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Securities Operations: A Guide to Trade and Position Management by Michael Simmons

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17

The Role of the Custodian

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17.1 INTRODUCTION

As stated in the previous chapter, the term custodian has been used in this book as a generic term to describe those organisations that effect settlement (the exchange of securities and cash) on behalf of STOs. In reality, a number of organisation types that are in similar roles fall within this heading, and the similarities of and differences between these types of custodian will be explored within this chapter, as will the services they provide. In addition, custodians provide services to individual investors, institutional investors and agents (e.g. brokers), as well as STOs; all of these will be described generically as the custodian's account holder.

As described in Chapter 2, a custodian is appointed by the account holder to take care of his assets (normally securities and cash) and to carry out his instructions to deliver or receive securities and to pay or receive cash. This is a comparable arrangement to an individual's relationship with his bank.

17.2 SERVICES PROVIDED BY CUSTODIANS

When an account holder first sets up an account with a custodian, in a situation where the account holder has had little or no prior involvement in the market(s) in which the custodian is focused, the custodian typically advises the account holder of local market procedures and practices.

In a day-to-day sense, the services usually provided by ...

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