over-the-counter derivatives transactions, saw its transaction volume jump 123% to 5.9 million transactions from 2.6 million in 2006.

DTCC Execs Attend Global CCP Conference on Clearing in Japan

A summit of the world’s major providers of central counterparty (CCP) clearing services and representatives from exchanges, marketplaces, global financial firms, central securities depositories and regulators, was held in Tokyo from April 16 through April 18. Under discussion was a broad range of emerging issues and challenges the industry faces as it moves toward a more seamless, efficient and safer global environment for securities and derivatives.

The conference was organized by CCP12, a global organization that works to further the industry’s dialogue on the adoption of best clearing and risk management practices, regulatory harmonization and cross-border trading.

“We all recognize and respect that each market has unique characteristics, market practices and technology capabilities; but we share a common challenge to support the growth of capital and help our customers lower their costs and reduce risk,” said Donald F. Donahue, chairman and CEO of DTCC, and one of the founding members of CCP12. “There are no simple solutions to fostering cross-border clearing, but this type of dialogue was a critical step in that process.”

Self-Service Password Management Coming Soon

Beginning mid-year, mainframe users, followed by Web-based customers, will begin to receive new capability to manage DTCC passwords. Through new software, customers will be able to enter or reset a password once, and have the new password applied to all other systems, eliminating the need to juggle multiple passwords.

Users also will be able to change and synchronize both their Web-based and mainframe passwords. Since the two systems have different password rules, it will be necessary to complete the self-service process separately for each one.

In addition, the new software will enable DTCC to further strengthen the security infrastructure that protects access to the organization’s systems and information.