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THE STORY OF THE DEPOSITORY TRUST & CLEARING CORPORATION
The trading volume was so intense that brokers could not physically deliver securities to their customers—they were unable to get them from transfer agents quickly enough. Compounding the problem, the securities industry had been weakened from the late 1920s through the early 1950s, having endured the Great Depression and World War II, creating a management gap. “In some instances, older, experienced management personnel simply had not groomed successors and found themselves overwhelmed by the volume surge. At other firms, younger management did not at first appreciate the risks inherent in the avalanche of paperwork or in neglecting to maintain financial standards above the minimum requirements set by the Exchange,” the NYSE report stated. Of course, some firms had invested in technology prior to the crisis, improving back-office functions and automating what they could. But even the most advanced firms were bogged down by the issues elsewhere. William Denzter, later head of The Depository Trust Company (DTC), put it this way in a history of the firm: “The paperwork crisis caused the post-trade processing of hundreds of millions of dollars to be delayed or to fail entirely, dividends to investors to be misdirected, and brokerage firms to go bust.” It was clear that the very foundation of the security industry was at risk.
Too Much of a Good Thing
The bull market in the early 1960s started off at a trot, and the flow of business was manageable for the first half of the decade. By 1967, however, the volume increased sharply, up 14 percent above the previous record for a three-month period. In all, some 615 million shares were traded in the first quarter of 1967.
1967 AUGUST The New York Stock Exchange (NYSE) Board of Governors
1968 JANUARY
1968 FEBRUARY The settlement period
1968 MARCH
Trading in all securities markets is limited to four hours a day. NYSE member companies are told to keep offices staffed until at least 7 p.m. on weekdays to catch up on paperwork.
The typical 5.5-hour trading day resumes. By June, volumes for the quarter will exceed 845 million shares and the NYSE, the American Stock Exchange (AMEX) and National Association of Securities Dealers vote to close markets one day per week.
is extended from four days after a transaction to five. Some firms begin operating six and seven days a week, while others maintain a 24-hour workday.
curtails trading by 90 minutes on nine consecutive business days to ease the paperwork problem.
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