You open a banking app, type “buy 10 Siemens”, and confirm. A few seconds later the app says “executed”. Two days later the shares are in your securities account. In between, the order has passed through a broker, a trading venue, a central counterparty, a central securities depository and the central bank, and none of them knows your name except the first.
This page follows that order down the chain and back up. German law splits the work into two licensed businesses, and the page is organised around them. In the Finanzkommissionsgeschäft (principal brokerage), your bank buys the shares in its own name, for your account. In the Depotgeschäft (custody), it then holds and administers them for you. Along the way, the page covers the central securities depository Clearstream, the two-day settlement cycle, what the last bank in the chain owes you, and the reference data that keeps the whole thing running.
Tags show where a statement holds:
DEGerman law or market practice
EUEU-wide rules (MiFID II, CSDR, T2S)
USUnited States
ALLtrue of securities markets in general
Start with the map. Each box is an institution with its own job, and four different things travel along the chain: your order, the shares and cash that change hands at settlement, the holding (who keeps a record of whose shares), and the data that describes the security. Pick a flow to follow it step by step, or tap any box for its job. Switch the jurisdiction to see the American counterparts.
The most important thing the map shows is the split between the top and the bottom of the chain. Everything above the trading venue is a retail relationship, governed by investor-protection law: suitability, best execution, cost disclosure, tax. Everything below it is wholesale: banks dealing with infrastructures they are members of, under rulebooks and contracts. The bank in the middle is the hinge. It is the only institution that knows both you and the market.
DEFinanzkommissionsgeschäft: “the purchase and sale of financial instruments in one’s own name for the account of others” (§ 1 (1) sentence 2 no. 4 KWG). It is a banking business under the KWG and, for securities institutions, an investment service under § 2 (2) no. 1 WpIG. The civil-law template is the commission agent of §§ 383 ff. HGB.
DEDepotgeschäft: “the safekeeping and administration of securities for others” (§ 1 (1) sentence 2 no. 5 KWG), with the civil-law details in the Depot Act (Depotgesetz, DepotG). Custody of fund units only is the lighter eingeschränktes Verwahrgeschäft (§ 1 (1a) sentence 2 no. 12 KWG).
EUMiFID II has no commission concept. Both agency and commission execution count as “execution of orders on behalf of clients” (Annex I A(2)). Custody is only an ancillary service (Annex I B(1)), so the EU passport does not cover it on its own, which is one reason custody law is still largely national.
USA broker-dealer registered with the SEC and a member of FINRA acts either as agent or as principal (often “riskless principal”). Customer securities are held in “street name” under SEC Rule 15c3-3 and, as a matter of property law, UCC Article 8.
The word Kommission matters. When your German bank executes your order on an exchange, it does not act as your agent in your name. It concludes the trade in its own name: on Xetra, the counterparty of the trade is the bank (or the clearing member it uses), never you. A second contract, the commission contract, obliges the bank to pass the result on to you, with the price and costs it actually achieved. You carry the market risk; the bank earns a commission.
The alternative, common for bonds, certificates and trades directly with an issuer, is the fixed-price transaction (Festpreisgeschäft). Here the bank sells to you from its own book at an agreed price, like a shop. There is only one contract, a purchase, and the bank earns the spread rather than a commission. The German Sonderbedingungen für Wertpapiergeschäfte, the standard terms almost every German bank uses, define both forms in their first clause.
EUUnder MiFID II the bank must take “all sufficient steps” to get the best result for you (§ 82 WpHG, Art. 27 MiFID II). For retail clients “best” means total consideration: price plus all costs. The bank publishes an execution policy naming the venues it uses. If you pick a venue yourself, that instruction overrides the policy for that order.
DEGerman retail investors pick venues more than most. Apps offer Xetra, the floor of Börse Frankfurt, regional exchanges, and venues built around market makers such as Tradegate, gettex and LS Exchange, which quote during long hours with no exchange fee. Many of those trades are not cleared by a central counterparty and settle bilaterally instead.
EUUSThe economics differ across the Atlantic. In the US, retail brokers route most orders to wholesale market makers who pay them for the flow (payment for order flow, PFOF), and must execute at or better than the national best bid and offer across all exchanges. The EU has banned PFOF under the 2024 MiFIR review. Germany used the transitional exemption for existing practice, which ended on 30 June 2026; the zero-commission neobrokers that relied on it have had to change their pricing.
