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What is the Depository Trust Company?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 19 September 2016
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The Depository Trust Company is a financial services company established in 1973 in New York City. The purpose of this company is to centralize the holding of paper stock certificates. Over more than three decades, the DTC has helped to make trading and other Wall Street activities vastly more efficient.

Prior to the establishment of the Depository Trust Company, brokers always exchanged paper certificates for stocks. With the rise of new technology and more diverse trading patterns, the market quickly became overwhelmed by the amount of paper changing hands. The DTC provided better record keeping and a central location for stock certificates, and alleviated many problems regarding keeping track of mountains of financial paper.

In 1968, several years before the Depository Trust Company was set up, New York Stock Exchange officials had already begun to plan for an overhaul of the paper-based system, which was resulting in massive confusion and lots of lost certificates. The CCS, or Central Certificate Service, was set up in New York City, and played a similar role until the establishment of the DTC, when the stock record keeping services were expanded to the entire American stock market. Another corollary financial service called the National Securities Clearing Corporation (NSCC) also provides for various types of security in broker-to-broker transactions with a focus on clearing, settlement, and risk management.

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When the DTC began to use electronic record keeping to monitor stock trades, computers were still a far smaller part of commerce than they are today. Years later, the Internet would replace simple database and archiving designs with incredible financial software services including full-featured brokerage accounts, where traders could buy or sell at will, and even predictive trading software. The evolution of the Depository Trust Company represents one of the first steps in a progressively more digital and virtual financial world.

Today, the DTC works through its holding company, the Depository Trust and Clearing Corporation. With offices at 55 Water Street in New York City, the DTCC handles accounts for both the Depository Trust Company and the National Securities Clearing Corporation. Though the DTC and the DTCC have been included in talks about the practice of “naked short selling” where traders may make deals without the necessary backing, the same services that revolutionized the stock market world in 1973 still provide more accurate holding records for stock market transactions.

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