The Depository Trust and Clearing Corporation (DTCC)
Most people who buy stock in the stock market logically think that they own that stock. In actuality, the Depository Trust and Clearing Corporation (DTCC) owns the stock. The receipts for the stock are traded through the DTCC and payments are settled at the end of the day instead of with each individual trade. This is known as “netting.” Ergo, you don’t own stock. The DTCC does.
“As the centralized infrastructure for the US capital markets, DTCC leverages economies of scale and a critical mass of trading volume to reduce trading costs. In addition, DTCC typically returns most volume-related excess revenues to clients through rebates or fee reductions consistent with its structure as a market neutral utility. This has helped, in part, establish the United States as the deepest, lowest cost, and most efficient and liquid market in the world, and so the most attractive to investors.
In addition—and perhaps even more important—DTCC minimizes risk and frees up trillions of dollars of capital each year that their clients can use for other investment purposes through a process called netting, which reduces the total number of trading obligations that require exchange of money for settlement.”[1]
To make it more confusing, the DTCC was created in 1999 and consists of three subsidieries: the Depository Trust Corporation (DTC), the National Securities Clearing Corporation (NSCC), and the Fixed Income Clearing Corporation (FICC) .[2]
The Depository Trust Corporation was created in 1973 and holds custody of 80%-90% of all securities in the USA. Stocks are held at a central location and are traded via a computerized book entry.[3]
“Jointly owned by key industry players, DTC's mission was to help eliminate the reliance on paper stock certificates, which was a major obstacle to efficient trade settlement. At DTC, stock certificates were immobilized or held at a central location, with changes of ownership recorded electronically using a computerized book-entry system. In doing so, DTC created the first electronic security.”[4]
The DTC has a “nominee name” of Cede & Company. Basically, it is like a DBA (Doing Business As) that is an extra layer of bull shit so that the plebs get confused.[5]
“DTC was created in 1973 to streamline the settlement process, which like the rest of the securities business was paper intensive, time consuming, and vulnerable to errors and delays. To get the job done, DTC took custody of and immobilized millions of paper certificates, re-registering the majority—between 85% and 90%—with the issuer’s transfer agent under the DTC’s nominee name of Cede & Co., better known as in street name.”[6]
The National Securities Clearing Corporation was created in 1976. Like the DTC, instead of people trading money for bonds/contracts/securities in the stock market, the NSCC simply owns the bonds/contracts/securites and keeps a ledger of who trades what without anything actually changing hands.
“In 1976, the NYSE, AMEX, and the NASD agreed to merge their clearing organizations to create greater efficiency and to guarantee trades would be completed even if an individual brokerage firm went out of business.
Now called the National Securities Clearing Corporation (NSCC), its mission was to ensure the marketplaces had the processing capacity, trade guarantees, and risk management to avoid any disruption of the trading markets. NSCC was also to ensure safety and soundness of the system by using a process called multilateral netting. With this technique, buy and sell positions within and among brokerage firms could be offset, requiring far fewer deliveries and settlement payments and reducing risk and financial exposure for the industry as a whole.”[7]
The Fixed Income Clearing Corporation was created in 2003 as a result of a merger between the Government Securities Clearing Corporation and the Mortgage-Backed Securities Clearing Corporation. It nets and settles trades for mortgages and US government bonds.[8]
“The Fixed Income Clearing Corporation (FICC) automates clearing and settling trades in US government and government agency securities in the primary and secondary market—the world’s largest and most liquid fixed-income market. Novation, or the process of a party stepping in and assuming either side of a contractual obligation between two parties involved in a transaction, is also automated.
Through its Government Securities Division (GSD), FICC handles the clearing, novation, and netting of trades in securities issued by the US government. These include US Treasury bonds, notes, bills, Treasury Inflation-Protection Securities (TIPS), US Treasury Floating Rate Notes, and Treasury zero-coupon issues, all of which typically settle on T+ 0 or T+1. GSD also clears trades in securities issued by non-mortgage government agencies, such as the Tennessee Valley Authority (TVA), and Fannie Mae and Freddie Mac Fixed Rate Debentures and Discount Notes.
A second division, the Mortgage-Backed Securities Division (MBSD), clears and settles secondary market transactions in mortgage-backed securities issued by US government corporations, agencies, or sponsored enterprises.”[9]
The DTCC is not a non profit. It is managed by some of the biggest names in finance. They are powerful. For more information on the DTCC and its consequences, listen to the former CEO of Overstock.com’s speech to the Mises Institute on March 13, 2015.[10][11]
Most people who buy stock in the stock market logically think that they own that stock. In actuality, the Depository Trust and Clearing Corporation owns the stock. The receipts for the stock are traded through the DTCC and payments are settled at the end of the day instead of with each individual trade. This is known as “netting.” Ergo, you don’t own stock. The DTCC does.
[1]https://www.dtcc.com/clearance-settlement-guide/#/chapterOne
[2]https://www.dtcc.com/clearance-settlement-guide/#/chapterTwo
[3]https://www.dtcc.com/clearance-settlement-guide/#/chapterThree
[4]https://www.dtcc.com/clearance-settlement-guide/#/chapterTwo
[5]https://www.nasdaq.com/glossary/n/nominee-name
[6]https://www.dtcc.com/clearance-settlement-guide/#/chapterSeven
[7]https://www.dtcc.com/clearance-settlement-guide/#/chapterTwo
[8]https://www.investopedia.com/terms/f/ficc.asp
[9]https://www.dtcc.com/clearance-settlement-guide/#/chapterEight
