National Securities Clearing Corporation

Note: The most up-to-date information about Clearance and Settlement through NSCC can be found at www.dtcc.com.

Please click here to navigate directly to the Clearance and Settlement section of www.dtcc.com.

Time is critical to minimizing risk in the financial markets. Therefore, regulators and the industry have set three business days to complete the clearance and settlement of equity and bond trades.

NSCC guarantees and settles transactions between market professionals during this time period to ensure sellers are paid and buyers receive their securities in a manner that reduces risk, cost and post-trade uncertainties.

Only a few decades ago, clearance and settlement was a colorful but cumbersome process, prone to risk and error. Instead of data flashing through computer networks, flocks of messengers scurried through Wall Street clutching bags of checks and securities. Each transaction between brokers had to be handled separately. Paper confirmations of the trade had to be exchanged. Then the stock certificate attesting to ownership had to be delivered and the payment for each trade picked up in return.

NSCC was established to take over the less risky but still highly paper-intensive clearance and settlement for the two major stock exchanges and the over the counter market in 1976. Working with the Securities Industry Automation Corporation (SIAC) and The Depository Trust Company (DTC), NSCC further automated and streamlined clearance and settlement to minimize the cost and risk of moving funds and securities.

NSCC provides the industry with three critical elements -- all aimed at eliminating marketplace uncertainty. First, we ensure that there is always adequate systems capacity to handle not only average daily trading volume, but unpredictable spikes as well.

Second, NSCC guarantees that a trade will be completed once it enters our system as compared, which means all trade details from the buyer and seller match up. This guarantee of settlement eliminates risk in the unusual event that a firm becomes insolvent.

Third, NSCC's Continuous Net Settlement (CNS) system reduces or nets down the total number of financial obligations requiring settlement, thereby further minimizing market risk. NSCC accomplishes this for each brokerage firm by netting the total buy (receive) and sell (deliver) obligations for a given security into one net position. We then simultaneously consolidate all debits and credits from these net positions in all securities into one final net money position for each firm. On a peak day, CNS can reduce total dollars requiring payment by more than 95 percent.