No one owns stock February 8, 2013 at 9:03 am

A timely reminder from Matt Levine:

nobody owns stock, they just own interests in their brokers’ interests in DTCC’s interest in stock. “Oh I own AAPL shares,” you say, but you don’t; you own like a second derivative on Apple shares. A delta-one derivative but still.

3 Responses to “No one owns stock”

  1. Well it’s a bit different in that it’s not dependent on the counterparties’s solvency or their continued existence. Even if the broker and the dtcc were nuked, with their records, you could still reconstitute the claims from client records and make everybody good. The only risk is that one of these guys fraudulently tells two people they own the same share, which could be fixed with a bit of IT (registrars publishing records openly and making dtcc/crest/etc accounts personal).

    PS: taxation is the wrong category methinks.

  2. Oops, thank you CIG, bad category click.

    I agree completely by the way – but I wasn’t claiming that your ownership of this 2nd stock derivative depends on the cpty.

  3. I couldn’t work out why I was struggling with this, but ultimately I think it boils down the fact that if it doesn’t depend on the counterparty, why is the characterisation of stock ownership as a derivative helpful?