Liquid tradable securities (or LTS) is a generic phrase for a wide range of financial instruments. It often differentiates financial instruments that are easily tradable (or tradeable) as opposed to those that require the permission of the company or a signed document that registers the transfer of securities between two market participants. Another way to look at it is the difference between how a person buys a fund (collective investment scheme) and how they buy a bond or share. Liquid tradable securities come in many forms and with a wide variety of acronyms. These include stocks and bonds as well as

exchange-traded fund An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the ...

s, exchange traded commodities,

exchange-traded note An exchange-traded product (ETP) is a regularly priced security which trades during the day on a national stock exchange. ETPs may embed derivatives but it is not a requirement that they do so - and the investment memorandum (or offering documents ...

s (including certificates), REITs, as well as most OTC securities. Note that these do not include Swaps or

repurchase agreement A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two pa ...

(repos), which are contractual arrangements and as such are not tradable. This is a wider definition than the definition of transferable securities under MiFID

LTS advantage over collective investment schemes

LTSs offer a significant advantage over

collective investment scheme An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages in ...

s. Collective investment schemes (or CIS or UCIS) come in many legal forms. What is common in each legal form is the existence of a shareholder register; according to the laws of most jurisdictions, an entry in the shareholder register must be accompanied by a signed declaration to invest. Equally, a transfer of shares in a collective investment scheme is usually not allowed without the signed consent of the company. These procedural requirements limit the ability of shareholders to trade their shares. A small subset of collective investment schemes are electronically tradable through stock exchanges (most notably REITs). However, the vast majority of collective investment schemes require these procedural steps. LTSs on the other hand have no such limitations. They are most commonly represented by dematerialised certificates or immobilisation conditions (according to US

IRS The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax ...

definitions). LTSs are held in a global note form and deposited with 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 t ...

(CSD). The simplifies the administrative procedures of buying and selling and reduces both the costs of administration for the company and the cost of compliance. The benefit for investors is the ease of trading. Positions can be sold without consent of the company and it is perfectly feasible for active secondary market sales to take place unbeknownst to the company. Many exchanges provide a list of tradable instruments (either in the form of a requirements for listing or as a searchable function). LTSs simply the compliance requirements of fiduciary trustees and financial advisers as they usually include a standard set of documents (including the form of the global note), an information memorandum or prospectus, and a term sheet. The approval of the CSD is critical to this process; all instruments are verified before the issue of an ISIN number and the creation of the dematerialised security is handled by the CSD. The criteria for acceptance are quite strict. IRS regulations stipulate particular requirements for tradable securities. These generally describe the characteristics necessary for an LTS (according to IRS definitions, at least).

References

{{reflist Securities (finance)