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Focus on DTCC’s Depository Business ACSDA Leadership Forum

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Presentation on theme: "Focus on DTCC’s Depository Business ACSDA Leadership Forum"— Presentation transcript:

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

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. As you may know, DTCC, is the largest financial services post-trade infrastructure organization in the world. Through our subsidiaries, we provide clearance and settlement information services for equities, corporate and municipal bonds, UITs, exchange-traded funds as well as over-the-counter derivatives. In addition, we’re a leading processor of mutual fund and insurance transactions, linking funds and insurance carriers with their distribution networks. As you will hear from a number of staff over the next several days on various components of DTCC processing and our role in the financial markets, I will limit my remarks this morning to the DTC processing and how our Operations support the financial services marketplace with a wide range of securities settlement, custody and asset services for Participant banks, broker/dealers and clearing agencies

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.

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 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)

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. As the world’s largest securities depository, at the end of 2006, DTC and its subsidiaries settled more than $1.5 quadrillion of securities. Handled more than $3.3 trillion in cash dividend, interest and corporate action payments and had within its custody more than $36 trillion in assets represented by more than 2.8 million securities issues from the US and 100 various countries and territories. Though not on the graphic, these custodial assets represent approximately 90% of all shares outstanding and traded on the listed US exchanges and virtually all of the outstanding corporate and municipal debt as well as 99% of all money market instruments – commercial paper

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 I won’t go through these asset classes, but this is a listing of the various types of securities that are routinely processed and services through the Depository. You will hear more about the degrees to which these assets are services from my colleagues when they present to you late today and tomorrow.

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. I won’t go through these asset classes, but this is a listing of the various types of securities that are routinely processed and services through the Depository. You will hear more about the degrees to which these assets are services from my colleagues when they present to you late today and tomorrow.

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

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.

11 Asset Servicing for DTC Issues
Function NYC Tampa 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 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.

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.

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

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

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

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