Central Securities Depository

In the past, owning shares or bonds often meant holding paper certificates. Today, most securities are held electronically by central securities depositories, and ownership changes are recorded as entries in their systems, rather than by moving physical documents.

CSDs perform several core functions: initially recording new securities, maintaining accounts showing who owns which securities and operating settlement systems that transfer securities from sellers to buyers, usually in exchange for payment.

Examples include the Depository Trust Company in the United States, part of DTCC; Euroclear UK & International, which operates the CREST system in the United Kingdom; and Clearstream and Euroclear, which act as international central securities depositories for Eurobonds and other cross-border securities.

For example, when an investor buys shares through a broker, the trade is settled through the CSD, which moves the shares from the seller’s account to the buyer’s account, usually through intermediaries such as custodian banks.

CSDs are critical financial market infrastructure, and failures could disrupt markets. They are tightly regulated and must meet international principles for financial market infrastructures.