Examkin

Question

Difficulty: EasyDepositories, Clearing Corporations, and Settlement Entities

Match each U.S. capital market entity to its primary clearing, settlement, or depository function.

  • Depository Trust Company (DTC)Maintains centralized custody of securities certificates and facilitates electronic book-entry transfer of ownership.
  • National Securities Clearing Corporation (NSCC)Acts as the central counterparty providing trade netting and clearance services for equity and corporate bond transactions.
  • Options Clearing Corporation (OCC)Issues, clears, and guarantees performance on all standardized exchange-traded options contracts.

Answer

Depository Trust Company (DTC) pairs with maintaining custody and facilitating book-entry transfers; National Securities Clearing Corporation (NSCC) pairs with trade netting and clearance for equities/corporate debt; Options Clearing Corporation (OCC) pairs with issuing and guaranteeing exchange-traded options.
Each entity matches its defining industry responsibility: DTC acts as the primary securities depository for book-entry transfers, NSCC provides trade clearance and netting for cash market securities, and OCC serves as the guarantor and issuer for exchange-listed options.

Step-by-Step Solution

1
Identify the primary role of Depository Trust Company (DTC).
DTC is the central securities depository focused on safe custody and electronic book-entry ownership transfers.
DTC immobilizes physical certificates and processes automated electronic delivery against payment.
2
Identify the primary role of National Securities Clearing Corporation (NSCC).
NSCC handles multilateral trade netting and clearing services for cash equities and debt.
NSCC reduces the volume of trade settlements required by stepping in as central counterparty.
3
Identify the primary role of Options Clearing Corporation (OCC).
OCC is the central issuer and guarantor for derivative options contracts.
OCC ensures buyer and seller performance across options exchanges to mitigate counterparty default risk.

Key Concept

Market infrastructure roles: DTC provides central depository and book-entry services, NSCC clears and nets cash market transactions, and OCC issues/guarantees listed options contracts.
Rate this question

Topics

Depositories, Clearing Corporations, and Settlement Entities

More questions from this topic