The Depository Trust Company – Here’s What You Need to Know

The Depository Trust Company – Here’s What You Need to Know

If you’ve ever had any dealings in the world of investing and stock deals, you might have heard of the Depository Trust Company (the DTC for short). Most of the big banks and broker-dealers in the country are participants of the DTC, so their name appears in the paperwork of countless trade deals. But what exactly is the DTC, and what do they do?

What Is the DTC?  

The Depository Trust Company is a New York based securities depository – and one of the largest in the world. Its services are mainly focused on providing safekeeping of securities (via electronic recordkeeping) and settling trades in municipal and corporate securities by acting as a clearing house.  

It is a member of the Federal Reserve System and the Securities Exchange Commission, and many companies in the financial industry own partial shares. The DTC interacts with institutions, brokers, paying agents, and banks, but it is important to note that it does not deal with individual investors.  

How and Why Did It Form?  

The DTC was founded in 1973 – although it had begun to take shape a few years earlier in the late 1960s, when the New York Stock Exchange (NYSE) started to struggle with handling its trade volume. At that time, the NYSE was dealing in over 8 million shares each day but lacked the systems to accommodate these numbers.  

Thus, the DTC was created with the goal of improving the efficiency of the market. Its services lower the overall costs of trade while improving the accuracy of the NYSE’s automated systems. Because of this, the NYSE is now able to deal in billions of trades each day.  

What Does It Do?  

The DTC’s primary goal is to provide settlement services that increase market efficiency while lowering risk and associated costs, thereby increasing market trade volume and decreasing trade costs. They do this through a variety of services, including:

  • Providing securities custody for money market instruments, corporate bonds and stocks, and municipal bonds
  • Settlement of funds at the end of each trading day
  • Electronic trade recordkeeping
  • Clearinghouse services
  • Underwriting services
  • Proxy Services
  • Dividend Services  

The Depository Services Company settles trillions of dollars’ worth of securities each year, having settled more than $54.2 trillion in 2017 alone. While the New York Stock Exchange is one of its largest shareholders and it deals with a majority of securities originating in the United States, the DTC also services companies in 132 countries and territories around the world. As such, the Depository Trust Company is a major player in both the United States domestic market and the global trade markets.    

Want More Information?  

The world of stocks and investing is quite complex. Although Easy Stock Loans is not a broker, we are glad to answer any questions you may have about the stock market over the phone. Call us today at (866) 867-7585 to speak to one of our representitives or visit our website for more information about stocks and investing.