Part Three of the book will take you through the post-settlement environment of safekeeping, asset servicing and asset optimisation.
We have seen in previous chapters that securities are generally no longer certificated; previously certificated securities tend to be either dematerialised or immobilised and newly issued securities might be represented by a single (global) certificate. This move has certainly helped to ensure that clearing and settlement are straightforward, as sales and purchases are represented by debits and credits across a securities account. We have also noticed that clearing systems, whether in the form of a clearing house or a central counterparty, play an important role. This leaves us with the question of how the securities are held in a safe and secure environment.
In much the same way that clearing and settlement take place centrally, so does the safekeeping (or custody) of securities. Securities issued in one particular domestic market will be held by the relevant local central securities depository. In this chapter we will therefore look at the relationship between the investor (i.e. the beneficial owner), the CSD and the intermediaries that sit between the investor and the CSD.
By the end of this chapter you will:
- Be able to define “custody”;
- Understand the forms in which securities are issued and the impact on their safekeeping;
- Know what a nominee is and how it can be used by the custodians; ...