What Is Deposit/Withdrawal at Custodian?
Let me explain Deposit/Withdrawal at Custodian, or DWAC, directly to you. It's a service from the Depository Trust Company (DTC) that handles the electronic transfer of securities. Through the Fast Automated Securities Transfer Program (FAST), DWAC moves shares between brokers and transfer agents without any physical certificates, which cuts down on time and makes settlements quicker.
You should know that DWAC is one of two main methods for transferring securities between broker/dealers and the DTC—the other being the Direct Registry System (DRS). Both let investors hold securities in registered form on the transfer agent's books instead of keeping paper certificates at home. When you request a transfer, it all happens electronically, so no physical movement of certificates is involved.
Here's where DRS differs from DWAC: with DRS, the shares are already issued, registered to owners, and held electronically by the transfer agent.
Key Takeaways
- Deposit/Withdrawal at Custodian (DWAC) is an electronic service by the Depository Trust Company allowing quick transfer of securities without physical certificates.
- DWAC utilizes the Fast Automated Securities Transfer Program (FAST) to enhance the efficiency and security of share transfers.
- Brokers and custodial banks who are DTC participants can request the transfer of shares using DWAC.
- Unlike DWAC, the Direct Registry System (DRS) handles already issued shares registered in electronic form.
- The DTC processes approximately 1.4 million settlement transactions every day, worth around $600 billion.
How DWAC Works: An Investor's Guide
If you're an investor, understand that DWAC is an electronic process for transferring securities between a broker and a transfer agent. It provides benefits like saving time, reducing costs, and minimizing risks.
Since it's electronic, DWAC enables immediate transfer of securities to your brokerage account. There's no waiting for physical delivery of share certificates, which makes the settlement process more efficient and faster. It also avoids costs from printing and mailing physical certificates.
With no physical certificates involved, you eliminate the risk of loss or damage during transport and handling.
While you might not worry about this as an investor, there are requirements for DWAC: shares must be free trading or eligible for restriction removal, your broker must be a DTC participant, and the issuer must be DWAC-eligible.
Understanding the FAST Program in DWAC Transfers
FAST is a contract between the DTC and transfer agents where FAST agents serve as custodians for the DTC. It eliminates the need to move physical securities and was established in 1975.
As per the DTC, the FAST program facilitates the industry's dematerialization efforts and significantly reduces costs related to shipping certificates to and from agents, as well as those for printing and processing. Note that money market securities cannot participate in the FAST program.
Requesting and Receiving Physical Stock Certificates
Even though DWAC is electronic, you as a shareholder can still withdraw your stock from a brokerage account and request a physical certificate. You'll need to ask your broker to initiate the request through the DTC or send the shares electronically to the transfer agent via DWAC.
Be aware there may be fees for this service. Withdrawing shares as physical certificates usually requires a Medallion Signature Guarantee, which is a certification stamp ensuring the signature on the certificate is authentic.
To deposit your stock into a brokerage account, you can either send the actual certificate to your broker or have the transfer agent send the shares directly using DWAC.
For depositing via DWAC, provide the original stock certificate, the DWAC deposit form, and any applicable fees.
Is DWAC Provided by DTC Only?
Yes, DWAC is exclusively a service offered by the Depository Trust Company. It's a method for requesting the deposit or withdrawal of securities to or from a transfer agent.
What Does the DTC Do?
The DTC, a subsidiary of the Depository Trust & Clearing Corporation (DTCC), provides transfers and trade settlement services for U.S. equity, corporate, municipal debt, and money market transactions. It also handles safekeeping and asset servicing for securities from 131 countries and territories, valued at about $37 trillion.
Does My Broker Use DWAC?
Your broker might use DWAC. For instance, if you want to transfer securities to your broker, they would give you an authorization form for either DWAC or DRS. DWAC manages the electronic transfer of new or certified paper shares, while DRS handles electronic transfers of shares already issued and registered to you.
The Bottom Line
In summary, Deposit/Withdrawal at Custodian, or DWAC, is a DTC service that lets participants like brokers and custodial banks request securities transfers using the FAST system between transfer agents and brokers.
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