MutualFundWire.com: DTC and NSCC Make Alphabet Soup

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Monday, March 22, 1999

DTC and NSCC Make Alphabet Soup

The National Securities Clearing Corporation (NSCC) and the Depository Trust Company (DTC) formerly announced their engagement today as their respective boards approved a plan to combine the two companies. The companies have not decided on a new name for the combined entity.

The two entities have been exploring a combination since July of last year. Last October, the management teams of DTC and NSCC and a group of 14 industry representatives (designated by DTC's and NSCC's boards), commissioned a study by Deloitte & Touche to examine the idea.

The plan must still be submitted to regulators for formal approval, but both DTC and NSCC have been briefing regulators and the exchanges on their discussions.

Under the plan announced by the two companies they will form a holding company with two separate operating subsidiaries, an executive management team and a single slate of directors. Jill M. Considine, the newly appointed Chairman and CEO of DTC, will become the CEO of the new entity. David M. Kelly, President and CEO of NSCC, will become vice chairman of the new organization. The position of chairman will be filled by an industry representative who will serve on the board.

David M. Kelly, President and CEO, NSCC, CEO International Securities Clearing Corporation, Government Securities Clearing Corporation

"NSCC and DTC have been enormously successful over the past 20 plus years in bringing greater efficiency and certainty to the marketplaces," said Considine. "The action we're taking today is really about preparing us for the future, to leverage the respective strengths of NSCC and DTC and to create an organization that can support the changing financial services business in the U.S. and overseas."

"The world around us is changing," said Kelly. "Shortening settlement cycles, new technology and financial services consolidation will continue. We must be prepared to meet these challenges as effectively as we've built capacity to handle volume growth, streamlined processing, reduced risk, lowered costs and expanded the industry's infrastructure to support new services in the past. In this regard, Jill and I share a common vision for a single industry-driven strategy that serves the best interests of our participants."

Jill M. Considine, Chairman and Chief Executive Officer, The Depository Trust Company

The companies also provided some examples of benefits expected from integration:

Brings together or harmonizes the processing streams for clearance and settlement of the institutional (buy) and broker (sell) sides of the market, thereby facilitating shortened settlement cycles, improved risk management and lower transaction processing costs.
A centralized infrastructure will competitively position the U.S. in overseas markets. It recognizes that capital knows no borders and trades will go to the marketplaces where it is easiest and least expensive to conduct business.
Establishes a single point of access to global products for smaller firms in the U.S., as well as global firms.
A single industry-driven strategy will enhance the introduction of innovative technology solutions, new products and services and achievement of "straight through processing."

"Most of the focus initially will be on centralizing executive management and staff functions at the holding company, while keeping the businesses running independently," Considine said. "We want to evolve a collaborative and integrated management process, not simply impose one. This will take some time."

"We also want to give employees time to adjust to these changes," said Kelly. "Senior management and our boards are well aware that a talented, well- motivated and stable workforce has played a key role in the certainty and consistency of support we've provided to the industry. We do not expect staff reductions to result from this combination, and people need time to see that integration will expand career opportunities."

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