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How does one of these transfers of stock work from a technical perspective? Is it all just paper transfers that are physically sent in the mail, or is there so

How does one of these transfers of stock work from a technical perspective? Is it all just paper transfers that are physically sent in the mail, or is there some kind of digital backing that can be transferred like crypto?

Lazare 6y ago
Stocks have been digitally backed since the late 60s. To quote the inimitable Matt Levine: > Nobody owns stock. What you own is an entitlement to stock held for you by your broker. But your broker doesn't own the stock either. What your broker owns is an entitlement to stock held for it by Cede & Co., which is a nominee of the Depository Trust Company, which is a company that is in the business of owning everyone's stock for them. This system sounds convoluted but actually makes it easy to keep track of things: If I sell stock to you, I don't have to courier over a paper share certificate, or call up the company and have it change its shareholder register. Our brokers just change some electronic entries at their DTC accounts and everything is cool. That simplifies things a bit, but basically yes, no paper transfers ever. There's a warehouse somewhere with all the paper certificates in it, they all technically belong to Cede & Co, and when (say) dividends are paid out, they all go to Cede & Co, who transfers the correct amounts to the various brokerages, who transfer the correct amount to their customers. There's a hilarious story (by Matt Levine, from which that quote is from) about some of the quirks in the system here: https://www.bloomberg.com/opinion/articles/2015-07-14/banks-forgot-who-was-supposed-to-own-dell-shares#footnote-1436883540292 https://www.bloomberg.com/opinion/articles/2015-07-14/banks-... (Although it should be noted, it works fine for an absurdly large volume of transactions; the story is interesting because it is unusual, not because it reveals any deep flaws in the system.)
- liquidify 6y ago
  Really cool. Thanks for the response.

Lazare 6y ago

Stocks have been digitally backed since the late 60s. To quote the inimitable Matt Levine: > Nobody owns stock. What you own is an entitlement to stock held for you by your broker. But your broker doesn't own the stock either. What your broker owns is an entitlement to stock held for it by Cede & Co., which is a nominee of the Depository Trust Company, which is a company that is in the business of owning everyone's stock for them. This system sounds convoluted but actually makes it easy to keep track of things: If I sell stock to you, I don't have to courier over a paper share certificate, or call up the company and have it change its shareholder register. Our brokers just change some electronic entries at their DTC accounts and everything is cool. That simplifies things a bit, but basically yes, no paper transfers ever. There's a warehouse somewhere with all the paper certificates in it, they all technically belong to Cede & Co, and when (say) dividends are paid out, they all go to Cede & Co, who transfers the correct amounts to the various brokerages, who transfer the correct amount to their customers. There's a hilarious story (by Matt Levine, from which that quote is from) about some of the quirks in the system here: https://www.bloomberg.com/opinion/articles/2015-07-14/banks-forgot-who-was-supposed-to-own-dell-shares#footnote-1436883540292 https://www.bloomberg.com/opinion/articles/2015-07-14/banks-... (Although it should be noted, it works fine for an absurdly large volume of transactions; the story is interesting because it is unusual, not because it reveals any deep flaws in the system.)

liquidify 6y ago
Really cool. Thanks for the response.