Wall Street Has the Upper Hand. The Senate Could Change That.

It was the late 1960s.

Stock certificates were physical pieces of paper. Messengers would haul them up and down Wall Street to settle trades.

Source: Marketmemoir.com

By the end of the 1960s, Wall Street back offices were overwhelmed. Five days would pass, and a stock would still not be delivered to its new owner… resulting in a “fail.”

Fails were rising so fast that the New York Stock Exchange started to close on Wednesdays to simply catch up.

This chaos was an opportunity.

Stocks and bonds were routinely transported in suitcases or bags across the country. They would travel by rail, truck, or air.

That setup allowed organized crime syndicates to thrive by bribing brokers, truck drivers, and airport employees. Stolen securities were sold for cents on the dollar or used as collateral for loans from unsuspecting banks.

It was clear a better system was needed. A U.S. Senate hearing in 1971 estimated that the amount of theft totaled more than $3.3 billion in today’s dollars.

The solution led to one of the biggest transformations of our markets: the creation of the Depository Trust & Clearing Company (DTCC).

DTCC housed stock certificates in a centralized vault. No need to ship paper. Ownership was recorded electronically. It was an effective solution to combat the issue of lost or stolen certificates.

But most don’t realize that this new setup created a new problem…

The DTCC’s Information Stranglehold

While the DTCC created an electronic system for stocks, it also created what is in effect a new kind of syndicate… one focused on the control of data.

The list of DTCC board members includes many of the largest players on Wall Street: Citadel, Nasdaq, NYSE, BNY Mellon, Citi, BlackRock, Bank of America, JPMorgan Chase, and so on.

Together, they own the DTCC. Each owner is by definition a “Direct Participant.”

That’s important because if you are a bank, broker-dealer, exchange, or clearing corporation that wants to move securities through the financial system, you must be a Direct Participant.

In other words, DTCC – which holds more than $100 trillion in assets globally – is not a cooperative or neutral third party. It’s a privately owned setup.

As a result, the DTCC avoids much of the regulatory oversight and reporting requirements that happen elsewhere in the marketplace.

Yet this entity knows who holds what security at any time of day for essentially all the stock traded on the NYSE and the Nasdaq globally. That’s a monopoly of information any crime family would envy.

And Wall Street can use that information to possibly know how many shares are tied up in short positions, create “phantom” shares without the market knowing, or know when a crisis is about to hit.

While the DTCC does make some of its data available to the market, it doesn’t share everything. We know this from the history of litigation filed against the DTCC, including cases against them from Nanopierce Technologies (2004-2005), Pet Quarters (2009), NovaStar Financial and Overstock.com (2006, 2007).

And while past lawsuits failed to force the DTCC to face more accountability, another key bit of legislation is about to make its way through the system.

Notably, many of the exact names we see listed at the DTCC are the ones who want to ensure the status quo is not disrupted. JPMorgan Chase’s CEO Jamie Dimon cursed live on air and vowed to fight legislation that could disrupt the gated setup.

That’s why we need to watch the Senate this week…

The Senate Tackles the CLARITY Act

The CLARITY Act is set to appear for a vote this week on the Senate floor.

It’s been a year since it passed the House of Representatives on July 17, 2025.

As for why it’s taken so long… Wall Street is fighting tooth and nail to keep it off the President’s desk. And it’s easy to understand why. The DTCC is under threat.

CLARITY offers a regulatory framework for digital assets. It creates “rules of the road,” so to speak. And it’s set to disrupt Wall Street’s major advantage with its rules for the tokenization of assets like stocks or bonds.

We’re seeing solutions arise like the issuance of stock on public blockchains. That setup would undercut the DTCC’s reason for existing. There is no need to hold paper certificates in a vault or keep track of who owns paper stock when the security is a token.

That means CLARITY is poised to upend how stocks flow through our markets.

The impact of its passage would be seen immediately. Anybody would be able to view an asset – and its movements throughout the market would be visible on public and transparent ledgers.

Here’s the most important bit…

The CLARITY Act has the potential to give retail a level playing field in the financial markets. A field that is overwhelmingly stacked against the public.

And if our Senators don’t want to pass this bill, we should ask ourselves: What are they trying to protect?

By the end of the first week of August, we should know whether the financial system is about to be disrupted in our favor.

Let’s hope our elected officials vote for a better tomorrow.

Your Pulse on Crypto,

Ben Lilly
Editor, Chain of Thought