Compliance Report ISSA Recommendations 2000

ISSA - International Securtities Services Association

Compliance to the ISSA Recommendations 2000

Market: U.S.A.

Status: December 28, 2001

Recommendation 1
Recommendation 2
Recommendation 3
Recommendation 4

Recommendation 5
Recommendation 6
Recommendation 7
Recommendation 8

Market selection

Recommendation 1

Securities Systems* have a primary responsibility to their users** and other stakeholders. They must provide effective low cost processing. Services should be priced equitably.

* Securities Systems = depositories, settlement and clearing systems
** Users = customers of the securities system, and all other parties to whom the securities system owes a duty of care

1. Is the board that governs the depository answerable to its users? DTCC: Yes. DTCC has a 27-member board of directors elected by the participant owners of DTCC which are directly answerable to its users. The DTCC Board of Directors also serves as the directors for both National Securities Clearing Corporation (NSCC) and The Depository Trust Company (DTC), subsidiaries of DTCC. Entities represented on the board are participant organizations, the New York Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. (NASD), as well as representatives from DTCC senior management.

FED: Yes. The Federal Reserve is overseen by a 7-member Board of Governors. Although there is no formal industry group directly responsible for lobbying in respect to settlement and custody activities, the Fed is very receptive to suggestions / recommendations from various industry groups (such as the Securities Industry Association (SIA) or recommendations made by the Bond Market Association (BMA)). Any suggestions / recommendations can be lodged with the Board of Governors at regularly scheduled meetings. The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. Meetings of the Board of Governors, typically held twice a week, cover the regulatory, monetary policy, and other responsibilities of the central bank. The Board conducts its meetings in compliance with title 5, section 552b, of the U.S. Code, known as the Government in the Sunshine Act.

2. Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository? DTCC: As of October 2000, DTCC had 152 shareholders. Ownership is as follows: Banks 34%, Broker / Dealers 22%, and NYSE / NASD / AMEX 44%. The maximum amount of shares a given participant may hold is based on a formula related to their level of holdings and activity. DTCC is a limited purpose trust company and is part of the Depository Trust and Clearing Corp., DTCC, the holding company, which also includes the major USA clearing corp., National Securities Clearing Corp. (NSCC). Only participants are eligible to become shareholders, although share ownership is not required.

FED: The Federal Book Entry System (FRB) is fully owned and operated by the United States Federal Reserve (FED), a government agency.

3. Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)? DTCC: No cross subsidisation.

FED: Not applicable.

4. What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)? DTCC: The DTCC Board of Directors works to ensure that DTCC meets the needs of its stakeholders. The board meets on a regular basis and there is an annual general meeting that is open to all shareholders in accordance with US corporate law. In addition, a relationship management team supports all users.

FED: The Board of Governors works to ensure that the FED: (1) conducts the nation's monetary policy; (2) supervises and regulates banking institutions and protects the credit rights of consumers; (3) maintains the stability of the financial system; and (4) provides certain financial services to the U.S. government, the public, financial institutions, and foreign official institutions. The board meets twice a week and most meetings are open to the public. In addition, The Fed is very receptive to suggestions / recommendations from various industry groups (such as the Securities Industry Association (SIA) or recommendations made by the Bond Market Association (BMA)). Any suggestions / recommendations can be lodged with the Board of Governors at regularly scheduled meetings.

5. What is the communications strategy of the depository to its stakeholders and how is this run? DTCC: The depository publishes an annual report detailing its actions and plans, as well as its financials. All major changes are preceded by a publication seeking input from the market. All events are broadcast to DTCC participants. DTCC's website

FED: The Federal Reserve Board regularly reports to the U.S. Congress on various matters of importance. In addition, the Federal Reserve Board maintains a notification service that alerts subscribers by electronic mail whenever a press release or other unscheduled item has been posted to the Board's web site. The e-mail message will give the web address of the item and a brief description of its contents. The FED's website also maintains a document repository.

1.	Is the board that governs the depository answerable to its users?	DTCC: Yes. DTCC has a 27-member board of directors elected by the participant owners of DTCC which are directly answerable to its users. The DTCC Board of Directors also serves as the directors for both National Securities Clearing Corporation (NSCC) and The Depository Trust Company (DTC), subsidiaries of DTCC. Entities represented on the board are participant organizations, the New York Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. (NASD), as well as representatives from DTCC senior management. FED: Yes. The Federal Reserve is overseen by a 7-member Board of Governors. Although there is no formal industry group directly responsible for lobbying in respect to settlement and custody activities, the Fed is very receptive to suggestions / recommendations from various industry groups (such as the Securities Industry Association (SIA) or recommendations made by the Bond Market Association (BMA)). Any suggestions / recommendations can be lodged with the Board of Governors at regularly scheduled meetings. The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. Meetings of the Board of Governors, typically held twice a week, cover the regulatory, monetary policy, and other responsibilities of the central bank. The Board conducts its meetings in compliance with title 5, section 552b, of the U.S. Code, known as the Government in the Sunshine Act.
2.	Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository?	DTCC: As of October 2000, DTCC had 152 shareholders. Ownership is as follows: Banks 34%, Broker / Dealers 22%, and NYSE / NASD / AMEX 44%. The maximum amount of shares a given participant may hold is based on a formula related to their level of holdings and activity. DTCC is a limited purpose trust company and is part of the Depository Trust and Clearing Corp., DTCC, the holding company, which also includes the major USA clearing corp., National Securities Clearing Corp. (NSCC). Only participants are eligible to become shareholders, although share ownership is not required. FED: The Federal Book Entry System (FRB) is fully owned and operated by the United States Federal Reserve (FED), a government agency.
3.	Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)?	DTCC: No cross subsidisation. FED: Not applicable.
4.	What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)?	DTCC: The DTCC Board of Directors works to ensure that DTCC meets the needs of its stakeholders. The board meets on a regular basis and there is an annual general meeting that is open to all shareholders in accordance with US corporate law. In addition, a relationship management team supports all users. FED: The Board of Governors works to ensure that the FED: (1) conducts the nation's monetary policy; (2) supervises and regulates banking institutions and protects the credit rights of consumers; (3) maintains the stability of the financial system; and (4) provides certain financial services to the U.S. government, the public, financial institutions, and foreign official institutions. The board meets twice a week and most meetings are open to the public. In addition, The Fed is very receptive to suggestions / recommendations from various industry groups (such as the Securities Industry Association (SIA) or recommendations made by the Bond Market Association (BMA)). Any suggestions / recommendations can be lodged with the Board of Governors at regularly scheduled meetings.
5.	What is the communications strategy of the depository to its stakeholders and how is this run?	DTCC: The depository publishes an annual report detailing its actions and plans, as well as its financials. All major changes are preceded by a publication seeking input from the market. All events are broadcast to DTCC participants. DTCC's website FED: The Federal Reserve Board regularly reports to the U.S. Congress on various matters of importance. In addition, the Federal Reserve Board maintains a notification service that alerts subscribers by electronic mail whenever a press release or other unscheduled item has been posted to the Board's web site. The e-mail message will give the web address of the item and a brief description of its contents. The FED's website also maintains a document repository.