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Notes have no effect on title.  Only mortgages and deeds of trust do, and those are recorded or there are consequences.  But those are just collateral instruments and don't show evidence of the underlying debt.  Notes, CDSes, and other securities don't have recording systems to readily determine who holds them.
by rifek on Wed Mar 14th, 2012 at 02:52:42 PM EST
[ Parent ]
The whole point of having exchanges rather than simply trading over-the-counter is to have a paper trail of who owns what. If the exchange does not keep track of who owns what securities, then it's not doing its job. And tools that do not do their jobs should be replaced or discarded.

Of course, alphabet soup derivatives are typically traded over the counter rather than on exchange. But that's a bug, not a feature.

In Denmark, notes are notarised and placed in a similar sort of central registry as deeds and titles. But then again, in Denmark, everything is noted and registered and recorded in a central registry somewhere.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 16th, 2012 at 05:39:28 AM EST
[ Parent ]
If a CDS were actually treated like an insurance policy, it would not be tradeable.  The CDS could only be held by the buyer of a named beneficiary, and the payment obligation could be transferred only under highly regulated conditions.  But then no one would score an endless series of commissions.
by rifek on Fri Mar 16th, 2012 at 10:06:15 PM EST
[ Parent ]

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