DTC Eligibility means that a public traded company’s stock can be deposited through DTCC either in physical form or electronically. If an issuer is not DTCC eligible, then their shares cannot be transferred directly with DTCC, but rather through DTCC’s Custody System. All securities that are DTCC eligible must be freely tradeable shares in accordance with the Securities and Exchange Commission.
Your company will fall into one of four different categories of DTCC eligibility:
DTCC Non-Eligible – New Company: Your company is new with no history of transfers.
DTCC Non-Eligible – DTCC Custody Securities: Companies that are Custody only will have shares issued into the broker’s name (street name) rather that DTCC’s nominee name. DTCC will clear these transfers for the brokers via physical certificate.
DTCC Eligible Securities: Companies that are DTCC Eligible will have physical share certificates issued under DTCC’s nominee name of Cede & Co.
A company cannot apply to become DTCC eligible on their own. As a transfer agent, we will work with your company, market maker and DTCC’s underwriting department to have you up and running as a DTCC eligible security usually within a few weeks.
A DTCC Non-Eligible company can apply to become DTCC eligible. The process requires the following:
- First, the company will need to apply to DTCC with a DTCC qualified participant like a broker or clearing firm.
- Second, the company must have free trading shares to be deposited with DTCC. The free trading shares will be held at DTCC under their nominee name of Cede & Co.
- Finally, the company must have at least one shareholder transfer their free trading shares to their broker. The broker would then deposit the shares with DTCC. Once this happens, the security would now be DTCC eligible.
Once a security is DTCC eligible, they may wish to become FAST Eligible. This is DTCC’s electronic transfer service. FAST (Fast Automated Securities Transfer program). Is a contract between DTC and transfer agents that eliminates the need for physical certificates.
FAST Eligible Securities: This category includes all electronic forms of transfer through DTCC including FAST, DWAC and DRS eligible securities. DTCC and Legacy Stock Transfer work together to hold your shareholder’s free trading securities in electronic form either with their broker (DWAC) or in book entry under the investor’s name (DRS) with the issuer.
The benefits of becoming DTCC FAST eligible include:
- Stock certificate deposits electronically your shareholder’s brokerage account.
- Reduction in the costs of having to print a large inventory of physical stock certificates.
- Less courier shipments as the shares can now be transferred electronically versus physical certificates being shipped from the transfer agent, shareholder, and broker.
- Decrease in the amount of “lost” certificates as book entry certificates will replace.
- Easy transfer of securities between brokers.
If you wish to change your DTCC eligibility from its current level to the next, please contact our firm. Legacy Stock Transfer will work together with the Depository Trust Company to facilitate this for your company.