Securities Transactions,
CSDs & SSS, Our Services
Financial Securities
Financial securities are tradable financial instruments or contracts that represent a claim on an asset, income, or ownership in an entity. They are used by organizations to raise capital and by investors to generate returns through price appreciation or income. Common types of financial securities include stocks, bonds, and derivatives.
Stocks represent ownership in a company, with shareholders entitled to a portion of the company's assets and earnings. Bonds are debt securities issued by organizations, such as governments or corporations, to raise capital, with investors receiving periodic interest payments and the return of the principal amount at maturity. Derivatives are financial contracts whose value is derived from the performance of an underlying asset, index, or interest rate.
Securities can be stored and transferred between market participants in the following ways:
- Physical certificates: Historically, securities were issued as physical certificates, which represented ownership and entitlement to the underlying asset or income. These certificates were stored in a safe location, and the transfer of ownership required the physical exchange of certificates between the buyer and the seller. This method was cumbersome, time-consuming, and prone to errors and fraud.
- Dematerialization: To overcome the challenges of physical certificates, most securities are now issued and held in electronic form, a process known as dematerialization. This transition has significantly improved the efficiency, security, and speed of securities transactions.
- Central Securities Depositories (CSDs): Dematerialized securities are held and managed by CSDs, such as Euroclear, Clearstream, and the Depository Trust Company (DTC). CSDs maintain electronic records of ownership and provide a secure environment for the safekeeping of securities.
- Securities settlement systems (SSS): When securities are bought or sold, the transfer of ownership is facilitated by securities settlement systems, which are often operated by or connected to CSDs. These systems update the records of ownership and ensure that the transactions are properly settled. They typically use a Delivery-versus-Payment (DvP) model, which ensures that the transfer of securities and the corresponding payment occur simultaneously, reducing settlement risk.
- Trading and clearing: Securities are traded on exchanges or other trading platforms, with transactions being cleared by central counterparties (CCPs) to reduce counterparty risk. Once transactions are cleared, the details are sent to the securities settlement systems or CSDs to update the ownership records and complete the settlement process.
By leveraging electronic systems, CSDs, and securities settlement platforms, the storage and transfer of financial securities have become more efficient, secure, and transparent. This modern infrastructure has greatly improved the functioning of financial markets and facilitated global trading and investment activities.
Settlement
CSD
Central Securities Depositories
The CSD acts as a central hub that ensures the secure, efficient, and accurate transfer of securities between banks.
By maintaining electronic records and employing robust settlement systems, the CSD minimises risks and streamlines the transfer process, facilitating smooth operations in the financial markets.
SSS
Securities Settlement Systems
The Securities Settlement System is integral to the functioning of financial markets, serving as the crucial link between banks and the Central Securities Depository. It ensures that securities transactions are settled efficiently, securely, and in compliance with legal and regulatory requirements. By orchestrating the complex processes of matching instructions, coordinating with the CSD, and managing funds transfers, the SSS facilitates trust and reliability in the transfer of financial instruments between banks.
Which Securities can be transacted?
- Equities/Shares/Stocks: Ownership stakes in publicly traded companies. These can be transferred from one bank to another.
- Bonds: Debt securities issued by corporations, municipalities, or governments. Banks can transfer bonds to other banks.
- Treasury Bills/Notes/Bonds: These are debt securities issued by the government. They are often transferred between banks.
- Mutual Funds: These are investment vehicles that pool money from many investors to purchase a diversified portfolio of stocks, bonds, or other assets. Shares in a mutual fund can be transferred between banks.
- Exchange-Traded Funds (ETFs): Similar to mutual funds, but they trade on an exchange like a stock. ETF shares can be transferred between banks.
- Derivatives: These are financial contracts whose value is derived from an underlying asset, such as stocks, bonds, commodities, currencies, interest rates, or market indexes. Examples include options, futures, and swaps.
- Certificates of Deposit (CDs): Time deposit offered by banks with a specific, fixed term and, usually, a fixed interest rate. They can be transferred from one bank to another.
- Commercial Paper: A short-term debt security issued by large corporations. These are often bought and sold by banks.
- Mortgage-Backed Securities (MBS): These are securities whose cash flows come from a pool of mortgages. Banks often buy and sell these securities between themselves.
- Asset-Backed Securities (ABS): Similar to MBS, but the underlying assets can be a pool of loans (like auto loans or credit card debt) instead of mortgages.
Do you want to issue your financial instrument and make it tradeable?
Within our group, International Finance Corporation LTD offers a comprehensive suite of services related to issuing financial instruments. We specialize in managing the end-to-end process of issuing these instruments. Our dedicated team of experts are well-versed in navigating the intricacies of these processes, ensuring a seamless experience for our clients.
A key aspect of the issuance process is the assignment of an International Securities Identification Number (ISIN). This is a unique, 12-character alphanumeric code that distinctly identifies a specific security. Assigning an ISIN to your financial instrument is a critical step in ensuring its proper identification in global trade, thereby increasing its visibility and credibility in the marketplace. At International Finance Corporation LTD, we handle this complex task with precision and efficiency.
Additionally, we also manage the registration of your financial instrument on trading exchanges. This pivotal step is essential in making your financial instrument readily accessible for trading, allowing investors to buy or sell it in an open market. Our team not only registers your security on the exchange but also monitors and manages any changes that may be required due to shifts in market trends or regulatory environments.
As a leading authority in finance instruments for trading, we have a profound understanding of the rules and regulations of different exchanges around the globe. As such, we can guide you in selecting the most suitable exchanges for your instrument, based on factors such as the nature of the security, investor demand, and market liquidity.
Trust us to ensure the successful issuance of your financial instruments. With our industry-leading expertise and comprehensive service suite, we assure you a seamless, efficient, and professional process. Our team is committed to delivering top-tier service that meets and exceeds your expectations.
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If you want to discuss with us how you can transfer your securities to your deposit accounts with us, please contact director M, Mustapha