6 ms·

That system sounds convoluted. Here in Brazil, everyone who holds stock has an individual account at the stock exchange (BM&FBOVESPA), managed indirectly throug

by cesarb 11y ago

That system sounds convoluted. Here in Brazil, everyone who holds stock has an individual account at the stock exchange (BM&FBOVESPA), managed indirectly through your broker. It's always clear who owns what, since every transfer goes through its systems.

partiallypro 11y ago
The same is true in the U.S., but brokers can also lend out shares for shorting etc, or write derivatives such as options which are contracts that can be exercised to buy/sell a stock at X price. The same is true in Brazil, rest assured, and it gets even more complex than that when you start taking about ETFs, REITs, and more complex derivatives etc.
tedunangst 11y ago
That actually sounds like almost exactly the same system.
- guan 11y ago
  It’s not quite the same. In the US, the shares are legally owned by Cede & Co. on the books of the corporation. DTC then has a database that says the shares really belong to various brokers, for the most part. Finally, the brokers have a database saying which client owns the shares. This is a legal fiction that you can ignore sometimes, except when you can’t, as in this case. In many other countries, and I’m not sure about the particulars in Brazil, the central book-entry system is the definitive record of who owns shares. There’s no entity like Cede & Co. that is even nominally the owner. (Sometimes brokers are still listed as nominal owners, eliminating one layer compared to the US.) Whoever is in the book-entry system is the owner, at least from the point of view of the corporation. This is more similar to the way ownership of Treasury bonds is recorded in the US. In the countries that I’m familiar with, China has direct recording of ownership for individual brokerage clients, while Denmark has a mixed system where some ownership is recorded directly, but “street name” also occurs. Danish securities owned by foreigners are often held through Euroclear or Clearstream, which does operate more or less like DTC/Cede & Co. in the US.
addicted 11y ago
That system exists in the US as well. However, that system exists at a level of abstraction WELL above what the author is describing. In computing terms, you are talking about the system at the HTTP level of abstraction. The author is talking about the system at the transistor level of abstraction.
- cesarb 11y ago
  From what I understood, it's not a matter of levels of abstraction: the system here really is simpler. According to BM&FBOVESPA's own website (http://www.bmfbovespa.com.br/pt-br/servicos/servicos-de-pos-negociacao/central-depositaria/central-depositaria.aspx?idioma=pt-br http://www.bmfbovespa.com.br/pt-br/servicos/servicos-de-pos-... - unfortunately in Portuguese only), it has fiduciary ownership of the assets, and individual accounts for each end investor. The brokerage doesn't "owns is an entitlement to stock" or similar; there's a single indirection layer. Your brokerage manages that account for you, but the account is in your name, not in the brokerage's name; you can even login directly to the bmfbovespa site (your login is your national tax ID) and monitor it.
- grkvlt 11y ago
  Transistors is way too abstract. He is talking about something around the HTTP and DNS protocol layers, so getting access to 'http://example.com/' http://example.com/' for instance, wheras the article is dicussing the IP routing and MAC address layers. That is, where the actual packets eventually end up, on which NIC and which server.
lmm 11y ago
Was the Brazilian system set up from scratch that way? The beauty of the DTC approach in the US was that it allowed a gradual transition: people who liked their paper certificates could keep using them, people who preferred to have DTC hold them electronically could do that, and both kinds of people could trade with each other seamlessly. Nowadays there's probably little need for that, but the anglic approach to law in general is to make incremental changes to minimize unintended harm, with much less concern about keeping the law "clean" than European-style systems. I just went to Wikipedia and discovered that the Brazilian constitution was completely rewritten in 1988 (for the seventh time) - that would be unthinkable in the US.
- cesarb 11y ago
  Wikipedia has the history of the Brazilian system: https://pt.wikipedia.org/wiki/Companhia_Brasileira_de_Liquida%C3%A7%C3%A3o_e_Cust%C3%B3dia#Hist.C3.B3ria https://pt.wikipedia.org/wiki/Companhia_Brasileira_de_Liquid... According to that article, the original system used paper certificates stored with the brokers. To do a trade, the broker sent the paper certificates to a central place (the predecessor of the current one), which recorded the trade and sent the paper certificates to the other broker. The current system is a natural evolution of the old system: instead of paper certificates, we have records directly within the CBLC (now a department of BM&FBOVESPA). The 1988 constitution was rewritten as part of a regime change (from a USA-supported military dictatorship to its present-day democracy). From what I understand, every time the Brazilian constitution was written or rewritten was due to a regime change. I believe the current USA constitution is also from the last time its regime changed, so there's not much difference in that aspect.

