Depository Trust & Clearing Corporation
From Wikipedia, the free encyclopedia
The Depository Trust & Clearing Corporation (DTCC) is a financial services company, based primarily in 55 Water Street in New York City, that clears and settles securities trades and provides custody of securities. Its depository custodies well over $25 trillion in stocks and bonds, more than any other depository in the world, and DTCC processes most of the securities transactions in the United States, over $1 quadrillion worth every year. DTCC was set up to provide an efficient and safe way for buyers and sellers of securities to make their exchange, and thus "clear and settle" transactions.
[edit] History
Established in 1972, The Depository Trust Company (DTC) was created to alleviate volumes of paperwork and lack of security that developed after large growth in the volume of transactions of the U.S. securities industry in the late 1960s. The increase in volume made the exchange of physical stock certificates more difficult, and less efficient.
Two methods were devised to solve the crisis. The first was to hold all stock certificates in a centralized location and record all changes of ownership electronically - this method led to the creation of DTC in 1973 (stocks held by DTC are kept in the name of its partnership nominee, Cede & Co.). The second method involved multilateral netting; and led to the formation of the National Securities Clearing Corporation (NSCC) in 1975.
Before DTC and NSCC were formed, brokers physically exchanged certificates, employing hundreds of messengers to carry certificates and checks. With volumes approaching 10 to 12 million shares a day, the paperwork became enormous. To deal with this large volume, the exchanges closed every Wednesday, and trading hours were shortened other days of the week.
This increased volume led the New York Stock Exchange to establish the Central Certificate Service (CSS) in 1968. The CSS kept track of the total number of shares held by NYSE members. This led to the development of the Banking and Securities Industry Committee (BASIC), and finally the development of DTC.
[edit] Litigation
DTCC has been sued with regard to its alleged participation in naked short selling.[1] The plaintiff is seeking $400 million in damages. In the case of Pet Quarters, Inc. v. The Depository Trust & Clearing Corporation, et al., filed October 29, 2004, the DTCC Defendants’ motion to dismiss and plaintiffs’ motion to remand to state court are pending.[2]
