Custody and clearing services are a vital part of the trading process, even if they tend to go unnoticed by investors. Our parent company GIS UK Ltd has been involved in more than 250,000 transactions over the last three years, with a combined value of £50 billion. We have a robust clearing and custody service, but how does this fit into the overall trading process?

 

Execution of trade

 

Whether dealing electronically with Direct Market Access (DMA) or via our helpdesk, the execution of a trade is precisely the same. In simple terms, a buyer and a seller enter into a legally binding agreement. This is a commitment to transfer securities from the seller to the buyer. On the flip side of the coin, this is a commitment to transfer funds from the buyer to the seller. Sounds very simple in theory!

 

Clearing services

 

The clearing process involves updating stock accounts and arranging the transfer of funds to pay for securities. Clearing services are an integral part of any investment market as they create the integrity and confidence that trades will be settled efficiently. Conversely, if there is no confidence in the clearing services, this will impact the integrity of the underlying market.

 

There are two types of clearing services, bilateral clearing, where the parties deal directly with each other. Then we have the more common clearinghouses where member firms commit to the settlement of transactions via a central third party. If a broker were to experience financial difficulties and cease trading, there are procedures to ensure the settlement of outstanding trades. Maintaining market integrity at all times is crucial!

 

Settlement

 

The clearing services process is the preparation work for settlement, at which point funds and stock ownership will be transferred between the relevant parties. While historically, the transfer of securities to the buyer was a physical transaction, most trades are now settled electronically. This is where clearing and custody services come together.

 

Custody services

 

In the "olden days", investors used share certificates and stock transfers to physically change ownership titles. But, as you might guess, trading on a global basis with physical share certificates and stock transfers would be challenging at best and, in some cases, near impossible. Moreover, even in a best-case scenario, there would be considerable delays in settlement hence the move to electronic custody services.

 

Global co-operation

 

Here at GIS HK Ltd, we have nurtured numerous tier 1 custody service relationships with providers spread across the globe. This allows us to provide customers with the opportunity to trade on international markets. Our services are strictly regulated, transparent and abide by the latest best market practices. This ensures that we can complete the settlement process via the transfer of stock and funds to and from client accounts under our control.

 

Confidence is the key

 

GIS HK Ltd benefits from investment in local trading and clearing services and the global reach of our parent company GIS UK Ltd. Over the years, we have built market-leading clearing and custody services that allow our clients to concentrate on what they do best, investment. However, we constantly strive to expand our custody and clearing services, introducing even greater efficiencies while maintaining a seamless trade to settlement process. All the while, we maintain a high level of transparency and accountability via ateam with unrivalled experience.

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