In the majority of equity transactions, neither
money nor certificates actually change hands. The amount that's
due is debited from the buyer's brokerage firm's account
and credited to the seller's brokerage firm's account.
It's rather like paying your bills electronically or having
your paycheck direct deposited.
In most cases, paper certificates don't
change hands either. Increasingly, stock ownership is recorded
electronically, in book entry form. When you buy or sell, the
electronic records are updated to reflect the change.
Recording ownership
You may own your stocks in
street name,
which means they are held in DTC's
nominee
name,
Cede & Co, for all brokers. DTC's
records indicate which brokerage firm owns the shares, and your
firm maintains electronic records listing you as the beneficial
owner. If a transaction is netted within a firm, the firm adjusts
its records to reflect the new beneficial owner. If the buyer
is the client of a different firm, DTC records and both firms'
records are updated to reflect the change.
