Sufficient Securities, Segregation, and Loss Sharing

Abstract

Abstract This chapter analyzes the occurrence of an imbalance when more securities are credited to the securities accounts of the account holder than its intermediary actually holds. It reviews different reasons that an imbalance can occur that can have a disruptive effect on the intermediated holding system, such as an administrative error or even fraud. It also discusses the requirement that intermediaries should hold sufficient securities to cover the claims of their account holders and examines the allocation of securities to account holders, notably by way of segregation. The chapter highlights allocation as a crucial factor when determining how shortfalls should be distributed in insolvency. It considers the possible impact of new technology, such as the distributed ledger technology (DLT).