The earliest securities existed in a physical form. For securities trading, it was necessary to transfer, deliver and register the physical securities between parties to the transaction. However, a large number of physical securities cannot be transferred in a timely manner with the expansion of the securities market and the explosion in trading volume. In order to improve trading efficiency, investors deliver their physical securities to securities companies for custody (known as securities custody). The securities companies then deliver their own securities, together with the securities from investors, to securities registration and clearing institutions for collective custody (known as securities deposit), which record the ownership and change of securities through electronic bookkeeping and provide interest safeguard services, thus achieving the “non-mobility” of securities. In the presence of collective deposit, the market has evolved towards “paperless securities” without issuing physical securitiesand only CSD establishes securities account for securities bookkeeping to improve efficiency of securities settlement.
       The securities market in China has achieved the transition from physical to paperless securities only in the short time since its early establishment. The CSDC undertakes the securities deposit function. The holders must deposit all their securities at the CSDC upon listing securities for trading.
       To engage themselves in the China securities market, investors are required to build trusteeship with a securities company that will keep securities, collect dividends and offer other interest safeguard services to and for clients. The CSDC offers securities companies collective deposit of securities (from their clients and their self-owned securities) upon entrustment as well as interest safeguard services. Specific services include opening and managing securities account, maintaining the balance of securities deposited by securities companies (from their clients and their self-owned securities) by a bookkeeping system, offering query and dividend  collection services, and recording the establishment, change and termination of trusteeship between securities companies and clients.
       In the Shanghai and Shenzhen markets, the trusteeship between securities companies and clients presents some differences: in the Shanghai market, investors can only select one securities company as the entrusted agency to trade securities, i.e. known as a “designated trading” system, while in the Shenzhen market, investors may select several securities companies as the entrusted agencies to trade securities. Once buying of securities from any securities company succeeds, the trusteeship with the securities company is automatically established.
       In the Shenzhen market, clients with an established trusteeship can transfer their securities deposited at one securities company to another for custody through the securities custody transfer system, on condition that the former custody securities company has already performed clearing and settlement obligations without any default. In the Shanghai market, the issue of the securities custody transfer system does not exist. Release of trusteeship requires cancellation of designated trading.
       In addition, some cross-market custody transfer businesses are also available in the China securities market, including listing enterprise bonds and transferring their custody, cross-market custody transfer of treasury bonds, cross-system custody transfer of listed open-end funds, etc.