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Thursday, November 19, 2009

DTCC Rings in a Decade

Reported by Patricia Kelly

What better way to usher in a decade than to ring the closing bell of the New York Stock Exchange? That's precisely how DTCC celebrated its 10th anniversary on Thursday.

"The next decade already looks as dynamic as our first 10 years," stated Donald Donahue, chairman and CEO. “We stand on the cusp of launching several innovative new services that will allow the industry to continue moving forward.”

Since its inception in 1999 as a holding company containing two separate subsidiaries –- the Depository Trust Company and the National Securities Clearing Corporation –- DTCC has grown to include seven subsidiaries, of which four are clearing corporations. Today, the company has over 600 offices across the U.S., Europe, and Asia.

DTCC recently revealed plans to relocate 1,600 employees to Jersey City by early 2013, when its Lower Manhattan lease expires.

Company Press Release

New York, November 19, 2009 – The Depository Trust & Clearing Corporation (DTCC) will ring the closing bell at the New York Stock Exchange today, marking the 10th anniversary of its creation as the central infrastructure supporting the financial markets in the U.S. and overseas. Clearing and settling more than $1.88 quadrillion in securities transactions last year, DTCC has played a central role in bringing safety, soundness and transparency to the financial industry.

“Since it was established, DTCC has delivered services that have helped the U.S. capital markets remain the most competitive, robust and liquid in the world, which has been instrumental in attracting the flow of investment capital,” said Donald F. Donahue, DTCC chairman and CEO. “DTCC has provided the risk mitigation and processing efficiencies that have allowed its customers to drive down post-trade costs to record lows for a wide variety of financial instruments. However, our most important role is to bring the certainty, stability and reliability that protect the integrity of the financial system during times of crisis and adversity.

“The past decade has seen dramatic changes across the industry, and since our customers are just as likely to be headquartered in Europe as in the U.S., we have transformed ourselves into a global organization that is delivering the benefits of innovative, post-trade processing solutions to a more diverse range of market participants and a broader range of asset classes,” said Donahue.

Some of the key events of the past 10 years for DTCC include:

  • Lehman Brothers – Protected the stability of the financial system during the Lehman bankruptcy, the largest and most complex in DTCC’s history, by closing out more than $500 billion in pending trades with no loss to DTCC members or the industry. Using lessons learned from the crisis, DTCC further enhanced its risk management capabilities to provide additional protections for the industry.

  • 9/11/01 Attack –Protected the integrity of the financial system following the 9/11 attack by settling $280 billion that day alone, despite being just 10 blocks from the World Trade Center buildings. DTCC remained open throughout the week, even as the U.S. equity markets were closed, to clear and settle more than $1.8 trillion in transactions, which averted a potential liquidity crisis had these transactions remained open. Within weeks of the attack, DTCC unveiled plans to expand and enhance its business continuity capabilities, leading to the opening of new data centers and operational centers.

  • OTC Credit Derivatives – Created the Trade Information Warehouse, the world’s only trade repository for OTC credit derivatives transactions, in 2006 reducing costs and increasing transparency in this market. The Warehouse, which centrally stores virtually all OTC credit derivatives globally, is now used by all global dealers and more than 1,500 firms from 50 nations, and this year alone handled more than 40 credit events and some 80 successor events. DTCC also announced it would support all central counterparty (CCP) solutions developed globally for credit default swaps. The Warehouse played a central role in helping regulators understand the systemic exposure following the Lehman bankruptcy.

  • Fixed Income –Helped unify the U.S. fixed income markets by bringing Government Securities Clearing Corporation and MBS Clearing Corporation under the DTCC umbrella in 2002 and then merging them into the Fixed Income Clearing Corporation (FICC) in 2003. FICC introduced Real-Time Trade Matching to that market segment (greatly improving the clearing process and reducing costs), opened membership to non-U.S. members to provide them with the same risk protections U.S. brokers and banks receive, and cut costs and improved balance sheet offsets.

  • High Credit Rating – DTCC subsidiaries NSCC, DTC and FICC have maintained their financial soundness and leadership, receiving the highest credit rating, AAA/A-1+, from S&P. That high credit rating also allows DTCC to reduce credit costs to customers.

  • SIAC In-sourcing – Saved its customer firms about $40 million a year, or close to $200 million since 2004, by streamlining IT development, which included in-sourcing all the processing tasks handled by the Security Industry Automation Corporation (SIAC), which performed processing for NSCC and FICC.

  • Cost Savings and Capacity –Provided member firms with the lowest costs for clearing and settlement in the world. For equities clearing, DTCC charges an average of only 66-thousandths of one U.S. cent per 100 shares. While maintaining low costs has been a priority, DTCC has also invested to ensure it has adequate capacity to process trades. Since 2004, DTCC has increased its daily equity processing capacity to 850 million transactions, up more than 1,500%.

  • Quality and Excellence – Quality and excellence of services have also become a DTCC hallmark. DTCC became the only U.S.-based financial organization to obtain an enterprise-wide Capability Maturity Model Integration Level 3 certification for software development and maintenance. Other process improvements instituted by DTCC over the past 10 years include Six Sigma quality programs and Information Technology Infrastructure Library (ITIL), which also saved tens of millions of dollars and made the software development process more predictable. For the past four years in a row, DTCC has scored a world-class 91% satisfaction score in a survey of its customers.

  • Strategic Partnerships –Formed multiple strategic partnerships and joint ventures as part of its strategy to extend its ability to provide efficiencies, mitigate risk and reduce costs for the industry, including Omgeo in 2001 (with Thomson Financial) to provide institutional post-trade processing; MarkitSERV in 2009 (with Markit) to provide a single portal for OTC derivatives matching and confirmation; and a proposed new joint venture, New York Portfolio Clearing (with NYSE Euronext) to clear fixed income derivatives and margin them in a single pot with the fixed income cash markets.

    DTCC has grown in the last 10 years to encompass seven subsidiaries, including four clearing corporations, which underpin the global financial marketplace. The company serves virtually the entire financial industry, from broker/dealers and banks to insurance carriers, mutual funds and hedge funds around the world. DTCC, among its member firms, has more than 600 firms located in Europe and Asia.

    DTCC was formed in November 1999 as a holding company containing two separate subsidiaries, The Depository Trust Company, which acts as the central securities depository for the U.S., and National Securities Clearing Corporation (NSCC), the principal clearing house for the U.S. equity, corporate bond and municipal bond trades. Both those firms were formed in the 1970s.

    “The next decade already looks as dynamic as our first 10 years. Today, the infrastructure functions as a cohesive organization that offers customers a robust platform and an integrated package of services they can rely on,” Donahue said. “We stand on the cusp of launching several innovative new services that will allow the industry to continue moving forward. Our board members and our staff are always focused on the issues that will be facing the industry in the coming years, and our ability to stay ahead of the curve is part of the richness of the organization.”

    About DTCC

    The Depository Trust & Clearing Corporation (DTCC), through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with financial firms and third parties that market these products. DTCC’s depository provides custody and asset servicing for more than 3.5 million securities issues from the United States and 117 other countries and territories, valued at $27.6 trillion. Last year, DTCC settled more than $1.88 quadrillion in securities transactions. DTCC has operating facilities and data centers in multiple locations in the United States and overseas. For more information on DTCC, visit www.dtcc.com. 

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