U.S. clearing and settlement firm Depository Trust Company (DTC) Monday published a white paper calling for the elimination of physical securities over the next few years.

The DTC published a proposal to fully “dematerialize” the U.S. financial services industry, which it says would help to reduce the costs and risks associated with physical securities.

The paper notes that an ongoing effort to dematerialize the U.S. financial markets have been successful so far, with the number of physical certificates held in its vault down by 86% since the year 2000. But, it says that fixed costs remain that can only be eliminated with complete dematerialization. And, as the number of physical transactions shrinks, the cost of each one is on the rise.

The paper says that, “complete dematerialization will contribute to a more cost-effective, efficient, secure and competitive U.S. marketplace”, and it calls for the input and co-operation of all industry sectors toward that goal.

“The success of this plan will require strong support from both the industry and regulators,” the paper says. “It will hinge on the industry’s adoption of new business practices that will call for changes in technology platforms, the legal landscape and in DTC’s pricing policy, as well as regulatory approval.”

“This paper is a call to action,” said Susan Cosgrove, managing director and general manager, settlement and asset services of the DTC’s parent company, the Depository Trust & Clearing Corporation (DTCC). “We’re asking all sectors of the industry – stakeholders, banks, brokers, transfer agents, regulators and industry associations – to partner with us and to provide in-depth feedback on the proposals in this paper and help identify key, value-added services DTC can give market participants to accelerate the drive toward full dematerialization.”

The DTC indicates that it could begin implementing recommendations for its dematerialization campaign in 2013, with the goal of reducing and ultimately eliminating physical processing over the next three-to-five years. It is seeking comments on the paper by September 1.