Why Don’t I Know Who My Investors Are?

Abstract

The current Wall Street operating system, run by the Depository Trust Company (DTC) and known as the “street name” system, efficiently matches and settles roughly $2 quadrillion of trades every year. But because of the way all securities are traded through DTC’s intermediary custodians, the chief financial officer of a corporate issuer does not have access to an accurate, real-time record of all the holders of the corporation’s liabilities and therefore has limitations in direct communications with its stakeholders. Moreover, investor-to-investor communication is entirely handicapped by the existing framework. A large part of a company’s communication with investors is through third-party proxy services. Potential repairs to the direct channel between issuers and investors through DTC, through trustees, or through other legacy vendors all have limitations. There are encouraging possibilities in internet-based peer-to-peer networks.

TOPICS: Fixed income and structured finance, legal/regulatory/public policy