EUBefore any of this, the bank checks whether it may take the order at all. For complex products it must test whether you understand the risks (the appropriateness test, § 63 (10) WpHG). For non-complex products such as shares, it may act as “execution only” (§ 63 (11) WpHG). It must have shown you the costs in advance, and must send a confirmation of the execution no later than the next business day.
On an anonymous order book, the bank that bought your shares has no idea who sold them. It doesn’t need to. Moments after the match, a central counterparty (CCP) steps in by novation: the original trade is replaced by two new ones, seller to CCP and CCP to buyer. From then on every member faces only the CCP. For Xetra, this is DEEurex Clearing, also part of Deutsche Börse Group; in the US, USthe National Securities Clearing Corporation (NSCC), part of DTCC.
The CCP does two things that make the market cheaper and safer. It guarantees settlement even if a member fails, backed by margin and a default fund. And because everyone faces the same counterparty, it can net: a bank that bought 5,000 Siemens shares and sold 4,200 over the day needs to receive only 800, and pay or receive a single cash amount. The figure compares a day of trades among four banks settled one by one with the same day netted through a CCP.
ALLNetting typically shrinks the number of settlement instructions by an order of magnitude and the value to be moved by even more. It is the main reason the market can wait two days between trade and settlement without the exposure piling up: what is left to settle is the net, and the CCP holds margin against it.
The trade is concluded at the moment of the match. Ownership changes later, at settlement, when shares and cash move against each other. EUIn the EU, the Central Securities Depositories Regulation (CSDR, Art. 5) requires that transferable securities traded on a venue settle no later than the second business day after the trade: T+2. Most EU markets moved there from T+3 in October 2014; DEGerman exchange trades had already settled on T+2 for decades.
Why not settle at once? Because the two days are spent on work. The CCP has to net the day’s trades. Institutional investors have to allocate block trades to funds and confirm them. Sellers who lent out their shares have to recall them. Foreign buyers have to buy euros. Step through one order to see what happens on which day.
EUThe actual exchange of shares against cash runs on TARGET2-Securities (T2S), a single settlement platform operated by the Eurosystem. Clearstream Banking Frankfurt moved its settlement onto T2S in February 2017. The CSD still keeps the securities accounts, legally and operationally, but T2S moves them, and it moves the cash at the same moment on dedicated cash accounts at the central bank. That simultaneity is delivery versus payment (DvP): neither side can lose the shares without getting the cash, or the other way round.
EUSettlement that fails on the intended date costs the failing party a daily cash penalty under CSDR, in force since February 2022. The penalty is collected by the CSD and passed on to the party that was left waiting.
“Two days” means two settlement days, and those follow the EUTARGET calendar: no settlement on weekends, New Year’s Day, Good Friday, Easter Monday, 1 May, or 25 and 26 December. This matters most around a dividend. The issuer pays the dividend to whoever is on the books at the end of the record date. The market sets the ex-date so that trades from then on settle after the record date: under T+2, the record date is one business day after the ex-date.
DEGerman companies pay the dividend shortly after the general meeting that resolves it: the claim falls due on the third business day after the meeting (§ 58 (4) AktG), so the ex-date is the day after the meeting. The figure takes a hypothetical meeting on Wednesday, 24 March 2027, two days before Easter. Tap a day to trade on it.
Buy on the meeting day and you get the dividend, even though you own nothing until Tuesday after Easter; buy one day later and you don’t, and the share price drops by roughly the dividend that morning to match. When trades settle late, the CSD fixes the mismatch with a market claim, moving the dividend from the seller to the buyer after the fact.
USThe United States moved to T+1 on 28 May 2024, together with Canada and Mexico. The SEC’s argument was risk: a shorter cycle means fewer unsettled trades in flight, less margin at the CCP and less time for a member to fail in between. The cost lands on operations: trades must be allocated, confirmed and affirmed on trade date itself. EUThe EU, the UK and Switzerland follow together on 11 October 2027. Under T+1, the record date and the ex-date fall on the same day, which you can try in the calendar above.
Where are your Siemens shares? Not in a vault with your name on them. For almost every German share or bond, there is one paper document, a global certificate (Globalurkunde, § 9a DepotG), or since 2021 an electronic register entry, and it sits at a single institution: Clearstream Banking AG, Frankfurt (CBF), Germany’s central securities depository (CSD).
