Central Securities Depository

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A Central Securities Depository (CSD) is an organization holding securities either in certificated or uncertificated (dematerialized) form, to enable book entry transfer of securities. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of securities. The physical securities may be immobilised by the depository, or securities may be dematerialised (so that they exist only as electronic records).

International Central Cecurities Depository (ICSD) is a central securities depository that settles trades in international securities and in various domestic securities, usually through direct or indirect (through local agents) links to local CSDs. ClearStream International (earlier Cedel), Euroclear and SegaInterSettle are considered ICSDs. While some view The Depository Trust Company (DTC) as a national CSD rather than an ICSD, in fact DTC -- the largest depository in the world -- holds over $2 trillion in non-US securities and in American Depository Receipts from over 100 nations.

[edit] Functions

  • Safekeeping Securities may be in dematerialized form, book-entry only form (with one or more "global" certificates), or in physical form immobilized within the CSD.
  • Deposit and Withdrawal Supporting deposits and withdrawals involves the relationship between the transfer agent and/or issuers and the CSD. It also covers the CSD's role within the underwriting process or listing of new issues in a market.
  • Dividend, interest, and principal processing, as well as corporate actions including proxy voting Paying and transfer agents, as well as issuers are involved in these processes, depending on the level of services provided by the CSD and its relationship with these entities.
  • Other services CSDs offer additional services aside from those considered core services. These services include Securities Lending and Borrowing, Matching, and Repo Settlement

However, there are risks and responsibilities regarding these services that must be taken into consideration in analyzing and evaluating each market on a case-by-case basis.[1]

[edit] References

  1. ^ exchange-handbook.co uk article on the risks associated with Depositories, at the Handbook of world stock, derivative and commodity exchanges website.
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