In the U.S. financial market post-trade infrastructure, specialized organizations fulfill distinct roles regarding custody, clearance, netting, and derivative guarantees. Match each capital market entity on the left with its primary operational function on the right.
- Depository Trust Company (DTC)Provides central securities depository services, holding physical certificates in immobilized form and performing book-entry ownership transfers for corporate securities.
- National Securities Clearing Corporation (NSCC)Acts as a central counterparty (CCP) for equity markets, interposing itself via novation and executing trade netting through the Continuous Net Settlement (CNS) system.
- Options Clearing Corporation (OCC)Functions as the issuer, clearing organization, and guarantor of standardized exchange-listed equity and index option contracts.
- Fixed Income Clearing Corporation (FICC)Provides central counterparty clearance, trade comparison, and netting services specifically for U.S. Government securities and mortgage-backed bonds.
Answer
Depository Trust Company (DTC) pairs with Central Securities Depository & Book-entry Transfer; National Securities Clearing Corporation (NSCC) pairs with Central Counterparty & CNS Netting for Equities; Options Clearing Corporation (OCC) pairs with Issuer & Guarantor of Listed Options; Fixed Income Clearing Corporation (FICC) pairs with Clearing & Netting for U.S. Government & Mortgage-backed Securities.
Each entity performs a distinct post-trade operation: DTC maintains central custody and transfers book-entry records; NSCC nets equity transactions as a central counterparty; OCC issues and guarantees exchange-listed options contracts; FICC processes clearance and netting for Treasury and fixed-income securities.
Step-by-Step Solution
Key Concept
Distinction of Post-Trade Market Infrastructure Entities (DTC vs. NSCC vs. OCC vs. FICC)