MERJ DEP, the Central Securities Depository (CSD) for the MERJ Exchange group, offers a flexible and robust framework to support global issuers seeking a listing on a MERJ Exchange-operated market. MERJ offers two main frameworks to support these issuers:
- Principal Securities
- MERJ Depository Interests (MDIs)
Option 1: MERJ DEP Maintains the Principal Register or Subregister
In this option, MERJ DEP acts as the registrar or maintains a subregister for the issuer's Principal Securities (or "Registered Securities"). Applicable law of the issuer (e.g. domestic company laws) must permit MERJ DEP to maintain a register or subregister of the Principal Securities and settlement of transactions in same to be in accordance with MERJ rules.
- Register Maintenance: MERJ DEP either maintains the complete register or a subregister of the Principal Securities.
- Global Support: This option accommodates securities issued by companies worldwide, ensuring seamless integration with MERJ Exchange’s settlement systems.
- Transparency and Accountability: MERJ DEP’s role ensures that securities ownership is clearly recorded and tracked, facilitating corporate actions and investor engagement.
Option 2: Depository Nominee Structure with MERJ Depository Interests (MDIs)
The second option involves issuing MERJ Depository Interests (MDIs). In this model, the Principal Securities are held by a depository nominee, MERJ Nominees Ltd., on behalf of the beneficial owners. MDIs are created and issued to represent the ownership interests in those Principal Securities. This model is generally possible for issuers where Option 1 is not possible.
- Depository Nominee: The portion of the issuer’s Principal Securities intended for trading within the MERJ ecosystem is registered in the name of MERJ Nominees Ltd., acting as the Depository Nominee.
- Creation of MDIs: MDIs are credited to the MERJ accounts of investors, representing their beneficial interest in the underlying Principal Securities.
- Flexibility: This approach allows global issuers to integrate with MERJ Exchange while complying with domestic laws and regulations that restrict the location of registers and methods of transfers in their home jurisdictions. The Principal Securities remain in the Depository Nominee’s name, while MDIs circulate in the market.
- Corporate Actions: Holders of MDIs receive all economic benefits (e.g., dividends, voting rights) as though they directly held the Principal Securities.
This model, commonly used by international CSDs such as DTCC (through Cede & Co.) in the USA and Euroclear (through Euroclear Nominees) in Europe, simplifies cross-border issuance and trading by allowing securities to remain immobilized while MDIs provide liquidity and ease of transfer within the MERJ Exchange ecosystem.
Note on Digital Securities
The method of supporting Digital Securities (aks Security Tokens or Tokenized Securities) issued externally (e.g. via an external token platform on a Layer 1 blockchain network) is generally via this Option 2. The Digital Securities must be legally recognized as the Principal Securities according to the domestic law of the issuer. In such cases, MERJ DEP maintains an omnibus wallet in the name of MERJ Nominees.
- Deposits are affected by making a transfer of the Digital Securities to the whitelisted MERJ Nominees address and result in the automatic creation ("minting") and crediting of MERJ Depository Interests to the account of the investor.
- Withdrawals are then affected by requesting same through the MERJ platform and resulting in the debit and cancelation ("burning") of the corresponding MERJ Depository Interests from the account of the investor and transfer to the external wallet indicated.
This method allows MERJ to support a number of blockchain networks and protocols.
Global Issuer Benefits
With these two participation options, MERJ DEP offers flexibility to support issuers in any country where the securities regulator is an IOSCO Member. Whether through direct register maintenance or by utilizing MDIs, MERJ DEP provides issuers with access to a sophisticated, compliant, and efficient securities settlement infrastructure. This framework mirrors models used by DTCC and Euroclear, ensuring that issuers benefit from global best practices in securities management.