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THE STORY OF THE DEPOSITORY TRUST & CLEARING CORPORATION
It would not prove to be a quick fix, and by 1968, the problems only increased. In January, heavy trading volume strained the entire system. With a daily volume that averaged 12 million shares, the number of “fails to deliver” securities skyrocketed. With securities firms stretched to the limits, there simply was no time to check on delinquent items. The heavy trading volume created a cascade of other challenges as well. Failure to deliver meant that “keeping track of where the dividends belong and that sort of thing becomes a monumental accounting problem,” said William Jaenike, who worked at the American Stock Exchange (AMEX) at the time. He would later become chairman and CEO of CCS’ successor, DTC. “Tremendous write-offs took place and a lot of big brokers went out of business.” The year would be a challenging one—and one of ongoing increases in volume. The NYSE adopted a series of reporting requirements designed to identify special problems. Along with AMEX and the National Association of Securities Dealers, the NYSE voted to begin closing the markets one day per week. Every Wednesday, markets shuttered so that the paperwork could catch up. The other four days, trading only occurred from 10 a.m. to 2 p.m. “All it did was push the volume into the remaining trading days and hours,” Jaenike told the Securities and Exchange Commission Historical Society in 2011.
After a day of trading on the NYSE (below), mountains of paper are swept up from the trading floor (opposite). With every trade managed by paper in the 1960s, it took five full business days to settle a trade despite shorter trading hours. Still there were many fails to deliver, with the Stock Exchange shortening hours to allow the paperwork to catch up. (Photo below courtesy of Library of Congress Prints and Photographs Division Washington, D.C. 20540 USA. Collection: U.S. News & World Report magazine photograph collection. Reproduction Number: LC-DIG-ppmsca-56734.)
That volume was significant. By the end of 1968, the market had topped a record 2.93 billion shares, despite having 12 percent fewer trading hours than the previous year. It was an increase of 400 million shares over the 1967 volume. Most significantly, for 25 days during the year, markets reported volume of more than 16.4 million shares, topping a volume record that had stood since the great sell-off of October 29, 1929, known as Black Tuesday.
One Possible Solution
CCS, a computerized bookkeeping solution, stepped in as one possible fix to the crisis. CCS took its first deposits in 1966 and first book-entry deliveries on June 21, 1968. Initially, the service transferred ownership in just four issues, with additional issues added on an alphabetical basis
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