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Focus on DTCC’s Depository Business ACSDA Leadership Forum John Colangelo October 8, 2007 John Colangelo October 8, 2007.

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Presentation on theme: "Focus on DTCC’s Depository Business ACSDA Leadership Forum John Colangelo October 8, 2007 John Colangelo October 8, 2007."— Presentation transcript:

1 Focus on DTCC’s Depository Business ACSDA Leadership Forum John Colangelo October 8, 2007 John Colangelo October 8, 2007

2 2 A Snapshot of DTC Safekeeping and Custody: the world’s largest depository 2.8 million securities issues from the US and 100 other countries and territories. Valued at $36 trillion. Safekeeping and Custody: the world’s largest depository 2.8 million securities issues from the US and 100 other countries and territories. Valued at $36 trillion.

3 3 DTC Asset Servicing Collected and allocated $3.3 trillion dividend, interest, principal and other cash payments to its customers. Handled the processing, distribution and settlement of new issues – a record 50,867 issues worth $4.4 trillion. Collected and allocated $3.3 trillion dividend, interest, principal and other cash payments to its customers. Handled the processing, distribution and settlement of new issues – a record 50,867 issues worth $4.4 trillion.

4 4 DTC Settlement Settled securities transactions (both buy and sell sides) in 2006 with a gross market value of $444.7 trillion. (This counts the original gross value of net-settling dealer trades initially cleared and guaranteed by NSCC as the central counterparty. It also counts affirmed, gross-settling institutional trades instructed by Omgeo.) Handled ultimate book-entry delivery of securities valued at more than $179 trillion in 2006, also settled $142.2 trillion in money market instruments

5 5 DTC: Regulated, Secure, Resilient Regulated by the US Securities and Exchange Commission, New York State Banking Department and Member of the Federal Reserve System Ensuring Business Continuity Fully Redundant Capabilities for All Critical Business Functions Decentralize Staff and Systems DTC, supported by DTCC IT and Communications Infrastructure, has Operations staff in: New York City Tampa, Florida Shanghai, China (corporate actions announcement validations only) Regulated by the US Securities and Exchange Commission, New York State Banking Department and Member of the Federal Reserve System Ensuring Business Continuity Fully Redundant Capabilities for All Critical Business Functions Decentralize Staff and Systems DTC, supported by DTCC IT and Communications Infrastructure, has Operations staff in: New York City Tampa, Florida Shanghai, China (corporate actions announcement validations only)

6 6 What We Do … Immobilize Securities Immobilizing securities through custody & safekeeping DTC’s nominee name – Cede & Co. DTC-eligible securities maintained by DTC as a fungible mass, accounted for at participant bank or broker/dealer level. Client investor-level records are not centrally maintained in the U.S.; DTC participants maintain client-level accounts on their own books. Settlements only involve immobilized securities, generally held in either book-entry only form or as one balance certificate with U.S. transfer agent. Special physical custody services for ineligible issues. Immobilizing securities through custody & safekeeping DTC’s nominee name – Cede & Co. DTC-eligible securities maintained by DTC as a fungible mass, accounted for at participant bank or broker/dealer level. Client investor-level records are not centrally maintained in the U.S.; DTC participants maintain client-level accounts on their own books. Settlements only involve immobilized securities, generally held in either book-entry only form or as one balance certificate with U.S. transfer agent. Special physical custody services for ineligible issues.

7 7 DTC’s Eligible Securities Types Common and Preferred Stock Unit Investment Trusts Closed End Funds Corporate Bonds and Medium Term Notes Municipal Bonds/Notes Corporate and Municipal Commercial Paper Structured Securities (including CMOs and ABS) Retail and Institutional CDs Bankers Acceptances Common and Preferred Stock Unit Investment Trusts Closed End Funds Corporate Bonds and Medium Term Notes Municipal Bonds/Notes Corporate and Municipal Commercial Paper Structured Securities (including CMOs and ABS) Retail and Institutional CDs Bankers Acceptances

8 8 Identifying Securities CUSIP Number - stands for Committee on Uniform Securities Identification Procedures. CUSIP system—owned by the American Bankers Association and operated by Standard & Poor’s. CUSIPs identify most securities, including: stocks of all registered U.S. and Canadian companies, and U.S. government and municipal bonds. DTC is expanding support for International Securities Identifying Numbers (ISINs), in addition to CUSIPs. Reengineering of DTC’s Core Underwriting & Corporate Actions Systems. CUSIP Number - stands for Committee on Uniform Securities Identification Procedures. CUSIP system—owned by the American Bankers Association and operated by Standard & Poor’s. CUSIPs identify most securities, including: stocks of all registered U.S. and Canadian companies, and U.S. government and municipal bonds. DTC is expanding support for International Securities Identifying Numbers (ISINs), in addition to CUSIPs. Reengineering of DTC’s Core Underwriting & Corporate Actions Systems.

