The indirect holding system (also multi-tiered holding system) is a system of securities clearance, settlement and ownership system most widely used in the world today. It consists of one or more tiers of intermediaries between issuer and investor. It is an evolution from the "direct holding system" in which owners of securities had a direct relationship with the issuer.
The system is made up of various tiers, often with an increasing number of entries involved in each of the tiers. The top tier comprises "national" and "international central securities depositories" (CDSs), where large pools of securities of different issuers are immobolised or otherwise concentrated.
The next tier consists of a limited number of financial institutions, brokers, depositories and other professional investors who have direct contractual relationships with the CSDs and who hold their interests in securities in book-entry accounts with a CSD. These intermediaries (sometimes called participants of the CSD) in turn, hold in their accounts interests in or in respect of securities either for themselves or for their customers, such as institutional or retail investors or further intermediaries, and so forth until accounts are held for the investors.