Vault Status at DTCC Unclear, Post-Sandy
November 8, 2012
The Depository Trust & Clearing Corp. processed about $19 trillion in securities trades last week even as Hurricane Sandy submerged its 40-year-old underground Manhattan vault holding physical stock and bond certificates.
The company switched day-to-day command of its operations to its office in Tampa, Florida, and moved control of the technology that runs its clearing and settlement business and record-keeping to its Dallas data center the weekend before the Atlantic’s largest-ever tropical storm, Michael Bodson, president and chief executive officer of New York-based DTCC, said in a telephone interview. The average value of transactions processed weekly this year is $23.1 trillion, DTCC said.
The DTCC handles trades in U.S. equities and government, municipal and corporate bonds and is more important to how markets function than the New York Stock Exchange or Citigroup Inc., according to James Angel, a professor at Georgetown University’s McDonough School of Business in Washington. Of the approximately $35 trillion in securities for which DTCC provides services, the “vast majority” -- a percentage in the “high 90s” -- is in electronic form only, Bodson said.
“Over the weekend we saw flooding would hit lower Manhattan and declared we were going into recovery mode,” Bodson said. “Given our criticality to the U.S. financial system, we have very, very robust disaster-recovery plans that have been built up over the years. We kept operations going. Last week was a normal week. We did not have any significant issues other than the vault. We met all deadlines.”
Regulators including the Securities and Exchange Commission, U.S. Federal Reserve, New York Fed and Department of Financial Services in New York State tracked the DTCC’s emergency plans daily since last weekend, Bodson said. He and other executives have been in touch with them, the Treasury Department and Commodity Futures Trading Commission, he said.
“We can live without the NYSE and we can live without Citigroup, because their competitors will quickly fill the gap,” Angel said by e-mail. “We can’t live without DTCC because there is no substitute. They are one of the most important pieces of our financial infrastructure and the epitome of the ’must not fail’ institution.”
The DTCC’s emergency plans are “tested continually” and reviewed regularly by regulators and auditors, Bodson said. The company can run its operations from its New York headquarters at 55 Water Street in lower Manhattan or its offices in Tampa. Its three data centers are at 55 Water Street, its Brooklyn, New York, recovery site and in Dallas, he said.
The company occupies eight of the 54 floors at 55 Water Street, according to Bodson. The 10,000-square-foot vault, three levels below ground, contains 1.3 million stock and bond certificates and other securities stacked on shelves like in a library, he said.
The entire 55 Wall Street building remains closed. Over the weekend large yellow pipes emerged from the building’s side entrance, near a crane, and water-pumping machines ringed the premises. The building’s lobby contained other equipment related to the cleanup work. Workers could be seen inside.