A CSD does three things, which CSDR calls its core services:
DEClearstream is a group with two depositories. Clearstream Banking Frankfurt is the national CSD for German securities, the Wertpapiersammelbank of the DepotG. Clearstream Banking S.A., Luxembourg is an international CSD, which, together with Euroclear in Brussels, holds Eurobonds and settles cross-border business in commercial bank money. Both belong to Deutsche Börse Group, which therefore owns the exchange, the CCP and the CSD of the German market: a “vertical silo” that competition authorities have discussed for two decades.
USThe American equivalent is the Depository Trust Company (DTC), part of DTCC, which also owns the CCP, NSCC. DTC’s nominee, Cede & Co., is the registered owner of almost every listed US share, which is why it appears at the top of nearly every US company’s shareholder register.
From the CSD down, each tier holds an account at the tier above and keeps accounts for the tier below. Your bank sits at the bottom. The figure stacks the tiers for three cases and shows what happens if your bank fails.
DEFor securities in collective safe custody (Girosammelverwahrung), you are a co-owner of the whole pool at the CSD, in proportion to your holding (§§ 5, 6 DepotG). The chain of banks only holds possession for you. This is property, not a claim against the bank. Under a commission purchase, ownership passes to you at the latest when the bank credits the shares to your account (§ 24 (2) DepotG).
DEFor foreign securities held abroad, your bank usually cannot give you German co-ownership. It holds the securities as trustee in its own name and gives you a Gutschrift in Wertpapierrechnung (WR credit), a claim to them that is still protected in the bank’s insolvency because the assets are held for customers. The upper tiers follow the law of the country where the securities are kept.
USYou hold a security entitlement against your broker (UCC § 8-501): a bundle of rights plus a pro-rata property interest in what the broker holds for all its customers (§ 8-503). You can instead register shares in your own name with the company’s transfer agent through the Direct Registration System (DRS), an option with no real German equivalent for bearer shares.
DEOne thing German depositors often get wrong: deposit insurance does not protect securities, because they are not deposits. They don’t need it, because they are not part of the bank’s estate. What is covered is the rarer case that a bank cannot return securities it should have, for example after fraud: the statutory investor compensation scheme pays 90 % of the loss, up to €20,000 per investor (EAEG). USThe American counterpart, SIPC, covers up to $500,000, of which up to $250,000 may be cash.
Every tier of the pyramid keeps accounts, but only the bottom one faces you. German practice calls it the Letztverwahrer or letztverwahrendes Institut, the last custodian in the chain: the bank that keeps your securities account and pays out your income. Law and regulation load almost every customer-facing duty onto this one institution, because it is the only one that knows who you are. Clearstream knows how many Siemens shares your bank holds for its customers; only your bank knows that ten of them are yours.
Pick an event in the life of a securities account to see what the Letztverwahrer has to do, on what legal basis, and what data it needs from upstream.
DEThe heaviest of these duties is tax. Germany taxes capital income at a flat 25 % (Abgeltungsteuer), plus the 5.5 % solidarity surcharge on the tax and, for church members, 8 or 9 % church tax on the tax. The bank deducts it at source, as the “paying agent” (auszahlende Stelle, § 44 (1) EStG). For German shares in collective custody this has been the Letztverwahrer since 2012, not the company: the dividend travels gross through Clearstream and is taxed at the last step, where the bank knows whether you have filed an exemption order (Freistellungsauftrag, up to €1,000 a year), whether you pay church tax, and what losses it can offset.
For foreign dividends the bank also has to credit foreign withholding tax. A US company withholds 15 % from a German resident who has filed form W-8BEN; the bank then takes only the remaining 10 %. The calculator applies the formula the law prescribes when church tax is involved.
Here e is the taxable income after the exemption order, q the creditable foreign withholding tax and k the church tax rate (0.08 or 0.09). The formula (§ 32d (1) EStG) makes church tax deductible within the flat tax, which is why a church member pays 24.45 % instead of 25 % in withholding tax. Solidarity surcharge and church tax are then 5.5 % and k of the result.
Simplifications: the calculator ignores loss offsetting, the separate pot for share losses, the partial exemptions for fund distributions, and foreign tax that cannot be credited because the dividend is covered by the exemption order. The bank tracks all of these per customer.
None of the duties above work without data the bank can’t produce itself. To tax a distribution correctly, the bank needs to know whether it is an ordinary dividend or a tax-free repayment of capital from the company’s contribution account (§ 27 KStG). To process a rights issue it needs the ratio, the subscription price and the deadlines. To show costs it needs the fund’s ongoing charges. To file a transaction report it needs the instrument’s identifiers and classification. Multiply that by every security every bank in the country holds.
