The Depository Trust & Clearing Corporation (DTCC) says it will establish a new link with the Canadian CSD, the Canadian Depository for Securities Ltd (CDS).
It will for the first time enable users to settle Canadian dollar securities transactions at the US CSD, DTCC subsidiary the Depository Trust Company (DTC). It is the first DTC link to support settlement in a foreign currency. DTCC says it will be in place by year-end, providing DTC customers with a single depository interface for US and Canadian dollar transactions.
DTCC says the dual functionality will reduce cross-border processing costs and inefficiencies by eliminating problems associated with maintaining split inventories in Canadian and American issues. In split inventories, some portion of a position in a dually listed issue is maintained with CDS for Canadian dollar settlement and the remainder is with DTC for US dollar settlement. The new link will permit DTC customers to concentrate all US and Canadian security positions in their DTC accounts.
“Since the early 1980s, DTCC’s subsidiaries and CDS have developed linkages and close working relationships,” says Thomas Costa, DTCC managing director and general manager for Equity Clearance and Settlement. “These links between CDS and DTCC are among the most robust inter-market links in the world, processing more than a million transactions each month. But up until now, these links only supported transactions conducted in US dollars.”
The link, which will be implemented using a DTC omnibus account at CDS, will support transactions sent by a DTC participant to a CDS broker or custodian, as well as those sent by CDS brokers and custodians to DTC participants. It will also support Canadian dollar transactions between DTC participants. A group of select pilot participants will test the link in the fourth quarter, and it is planned to be made available to all DTC customers at the end of the year.
As with US dollar transactions, customers’ security positions received via Canadian dollars will immediately be available for redelivery in DTC. DTC also has developed an end-of-day settlement process to settle Canadian dollar obligations.