COCHRANE: DETAILS ON THE DEPOSITORY TRUST COMPANY

DTC FED NSS, THE (3380749)
12/05/2000 -NEW YORK NY Domestic Entity Other
Domestic Entity Other
Domestic institutions that engage in banking activities usually in connection with the business of banking in the United States

Important Notice
Fixed Income Clearing Corporation

NSS=National Settlement Service
THE DEPOSITORY TRUST COMPANY Assessment of … settlement day, DTC, as “Settlement Agent,” sends an NSS file to the Federal … in the name of Cede & Co., nominee of DTC …

Cede& co is a part of the Federal Reserve and does not answer to the SEC

“Shortcut ” Oh boy are we familiar with shortcuts, and this one not approved by the SEC, wow!

“Shortcut = assignee and/or successor”
“Cede & Co” = assignee and/or successor OWNER? and you are only a beneficiary.
Alike – Commercial Mortgage Asset Backed Securities?

‘Note’ in name of Cede & Co beneficiary Bank.

This “Shortcut” was invented so the broker would hold your stocks instead of you. A

Is this like the Corporate Treasury Securities of a bank nd in order for him to legally be able to trade them for you, the stocks were placed under their “street name”. I.e. they’re in the name of the brokerage, but they’re just holding them in trust and trading them for you. And you’re in reality the beneficiary rather than the owner. Which is all fine and dandy if everything goes right. Now, it appears the rules were then changed so the brokers are not allowed any longer to put the stocks in their own name. Instead, what they typically do is to put the stocks into the name of “Cede and Company” or “Cede & Co” or some such variation. And the broker might tell you that it is just a fictitious name, and will explain why it is really more practical to do that than to put it in your name.
Cede isn’t just some dummy name, but an actual corporation that DTCC controls
It is a private company, owned by the same people (major U.S. banks) who own the Federal Reserve Bank
if somebody at some point should decide otherwise, and there’s a national U.S. emergency and/or the U.S. government becomes unable to pay its debts, well, they might just not give you your stocks back. Because legally they own them. Something to think about.

Paste the link to read the document.

http://www.dtcc.com/downloads/legal/imp_notices/2006/ficc/mbs/MBS058.06.htm

#: MBS058.06

Date: April 4, 2006

To: Mortgage-Backed Securities Division Participants

Subject: Funds-Only Settlement Processing

The Mortgage-Backed Securities Division (“MBSD”) of the Fixed Income Clearing Corporation (“FICC”) is pleased to announce that it will support the processing of all MBSD funds-only settlements in an automated process through the Federal Reserve’s National Settlement System (the “NSS”).

FICC expects to implement this service in 2006 upon receipt of approval of the requisite rule filing with the Securities and Exchange Commission.[1]

The service will introduce an automated process for the collection and payment of clearing members’ MBSD cash settlement obligations due to and from the MBSD.

The NSS process, currently used by FICC’s affiliates,

The Depository Trust Company (“DTC”), the National Securities Clearing Corporation (“NSCC”), and by the Government Securities Division (“GSD”) of FICC,[2] will be leveraged to automatically debit and credit participants’ cash settlement obligations at the settling bank level.

That is, the individual debits and credits of all clearing members using the same settling bank will be aggregated, and the net debit or credit established at the settling bank level will be settled using the NSS.

FICC will further leverage systems and procedures already in place at DTC to perform this function by using DTC as its agent to interface with the Federal Reserve Bank for settlement.

The implementation of this service will extend the settlement finality benefits currently afforded by DTC’s interface with the NSS to MBSD clearing members.

Additionally, by automating the cash settlement process, risk will be mitigated (as MBSD would have greater assurance of being paid on a timely basis), the operational burdens associated with collecting and paying out cash settlement amounts will be eliminated, and the need for FICC to fine members for late settlements will be diminished.

It will also streamline and standardize the collection of funds across clearing corporations.

The new service will be mandatory and will affect all MBSD clearing members simultaneously upon implementation. FICC will establish a new limited membership category for MBSD “Cash Settling Banks” to support this service. MBSD clearing members will be required to appoint a Cash Settling Bank to process their cash settlements by completing and signing the requisite agreements that will be provided by FICC at a later date.

The following entities will be eligible to become Cash Settling Banks by executing the requisite membership agreements (and requisite agreement with the Federal Reserve) for this purpose:

1. Banks or trust companies that are DTC settling banks (as defined in DTC’s rules and procedures)
2. FICC Government Securities Division Funds-Only Settling Banks[3]
3. MBSD clearing members with direct access to the Federal Reserve and the NSS.

Other banks or trust companies that desire to become MBSD Cash Settling Banks must apply to FICC.

In order to qualify, they must have direct access to the Federal Reserve Bank and the NSS, as well as satisfy the financial responsibility standards imposed by FICC from time to time.

Initially, these applicants must meet and maintain a Tier 1 capital ratio of 6 percent.

MBSD clearing members are urged to contact their current settling banks and inform them of the need to become an approved MBSD Cash Settling Bank.

It should be noted that if NSS becomes unavailable for any reason, MBSD participants will be required to settle their obligations with FICC using the existing procedure.

The obligation of a participant to fulfill its cash settlement amount remains at all times with the participant.

The NSS is governed by the Federal Reserve’s Operating Circular No. 12 (the “Circular”).

Under the Circular, DTC, as FICC’s settlement agent for the MBSD process, will have certain responsibilities with respect to an indemnity claim made by a relevant Federal Reserve Bank as a result of the NSS process.

FICC will apportion the entirety of any such liability to the MBSD clearing members for whom the Cash Settling Bank to which the indemnity claim relates was then acting.

This allocation will be done in directly proportion to the amount of such participants’ cash settlement amounts on the business day in question. If for any reason such allocation is not sufficient to fully satisfy the Federal Reserve Bank’s indemnity claim, then the remaining loss shall be allocated among all clearing participants in proportion to their relative usage of the facilities of the MBSD (based on fees for services) during the period in which loss was incurred.

Please direct all questions and comments on the NSS service to George Parasole, Director, Product Management, at 212-855-7670 or gparasole@ficc.com.

Susan Tysk
Managing Director

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