DEIn Germany, much of this flows through one institution: WM Datenservice, run by the Herausgebergemeinschaft Wertpapier-Mitteilungen in Frankfurt, which also publishes the Börsen-Zeitung. WM is Germany’s national numbering agency: it assigns every German security its ISIN and its six-character WKN. It also collects master data, income and corporate action data, and tax data from issuers, paying agents, fund companies, exchanges, the CSD and official publications, and delivers it to banks in a standardised record per security. German back offices, including the large processing banks that run securities operations for savings and cooperative banks, are built around these fields.
The reason one hub dominates is arithmetic. If every bank collected data from every source itself, the number of connections would be the product of the two; through a hub, it is the sum.
A hub also concentrates responsibility. When a hub field is wrong, it is wrong at every bank at once, and every bank withholds the wrong tax. Banks therefore still check the data against a second source for critical events, and reconcile their own positions against the CSD every day: the sum of all customer accounts in a security must equal what the bank holds at Clearstream.
ALLEverything in the chain is keyed by the ISIN (ISO 6166): two letters for the country of the issuing numbering agency, nine characters of national number, and a check digit. Older German ISINs embed the WKN after the prefix DE000; US ISINs embed the nine-character CUSIP, assigned by CUSIP Global Services, the American numbering agency. Type an ISIN or pick one to see how the check digit is computed.
ALLBetween the institutions, data moves as standard messages, mostly over SWIFT: settlement instructions (MT540 to MT543), their confirmations (MT544 to MT547), statements of holdings (MT535) and corporate action notices and confirmations (MT564, MT566). The industry is moving from this ISO 15022 format to ISO 20022 XML, and T2S speaks only ISO 20022. The same corporate action therefore passes through several formats on its way from the issuer’s announcement to the line on your statement, and every translation is a chance to lose a field.
EUUSMarket data is aggregated too, with a gap between the two systems. The US has published a consolidated tape of all exchange quotes and trades since the 1970s; that tape is what makes the national best bid and offer, and therefore US best execution, possible. The EU’s trading is spread across hundreds of venues with no consolidated tape. The 2024 MiFIR review created one: the bond tape was awarded first, in 2025, and an equity tape is following.
| Germany | EU-wide | United States | |
|---|---|---|---|
| Executing your order | Finanzkommissionsgeschäft (KWG/WpIG); commission or fixed price | “execution of orders on behalf of clients” (MiFID II) | broker-dealer as agent or (riskless) principal |
| Keeping your securities | Depotgeschäft, a banking business (KWG, DepotG) | ancillary service; national law | broker-dealer custody, SEC Rule 15c3-3 |
| What you own | co-ownership of the CSD pool (GS); trust claim for foreign securities (WR) | national law, no harmonised securities law | security entitlement (UCC Art. 8); optional DRS registration |
| Best execution | § 82 WpHG; venue choice by the client common | Art. 27 MiFID II, total consideration | FINRA Rule 5310; Reg NMS order protection |
| Payment for order flow | ended 30 June 2026 | banned (MiFIR review) | allowed, with disclosure |
| CCP | Eurex Clearing (for Xetra) | several CCPs, EMIR | NSCC |
| CSD | Clearstream Banking Frankfurt | national CSDs; ICSDs Clearstream Luxembourg and Euroclear | DTC, nominee Cede & Co. |
| Settlement | T+2 on T2S | T+2 (CSDR); T+1 from 11 Oct 2027 | T+1 since 28 May 2024 |
| Withholding tax on dividends | deducted by the Letztverwahrer, flat 25 % plus surcharges | national | no withholding for residents; broker reports on Form 1099 |
| Investor compensation | EAEG: 90 %, up to €20,000 | at least €20,000 (Investor Compensation Directive) | SIPC: up to $500,000 |
| Numbering agency | WM Datenservice (ISIN, WKN) | one per country | CUSIP Global Services (CUSIP, ISIN) |
| Consolidated tape | none of its own | bond tape from 2025, equity tape following | since the 1970s |
The pattern is the same everywhere: one institution faces the customer and carries the duties, a few infrastructures in the middle carry the risk, and a single depository at the bottom makes sure the shares add up. What differs is the law that sits on each link. German law gives you property in a pool at Clearstream; American law gives you a protected claim against your broker. In normal times you can’t tell the difference. It matters when something in the chain fails.
This page explains how the system works. It is not legal or tax advice, and rules and venues change; check the current law before relying on any detail.
Constantin Lisson · 2026