Depositories and the Record of Ownership Rights

Depository System: Who Actually Owns Securities
The modern system of ownership of securities is based on a multi-level structure of depositories and nominal holders. Understanding this system is essential for assessing operational risks, protecting investor rights, and the specifics of corporate actions.

Evolution from Paper Certificates
Historically, securities existed in the form of physical certificates. Transfer of ownership required the physical delivery of the certificate. In the 1960s, Wall Street faced a "paper crisis"—the trading volume exceeded the capacity for processing paper documents. The solution became immobilization and dematerialization.
Immobilization means certificates are physically kept in a central depository, and trading occurs via entries in the registry.
Dematerialization is the complete abandonment of paper certificates: securities exist solely as records in an electronic system.
Central Securities Depositories (CSD) are infrastructure organizations that maintain the registry of owners. In the USA this is the DTCC (Depository Trust & Clearing Corporation), in Europe—Euroclear, Clearstream, and national CSDs.

Multi-Level Ownership Structure
Between the end investor and the issuer, there are usually several intermediaries. The typical chain: issuer → registrar → central depository → custodian bank → broker → client.
Nominal holder (nominee) is the organization in whose name securities are recorded in the registry, although the beneficial owner is the client. Brokers and custodians hold securities in their name as nominees for settlement convenience.
Omnibus accounts: the securities of multiple clients are held in a single account. This simplifies settlements but creates issues with identifying ultimate owners.

Rights and Risks of Indirect Ownership
The beneficial owner has economic rights: receiving dividends, participating in corporate actions, receiving value on sale. However, their name may not appear directly in the issuer's registry. Voting at shareholder meetings requires special procedures for indirect owners.
Proxy voting: the broker or custodian transmits voting instructions on behalf of the client. The process does not always work perfectly—especially in cross-border ownership.
Intermediary risk: bankruptcy of the broker or custodian may affect client assets. Regulation requires the segregation of client assets, but in practice, protection is not absolute. Modes of protection vary between jurisdictions.

Global Custody
For international investors, global custodian banks (BNY Mellon, State Street, Citi, JPMorgan, HSBC) provide a single point of access to the markets of many countries. They have a network of sub-custodians in each jurisdiction.
Custodian functions include: safekeeping of assets, settlement of transactions, income collection (dividends, coupons), processing corporate actions, currency exchange, reporting provision, securities lending.
The choice of custodian is an important decision for an institutional investor. Criteria include: market coverage, reliability of settlements, quality of reporting, processing of corporate actions, pricing, financial stability.

New Technologies
Blockchain and distributed ledger technology (DLT) have the potential to transform depository infrastructure. Direct recording on blockchain eliminates the need for intermediaries, provides transparency, and reduces settlement time.
Central banks and exchanges are experimenting with DLT. The Australian ASX is replacing its settlement system with a DLT platform. However, full transformation requires the solution of many legal, technical, and operational issues.
Security tokens—securities issued and recorded on the blockchain—remain a niche phenomenon, but interest is growing. Regulators are gradually creating legal frameworks for tokenized assets.