DTCC The Outlook for 2007 Rich Lanning BDUG

DTCC - The Outlook for 2007 • Rich Lanning • BDUG • October 2006

Technology / Communication Plans for 2007 • PBS 2. 0 • SMART Messages • Multi Protocol Label Switching Upgrade (MPLS) • Common Data Transfer Services 2 • Web Service Simplified Sign-on

PBS Version 2 Update • PBS 2. 0 Launch • Internal Pilot (8/7 – 9/30) • External Beta • 2 Firms (10/1 – 10/31) • 10 Firms (11/1+) • General Availability – Phased Rollout (2/15) • Benefits • Single sign-on between PBS and PBS 2. 0 functions • Applications re-platform • Off the mainframe 3 • Enhanced security framework (seamless to users)

Urban Legend ? ! • PBS Slowdown w/ Settlement between 1 -3 PM • Contact CSC (1 888 382 2721 - Option 1 PBS related problem) as they occur • State that user is experiencing a "disruptively slow response time on PBS", the PBS function they are using, and the approximate time they first experienced the issue. 4 • Will not be able to immediately remedy the situation but that we plan to use the collected information to analyze and determine the cause and solutions.

PTS Screenscraping • Uploads for DO, NDO, IPOS and PO to be handled as part of 2007 planning • Investigating alternate delivery of PBS data • CA Re-Engineering - Messages will be published and the online queries will be supported with the ability to export lists to Excel. • CCF Files – • Projection files (CSHPRJ), • intra-day allocation files (CSHSTA - CSHSTJ), • EOD allocation files (CSHSET) • EOD unallocated files (CSHUNL) 5 • Please do not screenscrape PBS!!

SMART Messages • Fact: 3270 printer support will be phased out over time • SMART Messages is now generally available – Please try it! 6 • Deposit ticket options are still being reviewed and will be finalized shortly

SMART/Messages Short Term deliverables • Home Page • Display more than 5 days worth of available tickets - Max is 7 days. • Update Replay button in order to be more intuitive 7 • Enhanced sorting capabilities

SMART/Messages • Ticket Display Page • When viewing group of actual tickets be able to: • Provide better delineation between tickets • Allow users to search for ticket specific information • Allow users to print individual/specific tickets w/in all shown and not just the entire range 8 • Enhanced search capabilities: • Account # • $ amount • Status • Other ticket specific information

SMART/Messages • Message List Page • Display more than 30 tickets at a time (however, we need to keep a limit on the total number displayed as that could increase response times) 9 • Allow users to move between groups of 30 tickets instead of using the back and forth buttons (e. g. 130, 31 -60, 61 -90, etc. )

SMART/Messages Long Term Enhancements • Home Page • Enhanced sorting capabilities • Ticket type • Use of filters/ticket specific information • Alerts • Notify users when something new has come. • Allow users to define alert parameters. 10 • Parameters to include: Time, Ticket Type, Other Ticket Specific Information.

SMART/Messages • Home Page (cont. ) • Allow users to create a profile (i. e. define which ticket types should go to which destination – 00, 01, 02, xx) • Indicate which tickets in a range of tickets have already been printed • Message List Page 11 • Display ticket specific information in the message text field.

SMART/Messages • Ticket Display Page • Identify when a ticket has already been printed, especially when a range of tickets has been printed. 12 • Allow tickets to be downloaded either individually or in groups so users can archive

MPLS Network Upgrade • A technology “refresh” which requires swapping out the “old” frame relay circuits & routers • The new MPLS routers & circuits will offer optional features such as encryption • It is not a small effort & we hope to have it significantly completed in 2007 13 • We ask for your assistance with the coordination with this task

Common Data Transfer Service • An effort to re-engineer our message & file systems onto a single enterprise-wide architecture • Meeting with participants between now & the end of 2006 to examine message & file interfaces 14 • Results will be published in Q 2 2007

Web Service Simplified Sign On • Will be swapping out existing PC Web Direct digital certificates with new DTCC Web Direct certs • Piloted in October with 10 firms. November general migration of ACATS & MF services 15 • Will work with each firm’s Access Coordinator to review & authenticate each user’s existing access

