Re: e$: Guilds, Friedman, and Web-servers for mutual funds

["Perry E. Metzger" <perry@imsi.com>]

Eric Hughes says:
>    From: rah@shipwright.com (Robert Hettinga)
> 
>    You can sell anything digitable on the net.
> 
>    Securities are mostly traded on a book-entry
>    basis, that is, in IBM mainframe(still!) computer accounting systems. The
>    back offices are all automated. 
> 
> In the interest of buzzword-compliance, book entry securities in the
> USA are called ADR's -- American Depository Receipts.  ADR facilities
> are privately operated; Bank of New York has (if I'm remembering
> correctly) the single largest share of this market.

Not quite right. ADRs are receipts used to permit the trading of
*foreign* securities in American markets. The ADRs will have
properties that shield American investors from all sorts of evils like
getting warrant issues that aren't registered in the US. There is a
new breed of these things called GDRs that I've heard tell of, though
I know little about them. Bank of New York may be big in this business
-- I don't know a lot about it.

Almost all normal securities in the US can be held in book-entry form,
although most can still be physically delivered for the benefit of
nuts. The securities are depositied with the Depository Trust
Corporation, or DTC, which handles these things. (DTC has some sort of
connection to SIAC that I'm not entirely clear on; its been a long
time since I dealt with this stuff.) All securities have some sort of
certificate form, even the ones that never are able to be physically
delivered like some kinds of bonds -- this means that DTC gets to
maintain a big vault out in Long Island full of things like single
bond certificates covering an entire $500M issue and proudly stamped
all over "Non-Transferable". For some weird reason, the securities are
always held in the name of "Ceed & Co." when held this way; I don't
remember the details of why but it had something to do with compliance
with archaic laws, just as the existance of a physical certificate in
their vault does.

Japan does not do book entry at all -- there is an army of
ex-policemen on bicycles (I'm not making this up) who do delivery of
physical certificates in Tokyo.

Perry