The Depository Trust Company was established in 1973 to centralize the holding of paper share certificates, making trading and other activities on Wall Street more efficient. The company’s electronic record keeping helped pave the way for the increasingly digital world of finance. Today, the DTCC handles accounts for both the DTC and the National Securities Clearing Corporation.
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 share certificates. For more than three decades, the DTC has helped make trading and other activities on Wall Street much more efficient.
Before the establishment of the Depository Trust Company, brokers always traded paper certificates for shares. With the rise of new technologies and more diverse business patterns, the market quickly became overwhelmed by the number of paper hands changing. The DTC provided better record keeping and a central location for stock certificates, and alleviated many problems associated with keeping track of mountains of financial paper.
In 1968, several years before the Depository Trust Company was created, New York Stock Exchange officials had already begun planning an overhaul of the paper-based system, resulting in massive confusion and many lost certificates. The CCS, or Central Certification Service, was established in New York City and performed a similar role until the establishment of the DTC, when share record-keeping services expanded to the entire US stock market. Another corollary financial service called the National Securities Clearing Corporation (NSCC) also provides various types of security on broker-to-broker transactions with a focus on clearing, settlement, and risk management.
When the DTC began using electronic record keeping to monitor stock trading, computers were still a much smaller part of trading than they are today. Years later, the internet would replace simple database and file designs with amazing financial software services including fully 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 an increasingly digital and virtual world of finance.
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. Although the DTC and DTCC have been included in discussions about the practice of “naked short selling” in which traders can make trades without the necessary backing, the same services that revolutionized the stock market world in 1973 still provide more accurate holding records for stock market minutes.
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