Intermediated Securities: The European Perspective

The growth of intermediation in the holding of securities creates challenges for jurisdictions as often the body of law dealing with transferable securities continues to operate on the basis of the direct holding paradigm, and therefore fails to take full account of the changes that intermediation brings with it. Jurisdictions need to work out how best to recognise the advantages of intermediation and yet to deal with the problems that arise. This can be done at national level or at supra-national level, with the EU providing a valuable opportunity to tackle some issues. The thesis of the chapter is that there are advantages and disadvantages in holding securities through the intermediated chain, as compared to direct holding. We suggest that, for most market participants, the advantages outweigh the disadvantages. Moreover, some of the disadvantages can be overcome by legal, regulatory or market changes (at least in the UK and in Europe) which could tip the balance even further in favour of the advantages over the disadvantages.