by cesarb 11y ago

partiallypro 11y ago

The same is true in the U.S., but brokers can also lend out shares for shorting etc, or write derivatives such as options which are contracts that can be exercised to buy/sell a stock at X price. The same is true in Brazil, rest assured, and it gets even more complex than that when you start taking about ETFs, REITs, and more complex derivatives etc.

tedunangst 11y ago

That actually sounds like almost exactly the same system.

guan 11y ago
It’s not quite the same. In the US, the shares are legally owned by Cede & Co. on the books of the corporation. DTC then has a database that says the shares really belong to various brokers, for the most part. Finally, the brokers have a database saying which client owns the shares. This is a legal fiction that you can ignore sometimes, except when you can’t, as in this case. In many other countries, and I’m not sure about the particulars in Brazil, the central book-entry system is the definitive record of who owns shares. There’s no entity like Cede & Co. that is even nominally the owner. (Sometimes brokers are still listed as nominal owners, eliminating one layer compared to the US.) Whoever is in the book-entry system is the owner, at least from the point of view of the corporation. This is more similar to the way ownership of Treasury bonds is recorded in the US. In the countries that I’m familiar with, China has direct recording of ownership for individual brokerage clients, while Denmark has a mixed system where some ownership is recorded directly, but “street name” also occurs. Danish securities owned by foreigners are often held through Euroclear or Clearstream, which does operate more or less like DTC/Cede & Co. in the US.

addicted 11y ago

That system exists in the US as well. However, that system exists at a level of abstraction WELL above what the author is describing. In computing terms, you are talking about the system at the HTTP level of abstraction. The author is talking about the system at the transistor level of abstraction.

cesarb 11y ago
From what I understood, it's not a matter of levels of abstraction: the system here really is simpler. According to BM&FBOVESPA's own website (http://www.bmfbovespa.com.br/pt-br/servicos/servicos-de-pos-negociacao/central-depositaria/central-depositaria.aspx?idioma=pt-br http://www.bmfbovespa.com.br/pt-br/servicos/servicos-de-pos-... - unfortunately in Portuguese only), it has fiduciary ownership of the assets, and individual accounts for each end investor. The brokerage doesn't "owns is an entitlement to stock" or similar; there's a single indirection layer. Your brokerage manages that account for you, but the account is in your name, not in the brokerage's name; you can even login directly to the bmfbovespa site (your login is your national tax ID) and monitor it.
grkvlt 11y ago
Transistors is way too abstract. He is talking about something around the HTTP and DNS protocol layers, so getting access to 'http://example.com/' http://example.com/' for instance, wheras the article is dicussing the IP routing and MAC address layers. That is, where the actual packets eventually end up, on which NIC and which server.

lmm 11y ago

Was the Brazilian system set up from scratch that way? The beauty of the DTC approach in the US was that it allowed a gradual transition: people who liked their paper certificates could keep using them, people who preferred to have DTC hold them electronically could do that, and both kinds of people could trade with each other seamlessly. Nowadays there's probably little need for that, but the anglic approach to law in general is to make incremental changes to minimize unintended harm, with much less concern about keeping the law "clean" than European-style systems. I just went to Wikipedia and discovered that the Brazilian constitution was completely rewritten in 1988 (for the seventh time) - that would be unthinkable in the US.

cesarb 11y ago
Wikipedia has the history of the Brazilian system: https://pt.wikipedia.org/wiki/Companhia_Brasileira_de_Liquida%C3%A7%C3%A3o_e_Cust%C3%B3dia#Hist.C3.B3ria https://pt.wikipedia.org/wiki/Companhia_Brasileira_de_Liquid... According to that article, the original system used paper certificates stored with the brokers. To do a trade, the broker sent the paper certificates to a central place (the predecessor of the current one), which recorded the trade and sent the paper certificates to the other broker. The current system is a natural evolution of the old system: instead of paper certificates, we have records directly within the CBLC (now a department of BM&FBOVESPA). The 1988 constitution was rewritten as part of a regime change (from a USA-supported military dictatorship to its present-day democracy). From what I understand, every time the Brazilian constitution was written or rewritten was due to a regime change. I believe the current USA constitution is also from the last time its regime changed, so there's not much difference in that aspect.