DEMATERIALIZATION

Direct Registration System (DRS) • July 2006: • SEC rule approved - all exchange listed issues must be DRS eligible • 1/1/2007: new issues coming to market must be DRS eligible • 1/1/2008: all listed issues must migrate to DRS 17 • SIA approaches regional exchanges

DRS – Jan 2007 – New Issues • Underwriter awareness • Information flow to Syndicate Operations Division • Letters to all underwriters • @ DTCC article • US Facilities shut down • Eliminate Hold and Bust function • Minimal transaction volumes • 2 “Bust” per day. 18 • Certificate transactions continue to decline

DRS • Mid 2007: • Begin analysis of eliminating cert. for DRS eligible issues • Info exchange with DTCC Board, SIA, and industry • 3 Q 07: Implement DRS processing enhancements • Move “all” shares • Move “all”, sell fractions 19 • Move “all”, terminate account, sell fractions

DRS • Jan 2008: • All NYSE, NYSE Arca, Nasdaq, and Amex issues must be DRS eligible • Expand DRS to other exchanges • 2 Q 08: • Default to “statement only” for DRS eligible issues 20 • Currently: 80% of WTs are for DRS eligible issues

WTs • 2007: • Avg. daily WT cert. volumes decline by 22% • WT DRS statement volumes increase by 50% • 2 Q 07: 21 • Explore limited processing days each week for WTs

WTs • Mid 2008: • WT processing truncates to 2 X a week • Prepare to eliminate DMD processing • 4 Q 08: 22 • Sunset DMD functionality

Deposits • 2 Q 06: Efforts continue to expand Paperless Legal program • Letters and flyers to agents • @DTCC articles • One-on-one contact with agents and participants • Jan 2007: • “No paper” processed for legals 23 • Six month break-in period / paper stripped & returned for PLAs • Presentments outside of DTC for non-participating agents in July 2007

Deposits • July 2007: • No paper legal transactions accepted by DTC • Sept 2007: • DTC begins to charge for paper legal transaction rejects • 4 Q 2007: 24 • Explore limited processing days each week for deposits

Deposits • 2 Q 08: • Truncate deposit processing to 2 X each week • Consider sun-setting BDS • Exceptions: • Reorg deposits • Custody deposits 25 • Restricted deposits

Non-Transferables • 2007: • Over 1 million cert. in vault • PREM and Destruction process continues • As cert. decline, economies of scale diminish • Jan 2007: • Fees increase • 3 Q 2007: • Explore eliminating new deposits 26 • Fee increases considered

Custody • 2007: • Growth continues as less fungible cert. in circulation • Vault houses over half million cert. and growing • All manual processes, with no economies of scale • 1 Q 08: • Recommend “right sizing” fees • 3 Q 08: 27 • Plan for sun-setting of ESS service

Custody • 1 Q 09: 28 • Evaluate options for processing efficiencies and cost cutting

OTHER 2006 / 2007 NEWS

Other News You Can Use! • Settlement Hotline Established – 212 855 5800 • 2007 Fee Impact Analysis will be available in late November • Real time link between Omgeo’s Tradesuite & DTC in November – Late Affirm Processing • DTCC Learning – Review certification opportunities & new e-learning offerings 30 • 2007 BCP Testing & Out of Region Recovery Planning

Annual Meeting Recap

ATP Re-Design • Feedback on handout describing the holiday processing proposal • ISO 15022 Message Formats Feasibility 32 • Real-time 24 x 6

33 DTC Operational Metrics • Like you, we have hundreds of internal operational performance metrics. • We always tell you how we are doing. . . after we do it. • This year we selected 17 metrics from our catalog that we thought clients would be most interested in. We vetted those with the OAC and ASAB in 2005. • We set targets and are monitoring performance with the OAC and ASAB. We are planning to distribute more broadly in 2007. • We hope this additional transparency and accountability. • Are there other metrics you would be interested in for next year?

Structured Securities • Be mad as hell and pledge not to take it anymore. • White papers are nice but it's time for action. • Paying agents are not the problem - the structure of many deals is. • The community is together trying to separate the bad from the good deals and make recommendations for each. • We do not want to harm to the investor with our actions. 34 • BDUG is welcome to the table!

QUESTIONS?