The Depository Trust & Clearing Corporation (DTCC) set transaction processing records in most subsidiaries again in 2003, with the total dollar value of transactions cleared and settled increasing to $923.4 trillion from 2002's $916.9 trillion, while launching a record number of major new services.
DTCC's total revenue rose to $947 million from $906 million in 2002. Since DTCC operates on a "for-cost" basis, discounts and other refunds to members grew to a record $252 million from the previous year's $199 million.
Total expenses rose to $680 million from the prior year's $622.5 million, due largely to costs associated with creating new remote operations as part of decentralizing its operations. The company serves as the principal post-trade infrastructure for the United States, handling clearance and settlement of virtually all trades in equities, corporate and municipal bonds, and money market instruments, and the majority of U.S. government securities and mortgage-backed securities.
DTCC subsidiaries National Securities Clearing Corporation (NSCC), The Depository Trust Company (DTC), and Fixed Income Clearing Corporation (FICC) all experienced record transaction volumes, with only Emerging Markets Clearing Corporation transactions remaining flat. Most of the dollar volume increase in clearance and settlement was due to a 67% rise in the mortgage-backed securities division of FICC, which processed trades with a value of $42.7 trillion in 2003 compared with $25.5 trillion in 2002, due the record activity in the U.S. housing market.
"Overall, DTCC had a very successful year," said Jill M. Considine, chairman and CEO of DTCC. "We launched a record number of new services and initiatives, handled record transaction volumes at our various subsidiaries, and made significant progress on business continuity."
Among the key initiatives initiated by DTCC during the year:
Launched the Global Corporate Action Validation service, which validates and combines corporate action information on securities worldwide.Began operations of DTCC Deriv/SERV, a matching and confirmation service for credit default swaps, DTCC's first entry into OTC derivatives.Implemented a consolidated settlement reporting system for the U.S. equity, corporate bond and municipal bond markets, consolidating DTC's and NSCC's system and allowing member firms to submit a single Fedwire payment to satisfy both organizations' settlement requirements.Launched the first phase of an Inventory Management System that will provide member firms with much greater control over their delivery of securities for settlement. Strengthened business continuity plans by further decentralizing operations and data center functions, including the establishment of new remote data centers at a significant distance from New York City.Initiated a new operational risk management program designed to reduce and better manage operational risk at DTCC.
NSCC's transaction volume rose substantially in 2003, up 17% to 4.8 billion transactions from the previous year's 4.1 billion, despite a 4% decline in share trading on the New York Stock Exchange and Nasdaq. Average daily volume rose to 18.9 million transactions from 16.2 million in 2002. Peak day transaction volume rose to 26 million transactions, surpassing 2002's record of 24.7 million transactions.
The value of securities held in custody at DTC rose to $24.6 trillion at year-end, up 20% from the prior year's $20.5 trillion. The number of securities held in custody rose to 2.3 million from 2002's 2.1 million. The value of non-U.S. issues held at the depository also rose 21% to $2.1 trillion from the previous year's $1.7 trillion.
The total value of securities settled at the depository remained flat, at slightly over $270.4 trillion, as did the volume of electronic book-entry deliveries at 225.2 million, up slightly from the 224.3 million in 2002.
Asset Servicing
Asset servicing activity at the depository saw a sharp increase, with total cash dividend, interest, redemption and reorganization payments jumping 20% to almost $2.24 trillion from the previous year's $1.86 trillion. It is the first time asset servicing dollar volume has exceeded the $2 trillion mark. Underwriting services also saw a 24% increase in dollar volume, rising to almost $2.8 trillion from 2002's value of $2.25 trillion, led by a continued volume increase in municipal bonds.
Fixed Income
FICC Government Securities Division saw an increase in transactions processed of 17% to 20.1 million from 2002's 17.3 million transactions. While almost all categories of U.S. government securities showed dollar volume increases from the previous year, there was a major decline in the general collateral finance repos, where dollar value dropped 19% to $37.2 trillion from the previous year's $45.9 trillion.
FICC's MBS Division saw significant jumps in activity in virtually every area. In addition to the 34% increase in total dollar value processed, to $67.8 trillion from the prior year's $50.5 trillion, the number of pool messages processed by the Electronic Pool Notification system climbed 32% to 1.1 million from the previous year's 870,000, and the face value of the pools rose 42% to $12.1 trillion from 2002's $8.5 trillion.
Mutual Funds
In the mutual funds area, the number of mutual fund transactions rose 5% to 87 million from 2002's 83 million, although the value of those transactions declined 4% to $1.54 trillion from the prior year's $1.6 trillion. The number of customer sub-accounts handled by the Networking service, which coordinates the information between mutual funds and their distributors, rose 2% to 58 million sub-accounts from 2002's 57 million. One of the biggest growth areas was in defined contributions, where 26.1 million transactions were processed as opposed to 18.1 million the prior year, up 44%.
Insurance
DTCC's insurance services processing area, still relatively new, showed substantial growth in virtually every service. Total dollar value settled rose 75% to $9.5 billion from the previous year's $5.4 billion, while the number of commission, application and premium transactions rose 35% to 30.4 million from 2002's 22.5 million transactions. The largest increase in volume was in the Licensing and Appointments service, where transaction volume climbed 366% to 2.6 million from 557,000 transactions in 2002.