Book-entry ownership

Book-entry ownership means holding shares as an electronic record in an account rather than as a physical stock certificate. The vast majority of stock in the US is held this way today, tracked through an electronic system rather than represented by a paper document an investor keeps.

In practice, most retail investors hold shares in book-entry form through their broker, which itself holds the shares in street name at a central clearing organization, with the broker keeping its own records of which customer owns what. An investor can also hold shares in book-entry form directly with a company's transfer agent through a direct registration system, without a broker in between, though this is less common for actively traded positions.

Book-entry ownership replaced physical stock certificates as the default because it makes buying, selling, and transferring shares far faster and cheaper, and removes the risk of a certificate being lost, stolen, or destroyed. It also simplifies dividend payments and corporate actions like stock splits, since everything can be updated electronically rather than requiring a shareholder to send in a physical document.