DTCeligibility.com is owned and managed by a group of professionals who have been servicing public companies for over a decade. During the course of the last two years, the topic of DTC eligibility and related issues of how to achieve this status, how to navigate the application process, and items related to DWAC, DTC Chills, etc… have been raised increasingly more often. Moreover, DTCC retains the right to deny a company the ability to use their depository without providing a reason for this denial or an appeal procedure to redress grievances or wrongs! We would be delighted to discuss with you, the various ways in which we have helped companies navigate the dynamics of this process and how we might be able to achieve the results you are looking for. We invite you to contact us to discuss how we can help.

What is the meaning of DTC?

 

The Depository Trust Company (DTC) is one of the world's largest securities depositories. The DTC, which was founded in 1973 and is based in New York City, is organized as a limited purpose trust company and provides safekeeping through electronic record-keeping of securities balances.

 

 

What does it mean to be DTC eligible?

 

DTC eligibility means that a public company's securities are able to be deposited through DTC. DTC is the largest securities depository in the world and holds over thirty-five trillion dollars' worth of securities on deposit. DTC accepts deposits of securities from its participants only, who are usually clearing firms.

 

 

What is a DWAC?

 

DWAC stands for Deposit/Withdrawal at Custodian. It is an electronic transaction system run by The Depository Trust Company (DTC) that makes it possible to transfer new shares or paper share certificates between broker/dealers or custodial banks, the DTC participants, and the issuer's transfer agent.

 

 

Why It Is Important To Be DTC Eligible

 

The Depository Trust Clearing Corporation (“DTCC”) facilitates electronic trading of securities in the U.S. through its central depository system known as the Depository Trust Corporation (DTC).  The DTC system allows participating brokerage firms to electronically settle trades with other member firms.  This is accomplished by holding securities in “street name,” which means that they are held electronically at the brokerage firm that has deposited the securities into its account with DTC.  This eliminates the need for buyers and sellers holding securities in street name to produce physical certificates to settle the trades. The Depository Trust Corporation’s automated clearing and settlement system automatically transfers the “net” trades between participating firms.  This allows for a dramatic reduction in the costs associated with trading securities.

 

 

The benefits of being DTC Eligible include:

 

• Increased ease of trading the Company’s securities
• Lower trading costs
• Improved liquidity in the Company’s securities
• Higher valuation

 

 

How Non-DTC Eligible Securities Trade

 

Securities that are not in the DTC system a/k/a not DTC Eligible trade the very old fashioned way.  What this means is when a shareholder sells his shares, the that executed the trade for him must send his stock certificate to the company’s transfer agent who reissues the shares in the name of the buyer.  The transfer agent must then send the shares back to the seller’s brokerage firm, that then sends the shares to the buyers brokerage firm.

 

This creates a lot of extra fees. The brokerage firms charge higher commissions to cover their costs, which are ultimately passed along to the shareholders. These fees include transfer agent fees, and lots of shipping fees.  Investors and traders do not like to pay these fees.  Additionally there is the added risk that the certificate being sent to the transfer agent is not a valid certificate, which increases the risk of a buy-in.

 

Very importantly, most brokerage firms do not want to execute trades in non-DTC Eligible securities.

 

Companies whose securities are not DTC Eligible see dramatically lower investor interest and lower valuations.

 

Please feel free to contact us to see how we may be of assistance to your company in making its securities DTC Eligible.

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