Editing Security (finance) (section)

== Physical nature ==
=== Certificated securities ===
Securities that are represented in paper (physical) form are called certificated securities. They may be ''bearer'' or ''registered''.

=== DRS securities ===
Securities may also be held in the Direct Registration System (DRS), which is a method of recording shares of stock in book-entry form. Book-entry means the company's transfer agent maintains the shares on the owner's behalf without the need for physical share certificates. Shares held in un-certificated book-entry form have the same rights and privileges as shares held in certificated form.

==== Bearer securities ====
[[File:1969 $100K Treasury Bill (front).jpg|thumb|1969 $100,000 Treasury Bill|417x417px]]

Bearer securities are completely negotiable and entitle the holder to the rights under the security (e.g., to payment if it is a debt security, and voting if it is an equity security). They are transferred by delivering the instrument from person to person. In some cases, transfer is by endorsement, or signing the back of the instrument, and delivery.

Regulatory and fiscal authorities sometimes regard bearer securities negatively, as they may be used to facilitate the evasion of regulatory restrictions and tax. In the [[United Kingdom]], for example, the issue of bearer securities was heavily restricted firstly by the ''Exchange Control Act'' 1947 until 1953. Bearer securities are very rare in the United States because of the negative tax implications they may have to the issuer and holder.

In Luxembourg, the law of 28 July 2014 concerning the compulsory deposit and immobilization of shares and units in bearer form adopts the compulsory deposit and immobilization of bearer shares and units with a depositary allowing identification of the holders thereof.

==== Registered securities ====
[[File:1981 $10k 15.875% Registered Note .jpg|thumb|1981 $10,000 15.875% Registered Note]]

In the case of registered securities, certificates bearing the name of the holder are issued, but these merely represent the securities. A person does not automatically acquire legal ownership by having possession of the certificate. Instead, the issuer (or its appointed agent) maintains a register in which details of the holder of the securities are entered and updated as appropriate. A transfer of registered securities is effected by amending the register.

=== Non-certificated securities and global certificates ===
Modern practice has developed to eliminate both the need for certificates and maintenance of a complete security register by the issuer. There are two general ways this has been accomplished.

==== Non-certificated securities ====
In some jurisdictions, such as France, it is possible for issuers of that jurisdiction to maintain a legal record of their securities electronically.

In the [[United States]], the current "official" version of Article 8 of the [[Uniform Commercial Code]] permits non-certificated securities. However, the "official" UCC is a mere draft that must be enacted individually by each [[U.S. state]]. Though all 50 states (as well as the [[District of Columbia]] and the [[U.S. Virgin Islands]]) have enacted some form of Article 8, many of them still appear to use older versions of Article 8, including some that did not permit non-certificated securities.<ref>{{cite web|url=https://www.law.cornell.edu/uniform/ucc.html#a8 |title=LII: UCC – Locator |publisher=Law.cornell.edu |date=2004-03-15 |access-date=2012-04-24}}</ref>

==== Global certificates, book entry interests, depositories ====
To facilitate the electronic transfer of interests in securities without dealing with inconsistent versions of Article 8, a system has developed whereby issuers deposit a single global certificate representing all the outstanding securities of a class or series with a universal depository. This depository is called [[The Depository Trust Company]], or DTC. DTC's parent, [[Depository Trust & Clearing Corporation]] (DTCC), is a non-profit cooperative owned by approximately thirty of the largest Wall Street players that typically act as brokers or dealers in securities. These thirty banks are called the DTC participants. DTC, through a legal nominee, owns each of the global securities on behalf of all the DTC participants.

All securities traded through DTC are in fact held, in electronic form, on the books of various intermediaries between the ultimate owner, e.g., a retail investor, and the DTC participants. For example, Mr. Smith may hold 100 shares of Coca-Cola, Inc. in his brokerage account at local broker Jones & Co. brokers. In turn, Jones & Co. may hold 1000 shares of Coca-Cola on behalf of Mr. Smith and nine other customers. These 1000 shares are held by Jones & Co. in an account with Goldman Sachs, a DTC participant, or in an account at another DTC participant. Goldman Sachs in turn may hold millions of Coca-Cola shares on its books on behalf of hundreds of brokers similar to Jones & Co. Each day, the DTC participants settle their accounts with the other DTC participants and adjust the number of shares held on their books for the benefit of customers like Jones & Co. Ownership of securities in this fashion is called [[beneficial ownership]]. Each intermediary holds on behalf of someone beneath him in the chain. The ultimate owner is called the beneficial owner. This is also referred to as owning in "Street name".

Among brokerages and mutual fund companies, a large amount of mutual fund share transactions take place among intermediaries as opposed to shares being sold and redeemed directly with the transfer agent of the fund. Most of these intermediaries such as brokerage firms clear the shares electronically through the National Securities Clearing Corp. or "NSCC", a subsidiary of DTCC.

==== Other depositories ====
Besides DTC in the US, central securities depositories (CSDs) exist on a national basis in most jurisdictions. In addition, two major international CSDs exist, both based in Europe, namely Euroclear Bank and Clearstream Banking SA.

=== Divided and undivided security ===
The terms "divided" and "undivided" relate to the proprietary nature of a security.

Each divided security constitutes a separate asset, which is legally distinct from each other security in the same issue. Pre-electronic bearer securities were divided. Each instrument constitutes the separate covenant of the issuer and is a separate debt.

With undivided securities, the entire issue makes up one single asset, with each of the securities being a fractional part of this undivided whole. Shares in the secondary markets are always undivided. The issuer owes only one set of obligations to shareholders under its memorandum, articles of association and company law. A [[share (finance)|share]] represents an undivided fractional part of the issuing company. Registered debt securities also have this undivided nature.

=== Fungible and non-fungible securities ===

In a fungible security, all holdings of the security are treated identically and are interchangeable.

Sometimes securities are not fungible with other securities, for example different series of bonds issued by the same company at different times with different conditions attaching to them.