Jay BaumLars Petersson

December 15, 2003 Slide 1

Depository Trust & Clearing Corporation

Managing Paper for The Financial Services Industry

                                                                                                                                                                                                                                                                            

Jay BaumLars Petersson

December 15, 2003 Slide 2

Subsidiaries

T he Depository T rust Com pany(DTC)

National Securities Clearing Corporation(NSCC)

Governm ent Securities Division

M ortgage-Backed Securities Division

Fixed Incom e Clearing Corporation(FICC),

Em erging M arkets Clearing Corporation(EM CC)

Depository T rust & Clearing Corporation(DTCC)

Jay BaumLars Petersson

December 15, 2003 Slide 3

Settlement of Broker-to-Broker Trade

Buying Broker

Selling Broker

Marketplace 2

NSCC 4

DTC

• Brokers are given instructions to buy or sell on behalf of their client

• Trade is made on an exchange or Marketplace (Day T)

• Details of the trade are sent to the NSCC

• NSCC processes and records the trade. Details and contracts are sent to the brokers with figure for net money settlement

• DTC is instructed to move securities from Selling broker’s account to Buying broker’s account (T+3)

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Jay BaumLars Petersson

December 15, 2003 Slide 4

Operations Risk Management Unit (ORM) • Risk and Control Self-Assessment

– common framework

– common language

• Database of “Risk Events”– actual losses

– near misses

– opportunity costs

• Key Risk Indicators Established• Reporting and Review Schedule

Jay BaumLars Petersson

December 15, 2003 Slide 5

“Risk Universe”• People & Culture

– Key Person– Internal Theft– Fraud

• Execution, Delivery & Process Management– Data Input– Customer Service– Financial Controls– Financial Reporting– Legal/Regulatory– Information Management

• Technology– Interface– Network Failure– Software Corruption

• Business Continuity– Communication– Alternate sites– Data access

• External – Corporate Espionage– Third Party Risk