DTCC Provides Update On Status Of Flooded Securities Vault

Tyler Durden's picture

As has been widely reported previously, while the NY Fed's deep underground gold vault remained dry during the Sandy flooding in downtown NY, one institution which got badly hurt was the DTCC, aka Cede & Co (profiled here in July of 2009 in " The Biggest Financial Company You Have Never Heard Of"), which is the entity serving as custodian of virtually every electronically traded security in the modern marketplace (equity, debt, derivative, synthetic, in fact anything which is not a physical asset in itself and is not in the hands, or safe, of the rightful owner). We put the emphasis on electronically, because DTCC is also the actual custodian of all physical proof of stock ownership, such as certificates, bond deeds, and the like. It is the largely irrelevant latter (because it has been several decades since anyone actually demanded a physical copy of the stock certificates backing their shares of company XYZ) that the DTCC got in trouble for when its securities vault got flooded, and in the process destroyed countless physical stock certificates. Note we did not use the word electronic because those are there and accounted for in numerous back up data sites, with full designation and attribution. In other words anyone who made a mountain out of this particular mole hill sadly has no idea how modern markets operate, since all that the DTCC needs to do to remedy the flooding damage is to notify transfer agents of this natural disaster, and then have duplicate stock certificates printed at a cost of 1 cent for every thousands or so print outs. Which is more or less what the DTCC also just said in its press release.

DTCC Statement on Condition of Securities Vault

 

NEW YORK--(BUSINESS WIRE)--The Depository Trust & Clearing Corporation (DTCC) has begun the initial phase of recovering the contents of its securities vault. Our analysis of the condition of the vault, once we were able to open it, was that significant flooding and water damage occurred throughout the facility. While it is premature to determine the full extent of the damage, it is essential to begin the restoration process to avoid further deterioration.

 

DTCC has retained highly-recognized, well-respected disaster recovery and expert restoration firms to work with on this important effort in order to carefully and diligently address the challenges resulting from the damage caused by Superstorm Sandy.

 

DTCC expects to have a more accurate assessment of the condition of the physical securities within a week’s time. It is too early to determine how many of the physical certificates can be restored. The restoration process will take some time, possibly months.

 

DTCC maintains a robust certificate inventory file with ownership information that can be replicated from our multiple data centers. The company’s computer records are fully intact, including detailed inventory files of the contents of the vault. This effort is more of an administrative and logistical challenge than an economic issue. DTCC is engaged in active discussions with representatives of various transfer agents for the purpose of establishing a protocol for the issuance of replacement certificates, without requiring the presentation of the original certificates.

Cataclysm averted.

Or maybe not. Because at the end of the day, it is not whether or not the physical stock certificate for a given holding was damaged in the flood. What is far more troubling, and has been since the advent of Cede & Co as master custodian, is that regardless of the content of its securities vault, it is the DTCC that is the rightful and ultimately legal owner of every security. Or would be in case Cede & Co decided to make it a legal matter of assigning ownership: good luck in a legal battle with a company that is owned by every major financial institution  in the US (including Goldman, JPM, the NYSE and of course, the Fed).

In other words, it was not DTCC's flooding that was the issue: that is largely irrelevant. It is the fact that DTCC, and its "partnership nominee" exist, and that they are in effect, the default custodians of every transaction. Because if the day comes when all securities-based property has to be "sequestered", all that would be needed is one quick phone call to DTCC and it's done and done.

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Freegolder's picture

Will anyone at ZeroHedge comment on this article that appeared yesterday?

http://www.zerohedge.com/news/2012-11-13/china-says-it-must-add-gold-res...

 

The post mentions a Bloomberg article and quotes from that article.

The Bloomberg post was purported to come from an article in the China Securities Journal.

 

Despite extensive searches, neither the Bloomberg article nor the China Securities article can be located. These seaches were performed within an hour of the post appearing on ZH.

What is the story here?

Why no link, why no articles.

The post has been picked up across the web (of course), but more and more people seem to be asking if the whole thing is fictitious.

Zerohedge, please could you offer an explanation?

blunderdog's picture

Entertainment purposes only, yo.  Nothing you read on the Internet can possibly be TRUE.  It can at best be VIRTUALLY true.

Oh regional Indian's picture

For the low down and the down low on the topic of DTCC, I would HIGHLY recommend this article.... DTCC laid bare..

http://ming.tv/flemming2.php/__show_article/_a000010-000923.htm

ori

Ident 7777 economy's picture

Oh, and I'm sure a web address with "ming.tv" in it is going to be complete, accurate and more than truthful ...

 

(If we were playing cards, I would 'see' your ming.tv and 'raise' with just about ANY .edu site)

Au Shucks's picture

Riiiiiight.  Because .edu sites are known for being truthful, accurate and integral.... that is also why we should only watch teh major TV networks, believe only what we are told by our "elected" officials, and never question what we are told by our overlords.  Did I get it right? 

 

Square

chumbawamba's picture

There is a rather larger elephant standing in the middle of this room that is being ignored: SHOW ME THE <insert original instrument here>!

You want to prove ownership?  I see you have a very nice CERTIFIED COPY.  Thank you, but I WANT TO SEE THE ORIGINAL.  No original, no ownership.

