For the first time since the Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC) were merged in 1999, both settlement systems are now operating off a single platform.
The Depository Trust & Clearing Corporation (DTCC) says it has consolidated the settlement systems of the two subsidiaries into one settlement platform, with the aim of streamlining the settlement process and providing a single point of entry for members and their agent banks.
Through DTC and NSCC, DTCC provides clearance and settlement services for virtually all trades done on the New York Stock Exchange, Nasdaq and the American Stock Exchange, as well as on all regional exchanges and electronic communications networks (ECNs) in the United States, amounting to more than $1.4 trillion each day.
“The consolidated settlement system was one of the underlying goals envisioned by the industry with the integration of DTC and NSCC in 1999,” says James Koster, managing director, DTCC Product Marketing and Development. “It provides one, unified settlement system for the entire country and moves us closer to straight-through processing (STP), while reducing risk and increasing efficiency. The move to a consolidated settlement system also reflects the thinking of the Group of Thirty (G30) and its push toward greater interoperability and mitigated risk.”
DTCC explains that the new consolidated platform will reduce work for both banks and brokers, since they will in future have only one settlement system to support and one end-of-day settlement process to complete. Prior to consolidated settlement, customers accessed DTC and NSCC settlement systems separately, using different functions and screens to view their settlement obligations with each organization. A single set of functions on the new system will now enable customers to view settlement information for both DTC and NSCC on the same screen and provide them with one consolidated, end-of-day netted settlement obligation.
“Savings from running a consolidated settlement system will be reflected in reduction of overhead costs,” explains John Abel, director, DTCC Product Marketing and Development. “The consolidated system will end the settlement issue of wiring separate funds to satisfy separate obligations, which occurred when customers were dealing with two settlement platforms.”
This means that settling banks (banks that handle transferring money to and from DTC and NSCC on behalf of customers) need only make one payment – not two as they previously did – to settle both obligations.
The number of reports also will be reduced. Instead of receiving several different settlement-related reports, customers will receive a new, consolidated DTC/NSCC Participant Settlement Super Statement. Settling banks will have the option of receiving a new, consolidated computer-to-computer facility (CCF) file.
DTCC first introduced the consolidated system in June 2003, and ran it in parallel test phase with the existing two settlement systems so that customers had several months to adjust to the new functions and formats.