Traders and market makers, custodians and trustees, transfer agents, and the DTCC and OCC

Trading and quoting

A trader buys and sells securities, executing customer orders or trading for a firm's account. A market maker is a dealer that stands ready to buy and sell for its own account and quotes a bid and an ask. The bid is the dealer's buying price; the ask is its selling price. The difference is the spread. Market makers provide liquidity and bear inventory risk. Not every trader is a market maker.

Safekeeping and fiduciary duties

A custodian holds and safeguards securities and cash for others. Services can include collecting income and handling settlement instructions. Custody does not itself mean investment discretion. Certain bank custody arrangements qualify as control locations under customer protection requirements when conditions are met, including freedom from bank liens and access without further payment.

A trustee acts for beneficiaries under a trust agreement or for bondholders under an indenture. An indenture trustee administers the duties established by that document and acts to protect bondholders' interests. Distinguish safekeeping from fiduciary responsibilities; one institution can serve in different capacities.

Issuer ownership records

A transfer agent works for the issuer to record registered ownership and process transfers, exchanges, and book-entry ownership changes. A registrar monitors issuance to prevent unauthorized issuance. These transfer-agent functions are described in 15 U.S.C. § 78c(a)(25). With street-name holdings, a nominee can be the registered owner while customers are beneficial owners reflected in the broker's records.

Clearing and settlement

The Depository Trust and Clearing Corporation (DTCC) is the parent organization of subsidiaries providing post-trade services. The National Securities Clearing Corporation (NSCC) provides clearing, netting, and central counterparty services for many securities trades. Netting reduces multiple obligations to net amounts. The Depository Trust Company (DTC) provides central securities custody and book-entry settlement. Clearing determines obligations; settlement completes the movement of securities and money.

The Options Clearing Corporation (OCC) issues and clears standardized listed options and serves as a central counterparty between clearing members. Its support for contract performance does not protect investors from unfavorable market prices.

Remember each function: execute, quote, safeguard, administer fiduciary duties, maintain issuer ownership records, clear, and settle.