The Depository Trust Company (DTC) is a centralized securities depository in the United States that provides clearing and settlement services for the securities industry. The DTC serves as a link between the issuers of securities, such as companies and government entities, and the buyers and sellers of those securities in the secondary market.
The DTC acts as a centralized clearinghouse, which means that it eliminates the need for physical certificates to be traded between buyers and sellers. Instead, the DTC holds electronic records of ownership, known as book-entry securities, which are transferred electronically between buyers and sellers through the DTC’s systems. This greatly reduces the risk of lost, stolen, or damaged certificates and simplifies the settlement process for securities transactions.
The DTC is a subsidiary of the DTCC (Depository Trust & Clearing Corporation), a financial market infrastructure that provides clearing, settlement, and other related services for a wide range of financial products, including stocks, bonds, options, and derivatives. The DTC’s role in the clearing and settlement of securities transactions helps to ensure the efficient functioning of the securities markets, promotes transparency and stability, and reduces the risk of fraud and error in the trading of securities.