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Figure 38.2 The Indirect Holding System

Figure 38.2 The Indirect Holding System. Issuer. 100,000 Shares. DTC. 30,000 Shares. 70,000 Shares. Broker 1. Bank. 1,000 Shares. 50,000 Shares. Investor 1. Broker 2. 1,000 Shares. Investor 2. Note 1 : DTC owns a “security” (UCC § 8-102(a)(15)) represented by a “security

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Figure 38.2 The Indirect Holding System

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  1. Figure 38.2The Indirect Holding System Issuer 100,000 Shares DTC 30,000 Shares 70,000 Shares Broker 1 Bank 1,000 Shares 50,000 Shares Investor 1 Broker 2 1,000 Shares Investor 2 Note 1: DTC owns a “security” (UCC § 8-102(a)(15)) represented by a “security certificate (UCC§ 8-102(a)(16)) in DTC’s possession. There are no other security certificates in this scenario; none of the other parties “own” securities. Note 2: DTC is a “securities intermediary’ (UCC § 8-102(a)(14)) with respect to “security entitlements” (UCC § 8-102(a)(17)) held by Broker 1 and Bank as “entitlement holders” (UCC § 8-102(a)(7)). Note 3: Broker 1, in turn, is a securities intermediary with respect to a security entitlement held by Investor 1 as entitlement holder. In the same way, Bank is a securities intermediary with respect to a security entitlement held by Broker 2 as entitlement holder, and Broker 2 is a securities intermediary with respect to a security entitlement hold by Investor 2 as entitlement holder.

  2. Figure 19.2Documentary-Draft Transaction 3. Draft w/B/L Seller’s Bank (Remitting Bank) Buyer’s Bank (Presenting Bank) 6. $ 5. B/L 2. Draft w/B/L 6. $ Carrier 4. Draft 5. $ 7. B/L 1. Goods 7. Goods Seller (Manufacturer) Buyer (Importer) 1. B/L Step 1: Seller delivers the goods to Carrier; Carrier issues a bill of lading to Seller. Step 2: Seller sends the draft and the bill of lading to Seller’s Bank. Step 3: Seller’s Bank sends the draft and the bill of lading to Buyer’s Bank. Step 4: Buyer’s Bank presents the draft to Buyer. Step 5: Buyer pays for the goods and receives the bill of lading. Step 6: Buyer’s Bank forwards payment to Seller’s Bank and Seller’s Bank forwards payment to Seller. Step 7: Buyer gives the bill of lading to Carrier; Carrier releases the goods to Buyer.

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