The Depository Trust Company or DTC is a subsidiary of the DTCC and established in 1973. It was created to provide clearing and settlement efficiencies at a reduced cost by immobilizing securities and making “book-entry” changes to ownership of the securities.
The DTC increases the efficiency in the securities industry by retaining custody of more than 1.3 million active securities issues. As of July 31, 2017 these securities had a combined market value of $54.20 trillion. Securities issues were primarily of U.S. origin but also included securities issued in more than 130 countries and territories.
The DTC itself provides the following explanation and list of its activities
DTC provides securities movements for NSCC’s net settlements, and settlement for institutional trades (which typically involve money and securities transfers between custodian banks and broker dealers), as well as money market instruments.
DTC’s core services include:
- Settlement Services
- Corporate Actions Processing
- Securities Processing
- Issuer Services
- Underwriting Services
- Global Tax Services
During a tender offer where the investor has already tendered their stock, the investor must correctly withdraw the stock from the DTC should they now wish to sell their stock. This is often done electronically through a broker.
Additional Activities of the Depository Trust Company
In addition to the above services, the Depository Trust Company provides a dividend service. When a company declares a dividend, the DTC announces it and then collects the dividend payment from the issuing company. The dividend is then allocated as a dividend payment to the shareholders on record at the ex-dividend date, and the payment is reported. The principal subsidiaries are as follows:
- National Securities Clearing Corporation (NSCC) – central counterparty for clearing, settling and guaranteeing US stock trades
- The Depository Trust Company (DTC) – provided custody and safekeeping services for securities
- Fixed Income Clearing Corporation (FICC) – provides trade match, clearing and risk management services for fixed income securities through its Government Securities Division (GSD) and Mortgage Backed Securities Division (MBSD)
- DTCC Deriv/SERV LLC – provides trade match and comparison services for OTC derivative transactions
- European central Counterparty Ltd. (EuroCCP) – provides clearing and settlement services for pan-European markets
