Chapter 4. The Intermediated System in the United States
In the preceding Subsection, it was discussed that in the U.S. intermediated system, there exists no object of transfer; disposition of security entitlements involves mere extinguishment of relationship with the transferor’s intermediary, by debiting the amount of the security entitlements to her account, and creation of a new relationship with the transferee’s intermediary, by crediting the corresponding amount of the same type of security entitlements to her account; therefore, disposition of security entitlements are not transfer, as usually understood in a transaction of securities or other property. Accordingly, from the theoretical perspective itself, it may be impossible to trace the same object of the transaction, because there is no object of transfer. As drafters of UCC Article 8 justify, even because of the netting practice in a clearing and settlement process, presumably, it is almost impossible to trace the transferee of the same securities. Notwithstanding, in order to cut off adverse claims, and to protect acquirers including collateral takers, UCC Article 8 provides several mechanisms for fulfilling strong innocent acquisition.