2023-08-01 22:22:21
When entering the stock market, it is common to hear that these assets are under custody at the brokerage firm. Therefore, understanding what it is and how it works is essential for those who are starting out.
Furthermore, it is important to know that there are institutions that take care of the custody of these assets.
What is custody?
Custody is the custody, protection and responsibility of assets, with stocks, bonds and any other type of assets being maintained and updated by a specialized company, known as a custodian.
Therefore, depository institutions work to ensure that securities are traded and stored securely.
In this way, they function as a type of “deposit” where assets are kept, while investors carry out transactions, such as buying and selling these assets.
Thus, depository institutions play a key role in the financial market, ensuring that transactions between investors are carried out efficiently and securely, and that assets are protected.
How it works?
Custody works through custodians, who are responsible for the custody and protection of assets. That is, when you decide to invest in an asset, you use the services of a broker (custodian), which is a company that specializes in intermediating negotiations in the financial market.
Thus, the brokerage firm is responsible for taking care of its assets. It, in turn, executes the negotiation with the depository institution, which is responsible for keeping the shares safe on behalf of the clients.
In addition, the assets are deposited in the so-called clearing system, so that the shares are traded between two investors.
Therefore, the custodian sends important information about shares and transactions to investors to ensure transparency. This whole process takes place automatically, without you having to worry about complicated details.
What types of custody?
There are basically two types of custody:
fungible custody
In fungible custody, when an investor wants to withdraw his securities, he will not receive exactly the same shares he deposited.
In this sense, the titles are not identified individually and are mixed. But the institution maintains the quantity, quality and type of titles.
Non-fungible Custody
In non-fungible custody, the securities withdrawn are the same as those deposited. Therefore, the system registers the assets nominally to the depositor, and the securities are not mixed with those of other investors.
Which agents participate in custody?
In general, the main agents that may be involved in this process are:
depositary institution
The companies authorized to offer custody services are the depositary institutions, or custodian institutions. They act as guardians of investors’ assets, keeping them safe and secure. It is obligatorily registered and supervised by the Banco Central.
Custody agent
As mentioned earlier, custody agents act as intermediaries between investors and depositary institutions. Thus, they help investors carry out transactions and operations related to custody, facilitating the process and providing support during negotiations.
Operator
Finally, we have investors, who own assets such as stocks, bonds, among others, and wish to keep them in custody for protection and security. In addition, the operator pays for escrow services. Since all this security and administration process is not free.
What are the main depository institutions?
There are three main depository institutions in the financial system, namely:
Special System for Settlement and Custody (SELIC)
The Special System for Settlement and Custody (SELIC) carries out the primary and secondary operations of federal public securities. That is, the agent responsible for guarding these titles.
The Central Bank, through the SELIC, also defines the basic interest rate, known as the Selic rate.
Brazilian Clearing and Custody Company (CBLC)
The Companhia Brasileira de Liquidação e Custódia (CBLC) is the custodian of all transactions involving securities traded on the Stock Exchange.
Thus, when registering with the stock exchange, the investor automatically registers with the CBLC, and receives a code with his account number in the sequence.
Central for the Custody and Financial Settlement of Securities (CETIP)
Finally, the Central for the Custody and Financial Settlement of Securities (CETIP) is responsible for guarding and maintaining fixed income securities on the Brazilian private market, such as CDB, LCA, LCI and debentures.
In addition, CETIP also takes care of operations involving the CDI, as well as bank transfer processes, such as TED and DOC.
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