History
Established in 1973, The Depository Trust Company (DTC) was created to alleviate the rising volumes of paperwork and the lack of security that developed after rapid growth in the volume of transactions in the U.S. securities industry in the late 1960s.
Before DTC and NSCC were formed, brokers physically exchanged certificates, employing hundreds of messengers to carry certificates and checks. The mechanisms brokers used to transfer securities and keep records relied heavily on pen and paper. The exchange of physical stock certificates was difficult, inefficient, and increasingly expensive.
In the late 1960s, with an unprecedented surge in trading leading to volumes of nearly 15 million shares a day on the NYSE in April 1968 (as opposed to 5 million a day just three years earlier, which at the time had been considered overwhelming), the paperwork burden became enormous.[3][4] Stock certificates were left for weeks piled haphazardly on any level surface, including filing cabinets and tables. Stocks were mailed to wrong addresses, or not mailed at all. Overtime and night work became mandatory. Turnover was 60% a year.[5]
To deal with this large volume, which was overwhelming brokerage firms, the stock exchanges were forced to close every week (they chose every Wednesday), and trading hours were shortened on other days of the week.
Two methods were used to solve the crisis:
The first was to hold all paper stock certificates in one centralized location, and automate the process by keeping electronic records of all certificates and securities clearing and settlement (changes of ownership and other securities transactions). The method was first used in Austria by the Vienna Giro and Depository Association in 1872.[6]

One problem was state laws requiring brokers to deliver certificates to investors. Eventually all the states were convinced that this notion is obsolete and changed their laws. For the most part, investors can still request their certificates, but this has several inconveniences, and most people do not, except for novelty value.
This led the New York Stock Exchange to establish the Central Certificate Service (CCS) in 1968[7] at 44 Broad Street in New York City.[5] Anthony P. Reres was appointed the head of CCS. New York Stock Exchange President Robert W. Haack promised: "We are going to automate the stock certificate out of business by substituting a punch card. We just can't keep up with the flood of business unless we do."[8] The CCS transferred securities electronically, eliminating their physical handling for settlement purposes, and kept track of the total number of shares held by NYSE members.[9] This relieved brokerage firms of the work of inspecting, counting, and storing certificates. Haack labeled it "top priority," $5 million was spent on it,[10] and its goal was to eliminate up to 75% of the physical handling of stock certificates traded between brokers.[8] One problem, however, was that it was voluntary, and brokers responsible for 2/3 of all trades refused to use it.[4]
By January 1969, it was transferring 10,000 shares per day, and plans were for it to be handling broker-to-broker transactions in 1,300 issues by March 1969.[11] In 1970 the CCS service was extended to the American Stock Exchange.[12] This led to the development of the Banking and Securities Industry Committee (BASIC), which represented leading U.S. banks and securities exchanges,[6] and was headed by a banker named Herman Beavis, and finally the development of DTC in 1973,[13] which was headed by Bill Dentzer, the former New York State Banking Superintendent.[14] All the top New York banks were represented on the board, usually by their chairman. BASIC and the SEC saw this indirect holding system as a "temporary measure," on the way to a "certificateless society."[6]

Controversy over naked short selling
Several companies have sued the DTCC, without success, over delivery failures in their stocks, alleging culpability for naked short selling. Furthermore, the issue of DTCC's possible involvement has been taken up bySenator Robert Bennett and discussed by the NASAA and in articles in the Wall Street Journal and Euromoney Magazine[clarification needed awkward sentence structure].[19][20] DTCC contends that the suits are orchestrated by a small group of lawyers and executives to make money and draw attention from the companies' problems.[20]
Critics blame DTCC as being in charge of the system where it happens, say that DTCC turns a blind eye to the problem, and that the Securities and Exchange Commission has not taken sufficient action against naked shorting.[20] DTCC says that it has no authority over trading activities, cannot force buy-ins of shares not delivered,[21] and suggests that naked shorting is simply not widespread enough to be a major concern. "We're not saying there is no problem, but to suggest the sky is falling might be a bit overdone," DTCC's chief spokesman Stuart Goldstein said. The U.S. Securities and Exchange Commission (SEC), however, views naked shorting as a serious enough matter to have made two separate efforts to restrict the practice.[20] DTCC says that the SEC has supported its position in legal proceedings.[21][22][23] DTCC General Counsel Larry Thompson calls the claims that DTCC is responsible for naked short selling "pure invention."[23]
In July 2007, Senator Bob Bennett, Republican of Utah, suggested on the U.S. Senate floor that the allegations involving DTCC and naked short selling are "serious enough" that there should be a hearing on them.[24] The committee's Chairman, Senator Christopher Dodd, indicated he was willing to hold such a hearing.[24] However, no hearing was ever held, and both Sen. Bennett and Dodd are no longer in the Senate, so any possible investigation seems moot at this point, and no further action on naked short selling is anticipated. The North American Securities Administrators Association, representing state stock regulators, filed a brief in a suit against DTCC, arguing against federal preemption as a defense to the suit. NASAA said that "if the Investors’ claims are taken as true, as they must be on a motion to dismiss, then the entrepreneurs and investors before the Court have been the victims of fraud and manipulation at the hands of the very entities that should be serving their interests by maintaining a fair and efficient national market.".[25] The Whistler suit was later dismissed by the courts.
Critics also contend that DTCC and SEC have been too secretive with information about where naked shorting is taking place.[20] DTCC says it has supported releasing more information to the public.[21]