bookentry

Book-entry refers to a method of recording and transferring ownership of securities in electronic form, rather than issuing and exchanging physical certificates. In a book-entry system, the issuer’s ownership records and transfers are maintained by a central securities depository or transfer agent, with accounts held by participants such as banks, brokers, or custodians. Ownership of securities is evidenced by entries in these accounts rather than by physical documents.

Transfers and corporate actions are conducted through bookkeeping entries. When a trade is settled, the necessary entries update the accounts of the buyer and seller, and related actions such as dividend payments or voting rights are processed through the depository or participating institutions. This structure often enables faster settlement, reduces the risks and costs associated with handling physical certificates, and simplifies corporate actions and asset servicing.

Key components and players include central securities depositories (CSDs), transfer agents, custodians, and clearing houses. Notable examples include the Depository Trust Company in the United States and the Euroclear and Clearstream systems in Europe, with many other countries operating national or regional CSDs. Dematerialization laws and regulations in many jurisdictions promote or require book-entry holdings.

Advantages of book-entry systems include reduced credit, market, and operational risk, lower administration costs, and improved efficiency in settlement and custody. Potential drawbacks include systemic concentration risk, reliance on robust information technology and cyber security, and the need for coordination among a network of intermediaries.