Clearing, Settlement and Custody

Custody is a term that relates to a variety of events that take place

outside the settlements arena. Once a security has been settled, it

must be kept in safekeeping for as long as the investor owns the

security. However, further settlements activity might occur as the

result of custody-related events including, for instance, the interest

payments. Some example conventions are given in Table 3.7.

Once the correct beneficiary has been identified, all that remains is

for the interest to be paid. The coupon will be detached from the

bond certificate (see Figure 3.1) before being presented to the

issuer’s paying agent. The relevant amount of interest, as ...