9 9 DTC Custody and Safekeeping Fungible Securities Registered in DTC’s Cede & Co. Nominee. Traditional Vault Services - Safekeeping, Deposits, Withdrawals Also, Non-Cede & Co. Custody for ineligible issues Dematerialization – Eliminating Physical Certificates FAST – Fast Automated Securities Transfer Program DRS – Direct Registration Service Fungible Securities Registered in DTC’s Cede & Co. Nominee. Traditional Vault Services - Safekeeping, Deposits, Withdrawals Also, Non-Cede & Co. Custody for ineligible issues Dematerialization – Eliminating Physical Certificates FAST – Fast Automated Securities Transfer Program DRS – Direct Registration Service

10 10 What We Do: DTC Asset Services Handles all aspects of asset servicing: Money market instruments – from issuance through redemption. Processes initial public offerings (IPOs) and other new security issuances – making securities eligible in a book-entry environment. Newly reengineered Underwriting System now being introduced. Works with 4,000+ paying and transfer agents processing and settling payments, corporate actions and entitlements for DTC customers. Currently reengineering Corporate Actions Services for 2009 introduction. Provides value-added information on underwriting and announcements to the global securities industry. Offers global tax services on corporate actions. Handles all aspects of asset servicing: Money market instruments – from issuance through redemption. Processes initial public offerings (IPOs) and other new security issuances – making securities eligible in a book-entry environment. Newly reengineered Underwriting System now being introduced. Works with 4,000+ paying and transfer agents processing and settling payments, corporate actions and entitlements for DTC customers. Currently reengineering Corporate Actions Services for 2009 introduction. Provides value-added information on underwriting and announcements to the global securities industry. Offers global tax services on corporate actions.

11 11 Asset Servicing for DTC Issues FunctionNYCTampa Announcements√√√√ √√√√ Underwritings/Eligibility√√ Principal & Interest Cash Receipts, Allocations and Research/Claims √√ Redemption Support√√ Reorganization Announcements√√ Voluntary Reorganization Processing√√ Mandatory Reorganization Processing√√ Proxy/Shareholders’ Rights√√ Books & Records (aged transfers, FAST balancing, error research, lost certificate replacements, bank reconciliation) √√ Customer Support Center√√ Shanghai √ International Operations, Foreign Currency

12 12 What We Do: DTC Settlement Role Settling participants’ securities obligations to one another As instructed by participants, DTC completes efficient transfers of ownership of securities among broker-dealers, banks, NSCC, and other participants, providing for book-entry delivery of securities (free-of-payment and versus payment in USD and CAD). Current settlement system will be reengineered in next 5 years. Settling participants’ securities obligations to one another As instructed by participants, DTC completes efficient transfers of ownership of securities among broker-dealers, banks, NSCC, and other participants, providing for book-entry delivery of securities (free-of-payment and versus payment in USD and CAD). Current settlement system will be reengineered in next 5 years.

13 13 Settlement Role of DTC, the Depository Operates central book-entry systems for settlement of securities, including obligations from exchange and OTC market trades, institutional trades, corporate money market issuance and redemptions, collateral movements and financing transactions. Depository risk management requires participants to fully collateralize their settlement activities intra-day, with settlement banks taking on the net settlement at end of day. Using its account in the Federal Reserve Bank of New York, DTC manages, and for dual participants, integrates its own net settlements with those of NSCC, and in part, FICC cash obligations, via National Settlement Service unit of the Federal Reserve Bank of New York. Operates central book-entry systems for settlement of securities, including obligations from exchange and OTC market trades, institutional trades, corporate money market issuance and redemptions, collateral movements and financing transactions. Depository risk management requires participants to fully collateralize their settlement activities intra-day, with settlement banks taking on the net settlement at end of day. Using its account in the Federal Reserve Bank of New York, DTC manages, and for dual participants, integrates its own net settlements with those of NSCC, and in part, FICC cash obligations, via National Settlement Service unit of the Federal Reserve Bank of New York.

14 14 DTC Settlement & Risk Management Controls Settlement from multiple locations, if necessary Participants Fund Depository Settlement Risk Management Controls Debit Cap Collateral Monitor LPNC – Largest Provisional Net Credit, special limit for money market instruments Net Settlement (with intraday finality for dividend credits, end of day for settlement) Scheduled Daily Deadlines Cross Endorsement of NSCC and DTC Settlement for Dual Participants Final Net/Net Settlement via Settling Banks/FRBNY Settlement from multiple locations, if necessary Participants Fund Depository Settlement Risk Management Controls Debit Cap Collateral Monitor LPNC – Largest Provisional Net Credit, special limit for money market instruments Net Settlement (with intraday finality for dividend credits, end of day for settlement) Scheduled Daily Deadlines Cross Endorsement of NSCC and DTC Settlement for Dual Participants Final Net/Net Settlement via Settling Banks/FRBNY

15 15 Leveraging Six Sigma in DTC Operations Alignment of quality initiatives with goals Financial gains for stakeholders Service delivery to customers Strategic industry positioning Learning and growth for employees Alignment of quality initiatives with goals Financial gains for stakeholders Service delivery to customers Strategic industry positioning Learning and growth for employees

16 16 What We Measure Measure it – you improve it Key Business Processes (Balanced Business Scorecard) Customer Satisfaction Survey = 91% Industry-Facing Benchmarks Employee Survey Measure it – you improve it Key Business Processes (Balanced Business Scorecard) Customer Satisfaction Survey = 91% Industry-Facing Benchmarks Employee Survey


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