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CHAPTER THREE | TECHNOLOGICAL REVOLUTION
Left: DTC’s same-day funds settlement (SDFS) expanded to include municipal variable- rate demand obligations. Key players in DTC’s SDFS were (from left) Donald Donahue, Vincent Mauro and Christine Benedict. Below: DTC began holding municipal bearer bonds, a labor-intensive process in its earliest days. Technology would eventually play a role.
NSCC saw an opportunity to bring the same expertise in comparison and netting that it used in corporate and municipal securities to the government securities world. Three weeks after the GSA passed, NSCC moved quickly to fund the Government Securities Clearing Corporation (GSCC) with an initial capitalization of $1 million. By 1988, GSCC had implemented its comparison system, which automated a matching of next-day and future-settling Treasury and agency trades of 30 dealers and brokers. Mutual funds were also drawing increasing sophistication, and NSCC had a solution to improve processing capacity. Fund/SERV streamlined processing time while reducing risk. In 1986, NSCC was about to spark a revolution in the mutual fund market that would lead to explosive growth.
A Dramatic Downturn
The most significant challenge of the decade for DTC was just around the corner. The year 1987 had started off with a very strong market, but that was about to change. DTC launched the same-day funds settlement system in June. “At that time, some typically short-term instruments settled against what people referred to as federal funds, meaning that it was money good that day,” said Donald Donahue, DTCC’s former president and CEO. “The vast bulk of securities transactions settled in what was referred to as next-day funds, meaning I would give you a check drawn on a New York clearinghouse bank,
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