The Depository Trust & Clearing Corporation's (DTCC) depository subsidiary has begun implementing a new Inventory Management System (IMS) that will reduce risk and transform the way financial transactions are processed and settled in the United States.
DTCC, through its subsidiaries, provides clearance and settlement services of virtually all trades done on the New York Stock Exchange, Nasdaq, the American Stock Exchange and for all regional exchanges and electronic communications networks (ECNs) in the United States, amounting to more than $1.4 trillion each day.
Settlement is the final step in completing a securities transaction and includes the transfer of ownership in a security and the associated transfer of payment for the transaction.
"IMS will give banks, brokerage firms and other financial institutions that buy and sell stocks, bonds and other financial instruments greater control over their trade submissions for settlement by providing them with a broad variety of inventory management options," said James Koster, managing director, DTCC Product Marketing and Development. "This will enhance delivery efficiency."
"This settlement process was a goal set out in a white paper DTCC issued last year and also reflects goals set by the Group of Thirty (G30) last year," said Koster. The Group, a nonprofit, international body that addresses international and economic issues, last year recommended a plan of action for global clearing and settlement. Many of the G30 recommendations track DTCC's own efforts in enhanced clearing and settlement services.
John Kiechle, director, DTCC Product Management, explained why DTCC chose to develop the Inventory Management System. "When the financial services industry first started working toward a straight-through processing (STP) environment, it realized that it would need much greater control of the order and timing of trade submissions. Before the new process was introduced, trade settlement at DTC was based on a pre-determined submission and recycle order. So if a trade were held up for any reason, a participant would often interrupt the process by withholding other deliveries."