Marc Rubinstein on “The story of clearing”

Marc Roubinstein published an interesting post on his “Net Interest” newsletter delving into the history of clearing houses. His account is set against the background of the $3bn call the National Securities and Clearing Commission made on Robinhood Securities at the height of the recent peak in trading in GameStop. The post is short and worth reading in full but the following extract will give you a flavour …

Power comes in many forms. Last week’s events surrounding GameStop show how power can coalesce in the hands of individual investors when they pool their intellectual and financial resources. But the events also reveal a different manifestation of power: the power to call a high-profile tech company in the middle of the night and demand $3 billion. That’s quite some power!

The entity wielding that power is the NSCC, which – as Vlad Tenev, the CEO of Robinhood spelled out to Elon Musk – stands for the National Securities and Clearing Corporation. The NSCC in turn is a part of the DTCC, which stands for the Depository Trust and Clearing Corporation. And the DTCC is perhaps the most powerful entity you’ve never heard of. It’s the engine of the US securities markets; in 2019 alone, it processed over $2.15 quadrillion worth of securities (yes, quadrillion!) It’s big and ugly enough to be included among a very short list of entities designated by people in Washington as “systemically important financial market utilities”.  

To understand what (and who) the DTCC is, we need to delve a little into market structure, and the best way to do that is with some historical perspective.

WTF is DTCC? The Story of Clearing – net – Marc Rubinstein

If that appeals then read on here ….

Tony – From the Outside