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).
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Before getting a mortgage loan, make sure you know exactly what each of these five terms means... ...
Read More →
If you've ever had a job with a terrible commute, you know that road construction is like glitter -- once it gets on a city, it's almost impossible to get rid of, and it shows up everywhere....
Read More →
Did your paternal grandfather live to 97 and great aunt on your mother's side hit 93? While you may be delighted with your wonderful genes, you should also be concerned about something that every...
Read More →
A higher credit score means more money in your pocket. It's as simple as that....
Read More →
Most of us are constantly trying to minimize risk. We put on sunscreen to minimize the risk of developing skin cancer. We put on seatbelts to minimize the risk of getting injured in a car crash....
Read More →
