The Handbook of Municipal Bonds

CHAPTER 20

The Depository Trust Company and Real-Time Price Transparency

Sylvan G. Feldstein, Ph.D. Director, Investment Department Guardian Life Insurance Company of America

 

David Ratner Industry Consultant

 

 

 

This chapter explains the structure of the Depository Trust Company (DTC) and its sister organization, the National Securities Clearing Corporation (NSCC), as well as the important roles they play in the municipal bond market. These roles include securities trade settlement operations, trust services, and reporting. Investors, issuers, and bankers are most familiar with DTC and not NSCC, possibly because only DTC is briefly mentioned, usually near the end of the document, in most new issue municipal bond official statements.

THE DEPOSITORY TRUST & CLEARING CORPORATION

DTC is actually a subsidiary of the Depository Trust & Clearing Corporation (DTCC). DTCC is primarily a depository, or limited purpose trust company, that holds the securities. Another affiliated subsidiary of DTCC is NSCC. Other subsidiaries of DTCC, which cover other asset classes, include the Fixed Income Clearing Corporation (FICC), which has a U.S. government securities division and a mortgage-backed securities division. This chapter focuses mostly on DTC and NSCC, as they are the most relevant to the municipal bond industry.

The sources for this chapter include The U.S. Model for Clearing and Settlement (New York: The Depository Trust & Clearing Corporation, October 2006); “Response to the Disclosure ...