DTC
Traditional: Seller → Introducing Broker → Clearing Broker → DTC → NSCC → DTC → Clearing Broker → Introducing Broker → Buyer
NSCC nets all trades.
NSCC guarantees settlement.
DTC moves securities.
Fedwire moves cash.
If one side fails, NSCC covers.
FUNCTION
Immobilizes physical certificates (holds master certificate).
Maintains book entry ownership records.
Settles trades by debiting seller, crediting buyer.
Nets cash obligations across all participants daily.
Guarantees settlement via National Securities Clearing Corporation (NSCC).
NEW ISSUES
Issuer hires underwriter (investment bank).
Underwriter markets bonds to institutional investors.
Investors commit to buy at offering price.
On settlement date, DTCC settles the trade.
Underwriter deposits bonds at DTC (DTCC subsidiary). DTC holds bonds in street name (Cede & Co). DTC credits bonds to underwriter's DTC account. Underwriter delivers bonds to investor accounts via DTC book entry. DTC debits underwriter account, credits investor accounts. Fedwire or bank transfers move cash: investors → underwriter → issuer. DTC nets all cash movements across participants end of day.
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