Securities Industry Essentials (SIE) ExamKnowledge of Capital MarketsHard
Which of the following entities is responsible for ensuring the orderly settlement of securities transactions by acting as a central counterparty for both buyers and sellers?
- ADepository Trust & Clearing Corporation (DTCC)
- BFederal Reserve Bank
- CSecurities and Exchange Commission (SEC)
- DFinancial Industry Regulatory Authority (FINRA)
Show answer & explanationAnswer & explanation
Correct answer: A. Depository Trust & Clearing Corporation (DTCC)
The Depository Trust & Clearing Corporation (DTCC) is a major U.S. financial services company that provides clearing and settlement services for financial markets, acting as a central counterparty.
Why the other options are wrong
- B. The Federal Reserve Bank oversees monetary policy and banking, not direct securities settlement.
- C. The SEC regulates securities markets but does not directly handle settlement.
- D. FINRA regulates broker-dealers but is not involved in transaction settlement.
Depository Trust & Clearing Corporation (DTCC)
The DTCC provides clearing, settlement, and information services for equities, corporate and municipal debt, money market instruments, and OTC derivatives.
- Reduces risk and enhances efficiency in financial markets.
- Acts as a central counterparty for transactions.
- Its subsidiaries include NSCC (clearing) and DTC (depositories).
Memory trick: DTCC: 'Done, Traded, Clean, Clear'.