What is DTC Eligibility?

by | Feb 5, 2024 | Financial Services

If you are a company that is wanting to offer stocks, stock options, or any other type of security as part of your public offering, it is vital that your securities gain DTC eligibility. Learn what this eligibility is and why it is so important below.

What DTC Eligibility Is and What It Does For Your Company

DTC eligibility refers to the status of your company’s securities, such as stocks, bonds, stock and bond options, and more. If your securities have this type of eligibility, it means that your company’s securities are eligible to be deposited into the DTC (Depository Trust Company), the largest securities depository in the entire world. The value of securities that the DTC holds is estimated to be over $35 trillion.

When your company’s securities become eligible to be deposited into the DTC, many avenues open up in terms of what you can do with those securities. If you are wanting to raise capital through an Initial Public Offering (IPO) or want to buy back shares through a liquidity event, the securities should be eligible for deposit into the DTC.

Why Is This Type of Eligibility So Important?

This type of eligibility is so important because, if your securities do not have it, it is much harder to trade them, as they cannot be transferred between brokerage accounts electronically. Thus, many avenues of what you can do with these securities is closed off. For instance, if you wish to have an IPO or liquidity event, it is impossible to have either of them without having your securities being eligible for deposit into the DTC. This type of eligibility enables brokers to process and clear transactions, issuers to save on broker and clearing fees, and an enhancement of the securities’ liquidity.

ColonialStock.com is an experienced, transfer agent that sponsors companies for DTC eligibility. Learn more about the services we can provide your company at https://www.colonialstock.com/.

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