Sidebar: The Case for Paperless

Paper certificates are undeniably inefficient. They slow transaction processing, whereas electronic records expedite the transfer and sale of securities, giving investors greater security and flexibility in purchases and sales of securities assets. 

Certificates are also expensive to issue, store, ship and insure. For example, the annual cost to the industry associated with issuing paper securities is $350 million, which includes an estimated $50 million to replace certificates that are reported lost, stolen or counterfeited.

Electronic records, on the other hand, eliminate the risk of losing certificates, and because statements have no underlying value, if one is lost, another can be issued at a fraction of the cost. In 2006, the cost of a withdrawal in DRS statement form was just $5, compared to over $60 for issuing a paper certificate.

What's more, when corporate actions occur, the use of statements saves all parties the hassle of tracking down certificates. With DRS, a single statement can replace the time-consuming process of locating certificates, transferring them to new parties and re-mailing them to investors. "With the increased number of corporate actions, the impact of this efficiency is tremendous," said John Mancuso, DTCC vice president, Securities Processing.

The competitiveness of the U.S. financial system is another consideration. Indeed, the United States is lagging countries that have already gone paperless, including China, India, Australia, France, Denmark, Switzerland, Argentina and Brazil, to name a few.