Depository Trust Company

Depository Trust Company (DTC), founded in 1973, is a New York corporation that performs the functions of a central securities depository as part of the US National Market System. DTC annually settles transactions worth hundreds of trillions of dollars, processes hundreds of millions of book-entry deliveries, and custodies millions of securities issues worth tens of trillions of dollars issued in the United States and over 100 other countries. Since 1999 it has been a subsidiary of the Depository Trust & Clearing Corporation, a securities holding company.

DTC manages book-entry securities entitlement transfers for brokerage houses and maintains custody of global (jumbo) stock certificates and other stock certificates through its affiliated partnership nominee, Cede and Company. DTC maintains Omnibus Customer Securities Accounts for the account of the DTC Participant.

As of 2018, DTC was the world's second-largest CSD by value of securities held, behind the Federal Reserve System's Fedwire Securities Service and well ahead of Euroclear Bank.

Before DTC and NSCC were formed, brokers settled trades by physically exchanging stock certificates—that is, hard copy documents which declared their holders to be the owners of so many shares of stock. The mechanisms brokers used to transfer securities and keep records relied heavily on pen and paper, and they employed hundreds of messengers to carry certificates and checks. The exchange of physical stock certificates was difficult, inefficient, and increasingly expensive. Before 1946, the SEC had allowed for T+2 settlement (that is, settlement within two days of the trade date), but by the early 1960s, this deadline had been lengthened to four days and then five.

In the late 1960s, with an unprecedented surge in trading leading to volumes of nearly 15 million shares a day on the NYSE in April 1968 (as opposed to 5 million a day just three years earlier, which at the time had been considered overwhelming), the paperwork burden became enormous. Stock certificates were left for weeks piled haphazardly on any level surface, including filing cabinets and tables. Stocks were mailed to wrong addresses, or not mailed at all. Overtime and night work became mandatory. Back office worker turnover was 60% a year.

To help brokerage firms catch up on the overwhelming volume of paperwork, the stock exchanges were forced to close every week (they chose every Wednesday), and trading hours were shortened on other days of the week.

The first response was to hold all paper stock certificates in one centralized location, and automate the process by keeping electronic records of all certificates and securities clearing and settlement (changes of ownership and other securities transactions).

One problem was state laws requiring brokers to deliver certificates to investors. Eventually all the states were convinced that this notion was obsolete and changed their laws. For the most part, investors can still request their certificates, but this has several inconveniences, and most people do not, except for novelty value.