UNIDROIT’s work in the area of capital markets focuses on private law aspects of the holding and transfer of securities, with a view to  identifying best practices and enhancing legal certainty in the sector. This line of work was approved by Governing Council and the adopted General Assembly within the Work Programme of the Institute in 2001, which included a multi-step project entitled “Transactions on Transnational and Connected Capital Markets”.

The instruments adopted through this project provide harmonised and modern rules in order to enhance the internal soundness of domestic financial markets and their cross-border compatibility and, as such, to promote sustainable capital formation.

The Geneva Securities Convention sets key principles and rules regarding the holding, transfer and collateralisation of securities in intermediated securities holding systems. The Principles on Close-Out Netting are designed to improve the enforceability of close-out netting in order to facilitate risk management and secure risk mitigation. The Guide on Intermediated Securities offers recommendations and guidance on the principles and rules of the Geneva Securities Convention as well as related matters not addressed in the Convention.


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Modern capital markets rely upon a system of intermediated holding of securities: the investor holds securities through a chain of intermediaries that are ultimately connected to a central securities depository. Securities transactions are effected by way of book entries to the accounts concerned. However, the legal framework in many countries still relies upon traditional legal concepts first developed for tangible assets held in physical custody. This often creates legal uncertainty, which is multiplied by the fact that securities are increasingly held and transferred across borders, because domestic legal frameworks are not necessarily compatible with each other. Legal risk can, in times of “stress”, even trigger systemic effects.

A sound legal framework is all the more important in light of the extremely high value of securities held in intermediated systems and the enormous volume of transactions in such securities carried out every day. The use of securities as collateral in many instances underpins arrangements for high-value cash transfers. Moreover, securities play an important role in central bank monetary policy transactions and are therefore crucial to the liquidity of the modern financial system as a whole.

The UNIDROIT Convention on Substantive Rules for Intermediated Securities was adopted on 9 October 2009 in Geneva. It aims to promote internal soundness and stability of national financial markets as well as cross-border system compatibility, by setting out the basic substantive legal framework for the modern intermediated securities holding system.

Access the Geneva Securities Convention Webpage

Financial institutions and other financial market participants in their daily operations use a number of mechanisms designed to reduce their risk exposure. Taken together, collateral and close-out netting are key risk management tools in financial markets.

Currently, the extent to which jurisdictions recognise the effects of close out netting in insolvency and the scope and legal effects of close-out netting provisions differ significantly. This global ‘patchwork’ is unsatisfactory in cross-jurisdictional situations, because it undermines legal certainty, increases transaction costs and, generally, makes risk management of financial market participants more difficult.

As a first step towards an international consensus on the legal cornerstones regarding the enforceability of close-out netting provisions, the Geneva Securities Convention contains a definition of close-out netting and a key rule on enforceability.

As a second step, the Principles on the Operation of Close-Out Netting Provisions were adopted by the UNIDROIT Governing Council at its 92nd session (Rome, 8-10 May 2013). Their aim is to provide detailed guidance to national legislators and policy-makers of implementing States seeking to revise or introduce national legislation relevant to the functioning of close-out netting. The Principles are designed to improve the enforceability of close-out netting, especially in cross-jurisdictional situations, in order to provide a sound basis, in commercial and insolvency law terms, for risk management and risk mitigation by market participants.

Access the Close-out Netting Principles Webpage

The UNIDROIT Legislative Guide on Intermediated Securities adopted by the UNIDROIT Governing Council at its 96th session (Rome, 10-12 May 2017) complements the Geneva Securities Convention. The Guide summarises the key principles and rules from the Geneva Securities Convention and offers recommendations and guidance on those principles and rules as well as related matters not addressed in the Convention.

Based on its core and functional harmonisation approach, the Convention provides harmonised rules regarding certain intermediated securities issues, but also leaves various issues to be defined and determined by other rules of law in force in a Contracting State. The Guide explains what is and what is not covered by the Convention and provides guidance for States to consider in creating an intermediated securities holding system or evaluating an existing one. The Guide thus makes clear that the Convention is capable of accommodating different domestic holding systems and rendering their interactions significantly less risky and more predictable.

The Guide intends to promote the creation of comprehensive and coherent sets of legal rules for intermediated securities by promoting the adoption and implementation of the Geneva Securities Convention, and even where the Convention is not adopted, by promoting the implementation of the Convention’s principles and rules in those systems. Either way, the end result would be enhanced legal certainty and economic efficiency with respect to the holding and transfer of intermediated securities, in both domestic and cross-border situations.

Access the Guide on Intermediated Securities Webpage