Sure, in court, DTCC might give evidence of the storm, the flooding, ergo the need to replace the damaged originals with a certified copy...BUT, who is to say the DTCC ever had the original?  Maybe they only ever had copies?

I'm not saying this is necessarily true, but it potentially is.

And if it potentially is, then potentially everyone just recovered their estate, contracted away at birth, because DTCC also holds all the original certificate of live birth applications.  For Everyone.  Globally (I believe).  If they no longer have the original, each and every one of us with a birth certificate can lay allodial claim of our person.  Meaning everything based on the birth certificate--which is everything that comes after, i.e. SSN, Selective Service, driver's license, etc.)--is null and void, because they are based on an instrument that no longer exists.

Anyway, it opens up some interesting potentialities.

I am Chumbawamba.

TerraHertz's picture

So, if all the certificates of live birth applications are gone, that makes explaining the absense of one particular live birth application a lot easier, doesn't it, Mr Obama?

 

Next I expect the NY FED to claim their physical gold holdings are 'ruined and unrecoverable' due to flood damage. A boating accident, without the boat. Sorry Germany, etc, your gold is 'annnnd it's gone!'

 

 

Michaelwiseguy's picture

You're opening up a can of worms here Chwmba. Eventually the mountain of paperwork becomes unmanageable, especially when the exponential growth of the volume of it meets its critical mass.

Tyler Durden's picture

Perhaps if those "more and more" people did some diligence, they would be aware that the Bloomberg Terminal, which costs $2000/month has about 90% of its articles which never make it to the website and remain strictly within the paywall. Of course, if those "more and more" people had access to BBG terminal, they could check all of this on their own.

Freegolder's picture

Thanks for responding. Do you wonder why there is no article on the China Securities site?

sgt_doom's picture

I suspect this didn't impede DTCC's SBP (stock borrow program), which allows for that stupendous amount of naked short selling taking place.

Also, is the Frank Gaffney at DTCC, the same neocon Frank Gaffney with Center for American Security, and with that former PNAC outfit?

Just curious.....

icanhasbailout's picture

Thankfully, we can trust them not to change any of that electronic verification data before re-printing all those certificates.

Tyler Durden's picture

The certificates that were in their possession before the flood anyway?

That's the whole point - the onus is not on them to verify what you believe you have possession over.

Rainman's picture

all you paper sleeps with the fishes.

EnslavethechildrenforBen's picture

Twin towers, Corzine, now a mildly damp basement is an excuse to steal other peoples Gold...

ancient relic, tradition, that's what I meant to say

Beam Me Up Scotty's picture

"That's the whole point - the onus is not on them to verify what you believe you have possession over."

They don't have possession of my silver. That's at the bottom of the lake.

dark pools of soros's picture

Hmm new market segment:  Terminal Pooling

Zipcar for BBG Terminals??

Create pay per hour remote links and schedule reserved time

 offer 'Feel like Tyler for a Day' packages

 

 

 

Michaelwiseguy's picture

DTCC, aka Cede & Co (profiled here in July of 2009 in " The Biggest Financial Company You Have Never Heard Of"),

There is a reason the general public is not to know about this financial entity. Thanks for doing an article on it ZH.

Psychological warfare on the American people is alive and growing. We need to bring criminal charges against the MSM.

Move to change propaganda laws opens up Cold War argument http://legalinsurrection.com/2012/05/move-to-change-propaganda-laws-opens-up-cold-war-argumen/

Congress Reconsiders Domestic BBG Ban

http://rwonline.com/article/congress-reconsiders-domestic-bbg-ban-/215028

 

 

Ident 7777 economy's picture

 

 

 

MWG also formely known as "Michael":

 

 

" DTCC, aka Cede & Co (profiled here in July of 2009 in " The Biggest Financial Company You Have Never Heard Of"),

 

There is a reason the general public is not to know about this financial entity. ..."

 

THanks for the unsolicited CT (conspiracy theorist) view, but, Google has a ton of references/links on them when doing a search:

 

https://www.google.com/search?q=Cede+%26+Co&aq=f&oq=Cede+%26+Co&aqs=chro...

 

There are even LEGITIMATE discussions and papers to be found, as opposed to the nuttiness found across Youtube and other places on this subject, papers like this:

 

http://www.law.yale.edu/documents/pdf/cbl/Wilcox_streetname.pdf

 

which also discusses stock being owned (or held) in what is called a "street name".

 

SO MUCH for the big CONSPIRACY Michael.

 

 

Michaelwiseguy's picture

Are you always this quick witted I7e?

Ident 7777 economy's picture

Wit this quick, this cutting and this sharp is a developed TALENT. One can't be born with this stuff ... it's hard to turn off, too. ;-)

Machination's picture

Yo Freegolder, considering it is a China publication you probably want to do the searching in Chinese.  Many of China's English articles are often much different in content and context from the Mandarin versions (this I learned my first year in China, 20 years ago!).  Many times the English translation of an article is not even available from the publisher, and this is usually intentional.

