clearing procedures and securities markets(3)

By holding securities in street name and using clearing houses, brokers can reduce the cost of transfer operations. But even more can be done: certificates can be immobilized almost completely. The Depository Trust Company (DTC) accomplishes this by maintaining computerized records of the securities "owned" by its member firms (brokers,banks,etc.) Member deposit certificates, which are credited to their accounts. The certificates are transferred to the DTC on the books of the issuing corporation and remain registered in its name unless a member subsequently withdraws them. Whenever possible, one member will " deliver" securities to another by initiating a simple bookkeeping entry in which one account is credited and the other debited for the shares involved. Dividends paid on securities held by DTC are simply credited to member's accounts based on their holdings and may be withdrawn in cash.
The Securities Acts Amendments of 1975 instruct the Securities and Exchange commission to develop a central system of this sort to eliminate the movements of stock certificates and possibly eliminate stock certificates entirely. Eventually, at dividend time, corporations’ computers may deal directly with other computers that are in touch with still other computers in banks, brokerage firms, and so on. Moreover, the central market system may be integrated with the central clearing system, so that agreement of two parties to the terms of a transaction will automatically bring about the transfer of ownership required to complete the trade.