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DTCC Develops Solution to Help Market Participants Pass Cost Basis Information to Meet New Federal Reporting Requirements

Leveraging Existing Cost Basis Reporting Service Will Reduce Costs & Shorten Development Cycle; Pilot to Launch in Q3 2010

New York, November 12, 2009 – The Depository Trust & Clearing Corporation (DTCC) announced today that it is developing a solution to help financial firms and other market participants comply with a new January 2011 mandate requiring the reporting of adjusted cost basis information to investors and the federal government. The new law, part of The Emergency Economic Stabilization Act signed in October 2008, will require firms to not only report accurate, adjusted cost basis information to inves­tors and the U.S. Internal Revenue Service, but to also pass cost basis information between financial intermediaries when assets move from one firm to another. 

To help the industry meet the federal mandate without having to make a huge capital investment, DTCC will leverage the existing technology of its successful Cost Basis Reporting Service (CBRS), an automated system launched by the National Securities Clearing Corporation (NSCC) in 2003.

CBRS currently provides financial firms with the ability to pass customer cost basis information, but only on assets transferred through NSCC’s Automated Customer Account Transfer Service (ACATS). Pending approval from the U.S. Securities and Exchange Commission, the new version of the system will not calculate or store cost basis information for firms, but will effectively extend the efficiencies and capabilities of CBRS to transfer agents, issuers, mutual funds, custodian banks and broker/dealers to move cost basis information — from one financial firm to another — on both ACATS and non-ACATS transactions.

“Many in the industry had approached us to help solve this impending reporting challenge because they recognized that DTCC has the proven infrastructure and technical expertise to meet the federal mandate under such a short timeframe,” said Michael C. Bodson, DTCC Executive Managing Director, Business Management and Strategy. “This service enhancement is a natural fit for DTCC and complements our suite of post-trade processing services, including our mutual funds and corporate actions business.”

With customers on a tight deadline to comply with the upcoming reporting changes, DTCC’s strategy is to finalize business requirements before the end of this year, make the necessary coding changes and test the system early next year, and be ready to roll out the enhanced version of the CBRS system for participant testing by Q3 2010.

“This enhancement represents the value of an industry utility like DTCC to develop solutions that allow our customers to meet regulatory requirements, drive down costs and improve efficiencies,” said Susan Cosgrove, DTCC Managing Director, Equities Clearance and Settlement Group. “Leveraging our existing platform means the industry won’t have to invest in building a new system from scratch to serve as the common hub, and it also eliminates the need for individual firms to expend limited resources to build their own multiple systems and processes.”

Industry Input

DTCC has worked closely over the past several months with a broad coalition of market participants to develop the initial business requirements for enhancing CBRS, including hosting an industry steering committee that includes broker/dealers, transfer agents, mutual fund companies and industry organizations such as the Investment Company Institute, the Securities Transfer Association, and the Shareholder Services Association.

“The changes required to comply with the new cost basis legislation are complex and impact many systems within our industry,” said Kevin McCosker, director, Asset Services, Pershing LLC. “DTCC’s expanded Cost Basis Reporting System will allow entities to electronically pass along cost basis and eliminate future processing costs and paper flow, and is critical to helping the industry comply with the legislation.”

About DTCC

The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives.

In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with financial firms and third parties who market these products. DTCC's depository provides custody and asset servicing for more than 3.5 million securities issues from the United States and 110 other countries and territories, valued at $27.6 trillion. In 2008, DTCC settled more than $1.88 quadrillion in securities transactions. DTCC has operating facilities in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com.