China Securities Jornal's English search engine was not even working for me!  But, funny enough searching in Chinese for the quote from "Gao Wei" in Chinese I found a link to an article that was deleted from the server......hmmmm...interesting.

There are a lot of interesting articles on gold in that journal however, here is a link to search "Gold Reserves" in Mandarin, you might start there: http://search.cs.com.cn/newsQuickSearch.do?searchword=%E9%BB%84%E9%87%91...

And here are a couple of analysts calling for China to increase holdings, although it did not mention "Gao Wei": http://www.cs.com.cn/qhsc/gjs/201211/t20121114_3729785.html

 

blunderdog's picture

The flooding from "so-called" Hurricane Sandy was actually just a setup in advance to provide cover for a heist similar to the one in the movie Sexy Beast.

Winston Churchill's picture

Help wanted in NYC.

Temporary assignment ,pays $12-00 per hr., no benes.

Only ambidextrous females named Linda Green,need apply.

Bunga Bunga's picture

Finally the MF Global problem got disolved into the Atlantic.

buzzsaw99's picture

...and then have duplicate stock certificates printed at a cost of 1 cent for every thousands or so print outs.

I found thousands of paper stock certificates once upon a time and that's about what they were worth too.

kaiserhoff's picture

No bearer bonds have been issued since 1982, so it's hard to see what the fuss is about.

Still, some firms might be missing an opportunity.  Many moons ago, the firm I worked for did a stock issue for Barnum & Bailey Circus.  The earnings were crap, but the shares sold just fine.  The stock certificates had clowns and tigers on them, and plenty of grandparents bought a few shares, so their grand kids could have a nicely framed certificate.  Sell the sizzle, not the steak.

WAMO556's picture

Does the DTCC reside in the Nakatomi Tower???

chump666's picture

haha yes bearer bonds! 

Point is, hold the physical, what ever it may be.  I would never trust complete electronic transactions.

Die Hard story line was awesome, the Japanese (now poor) but when they were wealthy (mid 80's) companies bought physical assets.  Remember that scene when they blew open the vault?  Art, collectibles (probably precious metals) and of course bearer bonds.

We all should be mini corporations that hold physical illiquid assets.  The electronic exchange trade and black pool/derivative/HFT mess will self destruct one day.  Hell, maybe a full scale cyber war will break out soon.

dark pools of soros's picture

they still have that,.,.  many places like oneshare, giveashare,  etc

we all feel like the Professor inventing a Frisbee once he got off that island..  just because you weren't first doesn't make you less special

cbaba's picture

Its hard to see whats the Fuss about ?

If nobody use these certificate originals then why do they want a copy of original without showing the physical damaged original ? you tell me please ?

That is exact wording from the link above :

"DTCC is engaged in active discussions with representatives of various transfer agents for the purpose of establishing a protocol for the issuance of replacement certificates, without requiring the presentation of the original certificates."

Killer the Buzzard's picture

"Cede"... he he... I get the joke.

Bullionaire's picture

I asked a Fidelity phone rep to issue certs for my remaining buy-and-hold mining shares (SLW & AUY) 4 years ago.  He was incredulous.  But for a whopping fee I got them.  No worries here.

 

 

Phyzz bitchezzzzzzzzzzz.

Papasmurf's picture

Try again.  Not available these days.

Rainman's picture

It has been my experience that anybody or anything describing itself as robust should never be trusted.

Marco's picture

"it is the DTCC that is the rightful and ultimately legal owner of every security."

I like a bit of polemic every now and then, but this is just retarded ...

The biggest problem with the DTCC is that they create so much phantom stock out of thin air, but I guess the "anyone who says something bad about shorting is a statist stooge" prejudice on this site makes it very unlikely that point will ever be made in a post by Tyler ... even with the parallels to fiat printing.

kaiserhoff's picture

Good point Marco.  I wouldn't give a rat's ass what the rules are, if they were the same for everyone.

Everybodys All American's picture

Does the DTCC also contain all the counterfeit stock certificates for all the naked shorts? Just don't answer. I already know.

Papasmurf's picture

They print them up for a penney or so per thousands.

DriveByLurker's picture

Serious question:  how common is it for an NYSE/NASDAQ listed company to even still offer the option of getting a paper certificate in the name of the shareholder?  Does anyone know roughly what percentage offer this versus issuers that only offer electronic registration?

NotApplicable's picture

IANAL, but from what I've read on Jim Sinclair's site, they are supposed to provide you them upon request.

Otherwise... POOF!

All your stawks belong to DTCC.

Eternal Complainer's picture

I thought i read somewhere that cash accounts couldn't take delivery of their certificates. The small retailer is SOL as always. But he's supposed to be the one that always takes the hit when the shit gets real.

sitenine's picture

Does it matter?  All assets belong to the central banks.  All others are renters.

NotApplicable's picture

Magic checkbooks, bitchez!

Seer's picture

Dog ate my homework...

TN Jed's picture

Now we can chalk up "securities" with "homeowner" and "income tax."

knukles's picture

Not to dampen your enthusiasm, but this whole thing is a rather sticky subject that can't just be papered over with some wet brained ideas due to the water damage to the pooled interest otherwise we could get mired off the deep end and virtually drown.