DTCC Connection

Mar 01, 2010 • DTCC Connection

The Incredible Shrinking Vaults

by Michael Scholl


At the end of January 2010, DTCC’s vault inventory totaled 1,686,517 certificates, down from the 2,039,654 the vault held in January 2009 and the 4,213,278 held when the shredding program began in August 2004.


DTC’s vault count reached a high of about 32 million certificates in 1990. Of those, 22 million were bearer bonds. The supply of bearer bonds in the vaults has dwindled thanks to the maturation of old bearer bonds (which were usually returned to their transfer agents when they matured) and to a 1982 ban on the issuance of new bearer bonds. Despite those factors, there were still 5.4 million total certificates in the DTC vaults in January 2003, when DTC announced it would begin destroying non-transferable certificates.


In addition to the destruction program, the reduction of DTC vault inventory can be attributed to other DTC dematerialization initiatives, including its FAST (Fast Automated Securities Transfer) program, a service in which securities registered in the name of DTC’s nominee, Cede & Co., are held by transfer agents rather than by DTC itself.


Another initiative is the Direct Registration System (DRS), a service that allows investors to register the ownership of their shares electronically with either an issuing company or transfer agent. As of Jan. 1, 2008, all equities listed on U.S. exchanges must meet the requirements for using a DRS. There are about 7,000 such issues, and nearly 90 percent of them actually use a DRS, Clemente said. (DTC, a DTCC subsidiary, is the only registered clearing agency currently administering a direct registration system.)


dtccdotcom