From the early days of the New York Stock Exchange, when stocks were traded under a big tree through the enormous expansion of financial markets in the 20th century. Stock certificates have been the currency used to represent share ownership in companies. Millions have been made from iconic stock trading, but in recent times the financial industry has started to computerize stock trading and more precisely the stock certificate. The beautifully decorated staple of the financial industry is no longer converting, we will investigate the many reasons for its decline.
First, in the United States, the electronic registry is replacing the stock certificate. Companies are no longer required to issue paper certificates. In fact, Sweden has taken a regulatory step further by abolishing share certificates entirely, the use of electronic shares has replaced the paper alternative. Much like the system before shares are registered in the share owner’s name or share owner’s broker name. It is important to clarify that share certificates exist in Sweden in certain cases. Private companies, non-profit organizations and other entities can still grant paper certificates, only publicly traded companies have restrictions. However, in addition to government intervention as in these cases, the financial industry in North America has gradually phased out stock certificates from most of its businesses.
Only 1.6 million paper stock certificates remain in the vault of the Depository Trust & Clearing Corporation, a respected and leading transfer agent. The figures show a decrease of 1.9 million last year, 8 million in 2000 and 32 million stock certificates in 1990. The decrease affects the entire industry and is the result of many advances such as the Direct Registration System. The DRS was a breakthrough driven by the computerization of markets in the 1990s. The system allows corporations, brokers, and regulators to track shareholders electronically. SEC regulators gave DRS another boost last year by requiring that all major public companies be eligible for inclusion in the electronic system’s record-keeping system.
Second, companies are moving away from using stock certificates. A growing number of publicly traded companies have taken the lead, including big names (Sears, Visa, and Intel) who simply no longer deal with certificates. These few companies remain a minority, but as the demand for certificates continues to decline, it is highly likely that we will see an extension of the move to all electronic share transfers.
Many of these changes are driven by less demand for the certificates from investors; Investors prefer the ease and convenience of non-material substitutes. The emergence of low demand for paper versions has created a hostile environment for the few who wish to receive a paper copy of their shares. Prices to receive hard copy of stock ownership from online brokers are outrageous, the figures range from $ 50 to $ 500 to produce copies of stock certificates. Although this fee can be avoided by registering shares directly with the transfer agent (as opposed to the “street name” where the brokerage firm technically holds the shares) and having them issue the certificate. However, investor demand and DTCC regulation are the main cause of the high tariff situation.
The stock certificate was an icon that symbolized prosperity, growth, and opportunity. However, due to the modernization of stock exchanges, investor demand and, to a small extent, government regulation, the popular symbol was reduced to the brink of extinction.