Start passing out the mops.
“Significant flooding” took place at the Depository Trust & Clearing Corp.’s vault on Water Street lower Manhattan, a few blocks away from the river, when Hurricane Sandy swept through New York’s financial district on October 29.
Officials of the clearing industry utility, who for security reasons wouldn’t say exactly when they opened the vault, confirmed they have opened the vault and had begun to mop up the mess. That cleanup could take weeks or possibly months.
While, the exact damage from the recent Hurricane Sandy to the physical certificates isn’t known at this time, “it is essential to begin the restoration process to avoid further deterioration,” said DTCC vice president of communications Judith Inosanto late Thursday.
DTCC officials have emphasized that most of the physical certificates it stores are in electronic form. The value houses some 1.3 million physical securities, with an estimated value of $35 trillion. “I would estimate that the percent of electronic securities is in the upper 90s,” at this point, however, Inosanto said.
DTCC also said it should have an exact damage assessment in about a week.
“It is too early to determine how many of the physical certificates can be restored,” DTCC said. “The restoration process will take some time, possibly months.”
DTCC is an essential part of the U.S. markets because it handles trades in U.S. equities, government and corporate bonds. Exchanges depend on the DTCC to act as the industry’s utility in good and bad times, ensuring that transactions are completed in market meltdowns.
Meanwhile, DTCC officials said they have a certificate inventory file with ownership information that can be reproduced from various data centers. Records at those centers are intact, including the inventory files at the vault, DTCC said.
The next step, DTCC added, is for the utility to engage in “active discussions with representatives of various transfer agents for the purpose of establishing a protocol for the issuance of replacement certificates, without requiring the presentation of the original certificates.”
