If you plan to take your company public or are looking to offer your investors a liquidity event, you will need to obtain Depository Trust Company (DTC) eligibility. A company cannot apply for DTC eligibility on their own. The application requires the sponsorship of a DTC participant, like us.
If you are ready to take this important step, we’re here to help.
What is the DTC?
The Depository Trust Company (DTC) is a repository through which stocks are transferred electronically between brokers and agents and provides electronic recordkeeping and clearinghouse services. The DTC was established to reduce the volume of physical stock certificate transfers involved in the trading of securities. The DTC holds eligible securities for financial institutions such as brokerage firms and banks, collectively referred to as “participants.” Participants then may request debits and corresponding credits to their DTC accounts to affect transfers. In this manner DTC facilitates share transfers on behalf of shareholders, via their brokers or transfer agents.
What is DTC eligibility?
Becoming DTC eligible means that your securities are qualified for deposit into the DTC, allowing for smooth transaction processing between brokers and transfer agents. Once DTC eligible, companies can apply for additional services through the DTC such as their FAST system and DWAC transactions.
What is the Fast Automated Securities Transfer (FAST) system?
The FAST system enables participants to provide electronic custody, transfer, deposit and withdrawal services to beneficial holders more quickly and efficiently. For the FAST system, DTC establishes an account with transfer agents for each issue. These accounts are registered to Cede & Co., DTC’s nominee, and represent, on the transfer agents’ books, the sum total of shares for that issue held by DTC’s participants. Participants maintain corresponding books representing their shareholder accounts held in street name.
Transfer agents like Computershare can then make requests to debit or credit these accounts: the balance on the transfer agents’ books is increased and decreased on a daily basis, and participant accounts are adjusted accordingly by DTC. Transfer agents and issuers must meet specific DTC criteria in order to utilize FAST.
What is a DWAC?
DTC’s Deposit Withdrawal at Custodian (DWAC) program is used to transfer shares between issuers and broker accounts for new offerings, stock buybacks or transactions such as stock options and employee plan grants and vestings. Issuers may help facilitate DWAC transactions by providing instructions to the broker or custodian who initiates the transaction, and the transfer agent, who matches up the instructions and accepts the DWAC transaction. DWAC transactions offer the advantage of real-time share movement but are manually intensive to process.