Central securities depositories

A central securities depository (CSD) is a specialist financial organization holding securities such as shares either in certificated or uncertificated (dematerialized) form so that ownership can be easily transferred through a book entry rather than the transfer of physical certificates. This allows brokers and financial companies to hold their securities at one location where they can be available for clearing and settlement. 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.

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

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.

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 (earlier Cedel), Euroclear 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.

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.

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