Book entry is a system of tracking ownership of

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

where no

certificate Certificate may refer to: * Birth certificate * Marriage certificate * Death certificate * Gift certificate * Certificate of authenticity, a document or seal certifying the authenticity of something * Certificate of deposit, or CD, a financial pr ...

is given to investors. Several terms are often used interchangeably with "book entry" shares including "paperless shares", "electronic shares", "digital shares", "digital stock certificates", and "uncertificated shares". Some of these terms have somewhat different connotations but, at least in the United States, state securities laws only recognize certificated and uncertificated shares. In the case of book-entry-only (BEO) issues, while investors do not receive certificates, a

custodian Custodian may refer to: Occupations * Janitor, a person who cleans and maintains buildings * Goalkeeper, in association football * Fullback, in rugby, also called a sweeper * Legal guardian or conservator, who may be called a custodian in some ...

holds one or more global certificates. Dematerialized securities, in contrast, are ones in which no certificates exist; instead, the security issuer, its agent or a

central securities depository A central securities depository (CSD) is a specialized financial organization holding securities like shares, either in certificated or uncertificated ( dematerialized) form, allowing ownership to be easily transferred through a book entry rather th ...

keeps records, usually

electronically The field of electronics is a branch of physics and electrical engineering that deals with the emission, behaviour and effects of electrons using electronic devices. Electronics uses active devices to control electron flow by amplification a ...

of who holds outstanding securities. Most investors who use an online

broker A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confu ...

or even a regular full-service broker will have their shares held in book-entry form. This is generally convenient, as one does not have to preserve physical stock certificates, and can buy/sell securities without turning certificates in or having new ones issued. Also, replacement costs for certificates are high in case one loses them, while book-entry ownership can never be lost thanks to technological backups.

Direct Registration System

On August 8, 2006, the SEC approved a rule changed by

NASDAQ The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...

NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its listed co ...

and AMEX requiring all listed securities (except certain debt securities) to be eligible for a direct registration system ("DRS") as of March 31, 2008. DRS is an entirely electronic book-entry style system that does not involve physical stock certificates. The rule change does not eliminate physical certificates, but requires issuers to be eligible for entirely electronic recording of securities ownership.

Private companies

Adoption of book-entry systems among private companies has lagged adoption among public companies, public company transfer agents, and broker-dealers. This may be due to a number of misunderstandings and challenges unique to private company security issuance but, regardless, data suggest adoption of book-entry systems among private companies is growing rapidly.

References

Securities (finance) {{Stockexchange-stub