DWAC Explained: Deposit/Withdrawal at Custodian Service in 2025 and Its Cost Benefits

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What Is Deposit/Withdrawal at Custodian (DWAC)?

Deposit/Withdrawal at Custodian, commonly known as DWAC, is an innovative electronic service offered by the Depository Trust Company (DTC) that enables seamless deposit and withdrawal of securities between brokers, custodians, and transfer agents. Utilizing the Fast Automated Securities Transfer (FAST) program, DWAC streamlines the movement of new shares or paper share certificates without the need for physical handling.

DWAC is one of two primary electronic securities transfer methods within the DTC system, with the other being the Direct Registration System (DRS). Both systems allow investors to hold securities in a registered electronic form on transfer agent records, eliminating the inconvenience and risks associated with physical certificates.

Unlike DWAC, DRS involves transferring shares that have already been issued and registered electronically to owners through a transfer agent.

Key Highlights

• DWAC facilitates electronic transfer requests of share certificates between brokers, dealers, and the DTC.
• The service employs the FAST program to ensure rapid and secure processing.
• DWAC reduces risks related to lost or damaged physical certificates since transfers are book-entry based.
• Only brokers and custodial banks registered as DTC participants can initiate DWAC requests.

How DWAC Works and Why It Matters

DWAC is a fully electronic mechanism for moving securities, offering investors faster transaction times, lower costs, and enhanced security. By eliminating physical certificate delivery, DWAC accelerates settlement and reduces overhead expenses such as printing and postage.

This electronic transfer also minimizes the risk of loss or damage that physical certificates may face during transport or handling.

To utilize DWAC, shares must be free trading or eligible for restriction removal, brokers must be DTC participants, and issuers have to be DWAC-eligible.

Fast Fact

Every day, the DTC processes approximately 1.4 million settlement transactions valued around $600 billion, highlighting the scale and importance of services like DWAC.

Understanding the FAST Program

The FAST program, established in 1975, is a contractual framework between the DTC and transfer agents that enables custodianship and electronic transfer of securities without moving physical certificates. FAST plays a critical role in dematerializing securities, significantly cutting the costs tied to printing and mailing certificates.

Note that money market securities are excluded from the FAST program.

Physical Stock Certificates and DWAC

Though DWAC centers on electronic transfers, shareholders can still request physical stock certificates. Brokers facilitate this by initiating withdrawal requests through the DTC or transferring shares electronically to transfer agents via DWAC.

Fees may apply, and obtaining physical certificates often requires a Medallion Signature Guarantee, certifying the authenticity of the signature on the certificates.

Shareholders depositing shares to a brokerage account can send original certificates to their broker or have transfer agents use DWAC for electronic delivery. Proper documentation and fees are necessary to complete these transactions.

Is DWAC Exclusive to the DTC?

Yes. DWAC is a proprietary service of the Depository Trust Company, designed specifically to request electronic deposit and withdrawal of securities with transfer agents.

The Role of the Depository Trust Company (DTC)

The DTC, a subsidiary of the Depository Trust & Clearing Corporation (DTCC), provides critical settlement services for U.S. equities, corporate and municipal debt, and money market instruments. It also safeguards assets from 131 countries, managing securities valued at around $37 trillion.

Does Your Broker Use DWAC?

Many brokers support DWAC transfers. When transferring securities, brokers typically provide authorization forms allowing use of either DWAC or DRS, depending on whether shares are newly issued or already registered to the investor.

Summary

DWAC is an essential electronic securities transfer service offered by the DTC that leverages the FAST system to enable efficient, secure, and cost-effective movement of securities between brokers and transfer agents. It continues to play a vital role in modernizing securities transactions in 2024.

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