Hmmm, all the clearing firms are “participants”(4500+ US Brokers) of the DTCC, whether they use the DTCC for clearing and settlement or self clear is entirely up to that self clearing firm. You are correct that Penson is the largest OTC online clearing firm with the most brokers (437) under their umbrella. Pershing is the largest overall clearing firm (840+) but their only trading platform online is Sharebuilder and they mostly represent institutional brokers. But TDA for example uses the DTC for clearing and settlement but when a security becomes non DTC eligible they no longer process buys for that security, they will however self clear and settle sell transactions.
Now not all Penson trading platforms completely restrict trades when they are chilled, Zecco for example will still allow trades but if you are selling expect those nice pass through fees about 3-4 weeks after a sell transaction to appear in your account.
The trade for trade designation does apply to all trading the security, it just means the brokers cannot use the DTC for locate purposes or expect the “bank” to cover regular Market Making activities. As you said short volume now becomes about Newly Issued shares and not regular market making activity on existing shares.
