Intermediated Securities Holding Systems Revisited: A View Through the Prism of Transparency

Abstract

This chapter explains several benefits of adopting transparent information technology systems for intermediated securities holding infrastructures. Such transparent systems could ameliorate various prevailing problems that confront existing tiered, intermediated holding systems, including those related to corporate actions (dividends, voting), claims against issuers and upper-tier intermediaries, loss sharing and set-off in insolvency proceedings, money laundering and terrorist financing, and privacy, data protection, and confidentiality. Moreover, transparent systems could improve the functions of intermediated holding systems even without changes in laws or regulations. They also could provide a catalyst for law reform and a roadmap for substantive content of reforms. Among potential areas of law reform that transparent systems might inspire is the prospect for disintermediation of holding systems through new technologies, including digital ledger technology.

Keywords: intermediated securities holding systems, financial market infrastructure, transparent systems, intermediary risk, central securities depository, Geneva Securities Convention, corporate actions, upper-tier attachment, money laundering, terrorist financing, distributed ledger technology, blockchain

JEL Classification: G23, K22, O33