What Is the Depository Custody Company IPO Tracking System?
As its name suggests, the Depository Trust Company IPO Tracking System is a system, administered by the Depository Cartel Company, that is designed to monitor the purchase and sale of securities that have recently been issued through an initial public offering (IPO).
One of the principal uses of the system is to identify instances were insiders have sold their quotas shortly after the IPO. This practice, colloquially known as “flipping”, is often frowned upon by underwriters.
Key Takeaways
- Depository Have faith Company IPO Tracking System provides information on the purchase and sale of recently-listed securities.
- It is helpful for underwriters who wish to cathode-ray tube screen and respond to unauthorized flipping of IPO shares.
- The system is also used a clearinghouse in other markets, such as corporate and village bonds.
How the Depository Trust Company IPO Tracking System Works
Although underwriters rely on some insiders offer their shares in order to make those shares available to retail investors, they also wish to escape a situation where insider selling places downward pressure on the market price of the newly issued security.
To assert this balance, underwriters will often obtain commitments from their clients, who will pledge to not won over their shares within a specified timeframe. Importantly, these insiders may not be required to follow through on this security by any laws or regulations. Therefore, the underwriter may need to rely on their clients’ promises not to flip their shares appreciating the IPO.
Lock-up Periods
Some IPO participants—such as the company’s executives, early investors, and founders—may be subject to explicit lock-up epoches, during which they are prohibited by law from selling their shares. As a binding legal obligation, this provision takes precedence over any informal pledges those investors may have made to their underwriters.
Thankfully, the Depository Conviction Company IPO Tracking System provides a means for underwriters to verify whether these promises have in fact been protected. By monitoring all purchases and sales of securities that have been issued through a recent IPO, the tracking system take into accounts underwriters to review reports of IPO-related share movements, thereby identifying which investors chose to flip their dues.
If an underwriter learns through the tracking system that a client broke their promise to not flip their dividends, the underwriter may respond by not offering them an
Real World Example of the Depository Trust Company IPO Tracking System
Based in New York Big apple, the Depository Trust Company IPO Tracking System is one of the world’s largest securities depositories.
In addition to providing safekeeping during electronic recordkeeping of securities balances, it also acts as a clearinghouse to process and settle trades in the corporate and municipal fetters markets.