New York-headquartered Depositary Trust & Clearing Corporation (DTCC) that provides clearing and settlement services for the financial markets lets us have a look under the hood at the world of post-trade processing.
In its newly-updated, redesigned, and republished Guide to Clearance & Settlement, the financial market infrastructure kingpin, follows the story of a neglected back-office process.
While “investors are very familiar with the mechanics of buying and selling stocks or bonds, the world of post-trade processing remains a mystery to most people—if they think about it at all” Michael Bodson, President and Chief Executive Officer of DTCC, explains in the introduction.
“But what happens after a transaction is executed on an exchange or electronic platform is essential to safeguarding your investments and, more broadly, protecting the integrity of the global capital markets,” Bodson writes.
DTCC's new guide is packed with text and multiple flow diagrams tracking the route of orders and money through the financial system as bonds, shares, mortgage-backed securities, managed funds, derivatives and other securities change hands at almost light-speed pace today.
“With the growing prominence of fintech, or the integration of technology in banking and financial services, in recent years,
DTCC is now leading the industry into the digitization era by exploring ways to turn traditional and physical interactions, communications, business functions, and models into digital ones,” the guide also says.
With over 45 years of experience and from 21 locations around the world, DTCC, through its subsidiaries, automates, centralizes and standardizes the processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers.
In 2020, DTCC settled transactions in stocks, exchange traded funds, mutual funds, corporate and municipal bonds, and US Treasury issues valued at $2.3 quadrillion. To put that number in perspective, about every three days DTCC processes the equivalent of the US annual gross domestic product.
Of note, trading volumes of stocks and fixed-income instruments, including US government securities, mortgage-backed securities, and corporate and municipal bonds in US markets dwarf those in other markets around the world. For example, in a single day more than 19.3 billion shares of stock can be traded across equity markets in the United States, in contrast to 1.5 billion shares traded across European markets.