Depository Trust & Clearing Corporation (DTCC)

Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated September 30, 2020

What is a Depository Trust & Clearing Corporation (DTCC)?

The Depository Trust & Clearing Corporation (DTCC) is a subsidiary of the National Securities Clearing Corporation (NSCC). The DTCC, established in 1973, settles transactions between buyers and sellers of securities.

How Does a Depository Trust & Clearing Corporation (DTCC) Work?

When an investor sends an order to his or her broker and the trade is made with another broker/dealer or specialist, that trade information is sent to a clearing house such as the NSCC. The NSCC processes and records the trade, issues a report to the broker/dealers involved that includes their net securities positions and the money to be settled among the parties.

The NSCC forwards settlement instructions to DTCC, which electronically transfers the ownership of the securities from the selling broker's account to the buying broker's account. The DTCC also transfers funds from the buying broker's bank account to the selling broker's bank account. The brokerages then adjust their clients' accounts accordingly. The process is similar for institutional investors.

For most securities and trades, this occurs the same business day the trade occurs (this is called "T+0"), although not long ago it took one to three days (referred to as "T+3").

Source: The Depository Trust & Clearing Corporation

Why Does a Depository Trust & Clearing Corporation (DTCC) Matter?

Settlement is an important "back-office" function, and the faster it occurs, the more it reduces market risk by ensuring that trades are executed properly. Fast funds settlement also increases investor confidence in the markets by ensuring that their trades are completed on time and that they won't lose their funds to bankrupt brokerage firms or intermediaries. It also requires participants to have the money in their accounts as their trades are made (or arrange for credit before the trade is placed).

Ask an Expert about Depository Trust & Clearing Corporation (DTCC)
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Depository Trust & Clearing Corporation (DTCC).
Be the first to ask a question

If you have a question about Depository Trust & Clearing Corporation (DTCC), then please ask Paul.

Ask a question

Read this next

Don't Know a Financial Term?
Search our library of 4,000+ terms
 - profile
Ask an Expert about Depository Trust & Clearing Corporation (DTCC)

By submitting this form you agree with our Privacy Policy

Share
close