Third-party custody is a business provided by commercial banks and is commonly used in securities, futures, real estate and other trading activities. Take third-party custody in securities trading as an example. It means that the custodian bank is responsible for the deposit, withdrawal and settlement of client funds in accordance with the requirements of laws and regulations, and the securities trading operations remain unchanged. The securities transaction settlement funds of securities company customers are deposited in banks.

This business follows the principle of "brokers manage securities and banks manage funds", and strictly separate and manage investors' securities accounts and securities margin accounts. Under the third-party custody model, securities brokerage companies no longer provide customers with transaction settlement fund deposit and withdrawal services, but are only responsible for customer securities transactions, share management, clearing and settlement, etc.

The depository bank is responsible for managing the customer transaction settlement fund management account and the customer transaction settlement fund summary account, providing customers with transaction settlement fund deposit and withdrawal services, and completing the registration and settlement company and over-the-counter settlement for securities brokerage companies. Provide settlement support for legal person fund settlement between entities. The bank is responsible for completing the transfer of clearing funds between the investor's special deposit account and the securities firm's bank settlement account, and transfers the securities firm's clearing and settlement procedures to the bank, which is completed by the bank.

Extended information:

Characteristics of bank third-party custody:

1. Closed operation of customer funds. Under this model, the securities company hands over the customer deposit and withdrawal functions to the depository bank. The securities company no longer handles any form of customer fund deposit and withdrawal business. All deposits and withdrawals are initiated by the customers themselves through bank-securities transfers. .

The transaction settlement funds withdrawn by customers can only be returned to the pre-designated bank settlement account of the same name, thereby realizing the closed operation of transaction settlement funds and preventing the risk of misappropriation of customer funds, customer money laundering, cashing out and other risks.

2. Check the total score of the depository bank. In this mode, the depository bank opens a management account for the customer that reflects the balance of the securities company's fund ledger, so that it can master the customer's detailed account, and then check it with the securities company's customer fund general ledger after summarizing the detailed account. To a certain extent, it prevents securities companies from misappropriation at the general ledger level.

3. The customer inquires about the reconciliation mechanism through another method. Under this model, the depository bank will provide customers with an alternative management account query service. Customers will use the query methods and reconciliation mechanisms provided by the depository bank and securities companies to compare the management accounts at the depository bank and the fund desk at the securities company. Ensure the consistency of account data and effectively monitor the security of customer funds.

4. Comprehensive customer fund supervision system. Under this model, through reasonable business division of labor and institutional arrangements, securities companies, depository banks, customers and regulatory agencies jointly build a comprehensive customer fund supervision system to ensure the safety of customer funds.

Among them, the depository bank does not directly bear liabilities to customers, nor does it directly control the legal person settlement and other business operations of securities companies. It is only responsible for total score verification and providing customers with alternative inquiries, which plays a role to a considerable extent. It is to assist with supervisory duties.

5. The multi-bank depository mechanism helps to meet customers’ different banking preferences and is highly compatible. It can better adapt to existing domestic securities trading products and clearing and settlement rules, and can adapt to the future. Product innovation and institutional progress in the securities market.

Baidu Encyclopedia - Third Party Custody

Baidu Encyclopedia - Third Party Custody