A central securities depository (CSD) is a specialized financial organization holding

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any fo ...

shares In financial markets, a share is a unit of equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers to all of the shares ...

, either in certificated or uncertificated ( dematerialized) form, allowing ownership to be easily transferred through a

book entry Book entry is a system of tracking ownership of securities where no certificate is given to investors. Several terms are often used interchangeably with "book entry" shares including "paperless shares", "electronic shares", "digital shares", "digi ...

rather than by a transfer of physical certificates. This allows

brokers A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confu ...

and financial companies to hold their securities at one location where they can be available for clearing and

settlement Settlement may refer to: *Human settlement, a community where people live *Settlement (structural), the distortion or disruption of parts of a building *Closing (real estate), the final step in executing a real estate transaction *Settlement (fina ...

. This is usually done electronically, making it much faster and easier than was traditionally the case where physical certificates had to be exchanged after a trade had been completed. In some cases these organizations also carry out centralized comparison, and transaction processing such as clearing and settlement of securities transfers, securities pledges, and securities freezes.

Scope

A CSD can be national or international in nature, and may be for a specific type of security, such as

government bond A government bond or sovereign bond is a form of bond issued by a government to support public spending. It generally includes a commitment to pay periodic interest, called coupon payments'','' and to repay the face value on the maturity d ...

Domestic central securities depository

Many countries have one domestic CSD that was traditionally associated with the national stock exchange. These organizations are typically heavily regulated by the government and may or may not be separate from the exchanges where trading in securities occurs.

International central securities depository (ICSD)

An international CSD is a central securities depository that settles trades in international securities such as eurobonds although many also settle trades in various domestic securities, usually through direct or indirect (through local agents) links to local CSDs. Examples of international CSDs include

Clearstream Clearstream is a financial services company that specializes in the settlement of securities transactions and is owned by Deutsche Börse AG. It provides settlement and custody as well as other related services for securities across all asse ...

(previously Cedel),

Euroclear Euroclear is a Belgium-based financial services company that specializes in the settlement of securities transactions, as well as the safekeeping and asset servicing of these securities. It was founded in 1968 as part of J.P. Morgan & Co. to settl ...

and SIX SIS. While viewed as a national CSD rather than an ICSD, the US Depository Trust Company (DTC) does hold over $2 trillion in non-US securities and in American depositary receipts from over 100 nations.

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 Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabil ...

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, or ISIN assistance. * Pledge - Central depositories provide pledging of share and securities. Every country is required to provide legal framework to protect the interest of the pledger and pledgee. 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. exchange-handbook.co uk article
on the risks associated with Depositories, at the ''Handbook of world stock, derivative and commodity exchanges'' website.

Scope

Domestic central securities depository

International central securities depository (ICSD)

Functions

See also

References

External links