The Depository Trust and Clearing Corporation (DTCC) has outlined a multi-year programme for the complete elimination of paper securities certificates from US financial markets.
The proposal comes in a white paper issued by DTCC subsidiary, the Depository Trust Company, and calls for the input and co-operation of all industry sectors.
Successive dematerlialisation programmes have reduced by 86% the number of paper stocks clogging up DTCC vaults since the year 2000, says the depository, reversing the economies of scale for processing paper certificates.
States the paper: "As the number of physical issuances and transactions declines, the unit cost of processing them rises…until the US markets are fully dematerialised, the industry will be obliged to support this fixed-cost infrastructure for physical processing regardless of the volume of certificates processed."
The plan anticipates eliminating DTCC's centralised processing of physical deposit activity altogether by 2015, alongside the development of recommendations for processing new issues and the removal of existing paper stocks from DTCC vaults.
Susan Cosgrove, DTCC managing director and general manager, settlement and asset services, says: "DTC could begin implementing recommendations for its dematerialisation campaign in 2013, with the goal of reducing and ultimately eliminating physical processing over the following three-to-five years.
The success of this plan will hinge on the industry's adoption of new business practices, she adds, requiring changes in technology platforms, the legal landscape and in DTC's pricing policy, as well as regulatory approval.
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