DEFINITION of 'Depository Trust & Clearing Corporation (DTCC)'

Established in 1999, the DTCC is a holding company that consists of five clearing corporations and one depository, making it the world's largest financial services corporation dealing in post trade transactions.

BREAKING DOWN 'Depository Trust & Clearing Corporation (DTCC)'

Owned by its principal users, the DTCC's function is to integrate the National Securities Clearing Corporation (NSCC) and DTC, streamlining clearing and depository transactions in attempts to reduce cost and increase capital efficiency. Clearing corporations handle the confirmation, settlement and delivery of transactions. They fill the core mission of ensuring that transactions are made in a prompt and efficient manner. They achieve this by taking offsetting positions with clients in every transaction.

Clearing brokers are critical links between clearing corporations and investors. Clearing brokers are exchange members, who help ensure that trades settle appropriately and transactions are successful. Clearing brokers are also responsible for maintaining paperwork associated with the clearing and executing of a transaction.

At times, clearing corporations may earn clearing fees when they act as a third-party to a trade. In this case, the clearing house receives cash from the buyer and securities or futures contracts from the seller. The clearing corporation then manages the exchange, collecting a fee for doing so. This is a variable cost, dependent on the size of the transaction, the level of service required, and/or the type of instrument being traded. Investors who make several transactions in a day can generate significant fees. Specifically in the case of futures contracts, clearing fees can pile up for investors as long positions spread the per-contract fee out over a longer period of time.

Depository Trust & Clearing Corporation: DTCC and National Securities Clearing Corporation (NSCC)

The National Securities Clearing Corporation is a subsidiary of the DTCC and was established in 1976. The U.S. Securities and Exchange Commission (SEC) regulates the NSCC. Before the NSCC’s inception, stock exchanges would close once a week, due to huge demand of paper stock certificates. To overcome this problem, multilateral netting was proposed. In multilateral netting, multiple parties arrange for transactions to be summed, rather than settled individually. All netting activity is centralized to avoid a myriad of invoicing and payment settlements. This can occur between one or multiple organizations. This subsequently lead to the formation of the NSCC.

The NSCC today serves as a seller for every buyer and as buyer for every seller for trades settled in U.S. markets.

  1. Continuous Net Settlement - CNS

    Continuous Net Settlement (CNS) is an automated book-entry accounting ...
  2. Clearing Corporation

    A clearing corporation is an organization associated with an ...
  3. International Clearing System

    The International Clearing System is a trade clearing system ...
  4. Out Trade

    A trade that cannot be cleared by the associated exchange clearing ...
  5. Fixed Income Clearing Corporation ...

    The Fixed Income Clearing Corporation (FICC) is an agency that ...
  6. Chill

    A chill is when the Depository Trust Company (DTC) places one ...
Related Articles
  1. Trading

    Principal trading and agency trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on to find out.
  2. Tech

    DTCC And Digital Asset Bring Blockchain To Repos

    The rising interest in blockchain has attracted none other than the Depository Trust & Clearing Corporation (DTCC), an entity at the core of post-trade market infrastructure to test bitcoin’s ...
  3. Insights

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
  4. Trading

    Basics of the Mechanics Behind Electronic Trading

    Once associated with shouting traders and wild hand gestures, now statistics and programmers rule.
  5. Financial Advisor

    How Brokerage Fees Work

    What you need to know about fees when choosing between a full service and discount broker.
  6. Investing

    The Ins And Outs of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  7. Investing

    How To Trade Foreign Stocks

    We weigh the major ways to trade foreign stocks for investors.
  8. Investing

    The 4 Ways To Buy And Sell Securities

    Know the four main avenues of buying and selling investment instruments.
  9. Investing

    8 Investing Fees That You Should Never Pay

    In investment management and financial planning there are a plethora of fees that are unnecessary.
  10. Investing

    Bond Buyers: Is Your Broker Overcharging You?

    Retail investors are at a disadvantage when it comes to buying bonds, because brokers don't have to disclose everything. That’s expected to change soon.
  1. What do T+1, T+2 and T+3 mean?

    For security transactions, T+1, T+2, and T+3 refer to settlement dates which occur on a transaction date plus one, two and ... Read Answer >>
  2. Who Benefits From Loaning Shares in a Short Sale?

    Does loaning shares in a short sale transaction derive any benefit other than interest on the loan? Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  3. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  4. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  5. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  6. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
Trading Center