In the US, the role of the central securities depository is done by the DTCC.[0] But the registered holder (nominee) of the DTCC is a separate legal entity known as Cede & Co. [1] (I recommend reading Matt Levine's article for further discourse)
So basically, the concept of ownership of a financial asset (which is itself, an abstraction) is further abstracted, for the purpose of making the system more efficient.
Fun fact: After Hurricane Sandy in 2012, the DTCC had to recover/restore many damaged paper certificates after their securities vault was flooded. I don't know whether these had any electronic entries but I assume they did. But the physical certificates still needed to be retained.[2]
If you're interested in this sort of market structure/market participant discussion, I'd recommend the textbook Trading and Exchanges: Market Microstructure for Practitioners, by Larry Harris.
The other Matt Levine article about the Dell buyout is also a really good explanation of "how stocks really work": https://www.bloomberg.com/view/articles/2016-05-13/t-rowe-pr.... It really shows the parallels between finance and software, where we've taken simple primitives and built so many layers of abstraction on top that no one really knows what's going on top to bottom anymore. It makes our lives easier when it's all working but it can also have crazy failure modes.
This reminds me of the irony of people who discredit bitcoin because "it's digital fairy money" when only 8% of the world's currency is physical.
The entire concept of fiat currency is abstraction. It requires layers of illusion to maintain its integrity. At it's core, those in charge of the ledger can change where money goes and who has it.
Fun fact, if you're fired by a startup and own explicitly own stock (not a vested option, but a vested and exercised option) and they are Delaware C corp which has not been explicitly "uncertificated", you can demand a stock certificate for your shares. Really annoying for the people who fired you.
My last startup sent me a stock certificate upon exercise, without even asking. I've had this happen a few times, all east coast startups. Maybe it's an east coast thing?
Both companies and investors who have been ruined by "naked shorting" (a gray area despite regulation SHO) know more about the shadow world of settlement.
If you are a retail short, SHO regulations apply to you. If you are a shadowy short running operations in Bahamas, but funded by shadow partners of clearing house, you can make a killing.
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So basically, the concept of ownership of a financial asset (which is itself, an abstraction) is further abstracted, for the purpose of making the system more efficient.
Fun fact: After Hurricane Sandy in 2012, the DTCC had to recover/restore many damaged paper certificates after their securities vault was flooded. I don't know whether these had any electronic entries but I assume they did. But the physical certificates still needed to be retained.[2]
If you're interested in this sort of market structure/market participant discussion, I'd recommend the textbook Trading and Exchanges: Market Microstructure for Practitioners, by Larry Harris.
0. https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...
1. https://www.bloomberg.com/view/articles/2015-07-14/banks-for...
2. http://www.dtcc.com/annuals/2013/superstorm-sandy-recovery/i...
The entire concept of fiat currency is abstraction. It requires layers of illusion to maintain its integrity. At it's core, those in charge of the ledger can change where money goes and who has it.
If you are a retail short, SHO regulations apply to you. If you are a shadowy short running operations in Bahamas, but funded by shadow partners of clearing house, you can make a killing.
http://www.economist.com/news/finance-economics/21678146-lat...
http://cdn.static-economist.com/sites/default/files/pdfs/EN_...http://cdn.static-economist.com/sites/default/files/pdfs/Fif...