Issues of the Use of Intermediated Securities in Cross-Border Transactions

Abstract

This paper explores issues arising from international transactions using securities either in sale and purchase contracts or as collateral. Once paper securities were transferred to registered ones and book-keeping took virtual form, the complexity of the financial international system further increased. At the same time it facilitated trades across the globe that previously would not take place due to high transaction cost and legal uncertainty.Logical step in this evolution was, therefore, the introduction of intermediated securities holding systems where one or more securities intermediaries can hold securities for their clients across various jurisdictions and perform book-keeping and corporate proxy roles for a plethora of customers. Nevertheless, the system is still not harmonized as various legal regimes implement holdings of securities differently.This paper analyzes the structure of these systems and discusses the legal issues they pose on the transacting parties. The analytical part discusses possible solutions and provides alternatives to the current academic literature proposals by implementing private sector participants where the public and international community struggles to succeed.