Deposit At Custodian
Deposit/withdrawal at custodian (DWAC) is a method of electronically transferring new shares or paper share certificates to and from the Depository Trust Company (DTC) using a Fast Automated Securities Transfer (FAST) service transfer agent as the distribution point. The DWAC is one of two ways of transferring between broker/dealers and the DTC, the other being the Direct Registry System (DRS) method. Both enable investors to hold securities in registered form on the books of the transfer agent, rather than in physical form. DRS is different from DWAC in that shares in DRS have already been issued and are held electronically on the books of the transfer agent.
Deposit/Withdrawal at Custodian (DWAC)
Definition
Deposit/Withdrawal at Custodian (DWAC) is a method of electronically transferring new shares or paper stock certificates to and from the Depository Trust Company (DTC) through the Fast Automated Securities Transfer (FAST) service and a transfer agent as the distribution point. DWAC allows investors to transfer securities electronically without the need to physically hold paper stock certificates.
Origin
The concept of DWAC originated in the late 20th century as electronic trading and the digitization of the securities market developed. Investors and financial institutions needed a more efficient and secure way to manage the transfer of securities. The introduction of DTC and the FAST service made DWAC possible and it gradually became one of the standard methods for securities transfer.
Categories and Characteristics
DWAC has the following key characteristics:
- Efficiency: Electronic transfer of securities reduces the time and cost associated with handling paper certificates.
- Security: Electronic transfer reduces the risk of loss or theft of paper certificates.
- Convenience: Investors can manage and transfer securities more easily without the need to physically hold paper certificates.
DWAC and the Direct Registration System (DRS) are the two main methods of securities transfer. DRS involves shares that have already been issued and are electronically held on the transfer agent's books, while DWAC involves electronic transfer through DTC.
Specific Cases
Case 1: An investor purchases a batch of newly issued shares through their broker. Through DWAC, these shares can be directly transferred from the issuing company to the investor's DTC account without the need for paper stock certificates. This saves time and reduces management costs.
Case 2: A company decides to split its stock and distributes new shares to existing shareholders through DWAC. Through electronic transfer, shareholders can quickly receive the new shares without waiting for the mailing and processing of paper certificates.
Common Questions
Question 1: What is the difference between DWAC and DRS?
Answer: DWAC involves electronic transfer through DTC, while DRS involves shares that are already electronically held on the transfer agent's books. Both methods do not require physical paper certificates, but DWAC is more suitable for new share issuance and securities transfer.
Question 2: What are the risks of using DWAC?
Answer: While DWAC reduces the risk of loss or theft of paper certificates, it is still important to ensure data security and accuracy during the electronic transfer process.
