The Depository Trust & Clearing Corporation (DTCC) announced today
it cleared and settled more than $1.86 quadrillion in securities
transactions in 2007. DTCC also reported record revenue of $1.69
billion and returned $984 million to its customers in the form of
discounts and rebates.
Through its subsidiaries, DTCC provides clearance, settlement and
information services for equities, corporate and municipal bonds,
government and mortgage-backed securities, money market instruments
and over the counter derivatives, and is a leading processor of mutual
funds and insurance transactions. DTCC´s depository provides custody
and asset services for about 3.5 million securities issues from the
U.S. and 110 other countries and territories worth more than $40
trillion.
DTCC´s $1.69 billion in revenues last year was up 24% from the
$1.36 billion in 2006. Record high volumes and DTCC´s tight fiscal
management helped reduce costs in some of DTCC´s traditional market
segments and resulted in record rebates and discounts of $984 million.
Because DTCC operates on an "at-cost" basis, excess revenue beyond
that required to fund the business is returned to customer firms on a
pro-rata basis.
In addition to the rebates, the company announced the largest fee
cuts in its history for 2008, driven by the economies of scale and
frugal cost management provided by DTCC´s operations. These changes
are expected to result in a combined total of $198 million in fee
reductions to customers for the coming year. That followed fee
revisions resulting in almost $90 million in reductions for 2007.
DTCC made significant progress in expanding its services globally
in 2007 when its EuroCCP subsidiary was selected to clear and settle
trades for Turquoise, a new pan-European multilateral trading facility
developed by nine global investment banks. EuroCCP expects to provide
the lowest costs for clearing and settlement of trades in Europe and
is expected to support other European trading platforms, once it
begins operation in 2008.
In support of OTC derivatives trading, DTCC launched its Trade
Information Warehouse, the first global, automated repository for OTC
derivatives, where contracts can be tracked and serviced in an
automated environment over their lifecycle. During 2007, about 3
million contracts were recorded into the Warehouse, with an average of
an additional 10,000 new contracts now being added daily. Deriv/SERV´s
matching and confirmation platform has improved the automated
confirmation rate for credit default swaps to more than 95% from 15%
in 2003. DTCC also launched automated payment and centralized
settlement for Warehouse contracts through a partnership with CLS Bank
International. Almost 1,100 global dealers, asset managers, global
banks and hedge funds were using DTCC´s Deriv/SERV services at the end
of 2007, with more being added each week.
Customer satisfaction scores for DTCC across its diverse customer
base reached record levels. DTCC scored 91% in overall satisfaction on
an annual customer survey conducted by an independent polling company.
"All in all, we had a very successful year at DTCC in handling
high transaction volumes, helping to reduce risk and lowering costs
for customers across asset classes we support - and we continued to
expand our services globally. DTCC recognizes that we are facing a new
trading environment where customers require ever-greater levels of
efficiency and stronger risk management," said Donald F. Donahue, DTCC
chairman and chief executive officer. "We are facing new venues for
trading, new and complex instruments and risk transfer vehicles that
demand new solutions to reducing risk and implementing technology to
reduce costs, and we are responding to that challenge."
Volume Growth
DTCC´s National Securities Clearing Corporation (NSCC) subsidiary,
which clears virtually all trades done on the NYSE, the NASDAQ Stock
market and other exchanges, electronic communications networks and
alternative trading systems in the U.S., processed 13.5 billion
transactions versus 8.5 billion in 2006, up 59%. On an average daily
basis, transaction volume jumped to 53.9 million in 2007 from 34
million transactions daily in 2006, an increase of almost 20 million
transactions a day. The average cost for clearing of one side of an
equity trade through NSCC dropped to $.006 (six-tenths of a cent),
down 45% from the $.011 cost in 2006 and a fourth of the cost four
years ago. Overall, NSCC netted down (or reduced) transaction value
from $283.2 trillion to only $5.2 trillion that actually had to be
settled in 2007, a 98% reduction.
The Government Securities Division (GSD) of Fixed Income Clearing
Corporation (FICC) also saw significant volume growth. Transactions
processed increased to 30.4 million in 2007 from 24.9 million in 2006,
a 22% increase. GSD netted down the value of its U.S. government
securities transactions from $4 trillion in average daily transaction
value to just under $1 trillion, a 75% netting factor. The
Mortgage-Backed Securities Division saw volume increase to 2.1 million
transactions from 1.7 million a 22% increase. The MBS division handles
only agency-backed mortgages that are issued by Ginnie Mae, Freddie
Mac and Fannie Mae. The MBS division reduced the total $61.9 trillion
in par value to $3.3 trillion requiring bilateral settlement, a 94.5%
netting factor.
DTCC Deriv/SERV LLC, which matches and confirms over-the-counter
derivatives transactions, saw its transaction volume jump 123% to 5.9
million transactions from 2.6 million in 2006. The number of customers
also increased dramatically, up 43% to 1,078 at the end of 2007 from
753 in 2006.
Among the key highlights of 2007 for DTCC were:
-- Increased NSCC´s processing capacity to 280 million
transactions a day from 160 million, a 77% increase.
-- Completed the consolidation of FICC´s business applications
into DTCC´s data replication and recovery technology, the last
applications that needed to be brought into the business
continuity framework.
-- Launched a new Managed Accounts Service with 15 investment
managers and three broker/dealers.
-- Responded effectively to market turmoil in the second half of
the year by handling several instances of defaults on
asset-backed commercial paper issues without incurring any
loss.
-- Implemented service to support matching and netting of U.S.
Treasury prime broker transactions.
Other key statistical achievement milestones for 2007 included:
-- DTCC´s depository held in custody $7.6 trillion of non-U.S.
issues of the total $40 trillion value of all securities held
by the depository.
-- Mutual fund activity through Fund/SERV, NSCC´s main mutual
fund service, jumped to an average of 676,000 transactions a
day, up 19% from the prior year´s 569,000 daily volume. Total
dollar value of the transactions rose to $2.5 trillion in
2007, up 19% from $2.1 trillion in 2006.
-- Insurance Services saw the volume of transactions settled jump
to 63.1 million from 53.5 million, up 18%. Dollar value of
transactions settled increased to $20.8 billion in 2007 from
$16.3 billion settled in 2006, an increase of 28%.
-- The number of Underwritings handled by the depository
increased 7% to 54,266 in 2007 from 50,867 in 2006, although
the value declined 3% to $4.3 trillion from $4.4 trillion.
-- Cash dividend, interest, redemption and reorganization
transactions processed by DTCC´s depository rose 17%, totaling
$3.8 trillion compared to $3.3 trillion in 2006.
-- The Global Corporate Actions Validation Service provided more
than 1 million validated corporate action announcements
globally, up 17% compared to just under 900,000 in 2006, and
provided 3 million announcements about scheduled payments for
fixed income securities. GCA VS maintains service centers in
New York, London and Shanghai to provide round-the-clock
global coverage of corporate actions events.
About DTCC
The Depository Trust & Clearing Corporation (DTCC), through its
subsidiaries, provides clearance, settlement and information services
for equities, corporate and municipal bonds, government and
mortgage-backed securities, money market instruments and
over-the-counter derivatives.
In addition, DTCC is a leading processor of mutual funds and
insurance transactions, linking funds and carriers with financial
firms and third parties who market these products. DTCC´s depository
provides custody and asset servicing for 3.5 million securities issues
from the United States and 110 other countries and territories, valued
at $40 trillion. Last year, DTCC settled more than $1.8 quadrillion in
securities transactions. DTCC has operating facilities in multiple
locations in the United States and overseas. For more information on
DTCC, visit www.dtcc.com.
