What is the 'Depository Trust Company - DTC'
The Depository Trust Company (DTC) is one of the world's largest securities depositories. The DTC, which was founded in 1973 and is based in New York City, is organized as a limited purpose trust company and provides safekeeping through electronic recordkeeping of securities balances. It also acts like a clearinghouse to process and settle trades in corporate and municipal securities.
BREAKING DOWN 'Depository Trust Company - DTC'The settlement services that the DTC provides are designed to lower costs and risk as well as increase the market's efficiency. It provides net settlement obligations at the end of each day from trading in equity, debt and money market instruments. The DTC also provides asset servicing, along with a range of services.
History of the DTC
The DTC emerged in the late 1960s when the New York Stock Exchange (NYSE) became unable to handle its trade volume, which was then in excess of 8 million shares per day. Due in part to the creation of the DTC, the NYSE now can handle billions of trades per day. The DTC lowers costs and improves accuracy through its automated system.
The Depository Trust and Clearing Company (DTCC) owns the DTC. The DTCC manages risk in the financial system. Formerly an independent entity, the DTC was consolidated with several other securities clearing companies in 1999 and became a subsidiary of the DTCC.
Scope of Activities
The DTC holds trillions of dollars' worth of securities in custody, including corporate stocks and bonds, municipal bonds, and money market instruments. It settles funds at the end of each trading day using the Fedwire Funds Service. The DTC is registered with the Securities and Exchange Commission (SEC), is a member of the Federal Reserve System and is owned by many companies in the financial industry, with the NYSE being one of its largest shareholders. Securities brokers, dealers, institutional investors, depository institutions, issuing and paying agents, and settling banks use the DTC, but individual investors do not interact with it.
In 2012, the DTC settled 299.3 million securities, with a dollar amount of $110.3 trillion.
In addition to safekeeping, recordkeeping and clearing services, the DTC provides direct registration, underwriting, reorganization, and proxy and dividend services. For example, under the DTC's dividend services, it announces when a company declares a dividend, then it collects the dividend payment from the issuing company, allocates dividend payments to the shareholders and reports those payments. The DTC also provides global tax services.