The substantive laws in most countries suffer from these fundamental flaws. For example, in common law based countries, deposited securities are treated as a "regular deposit", and the investor is treated as having a traceable property right in individual securities deposited. This may lead to difficulties in ascertaining with sufficient certainty and predictability the substantive law that will govern the investor's rights and obligations or those of possible claimants.

Interests in securities held in an indirect holding system should therefore be defined by legislation or otherwise interpreted as a type of interest in a pro-rata portion of the pool of securities or interests in securities held by an intermediary with whom the investor has a direct contractual relationship evidenced solely by the investor's account with the intermediary, and not as a traceable property right in individual securities or a mere contractual claim. This means that certificates that are deposited are merged with the certificates of the same security that were deposited by other participants (concept of fungibility). Participants therefore lose the right to obtain the exact certificates they deposit. They do however have the right to obtain certificates equal to their book entry holdings of a security. This concept of fungibility is fundamental to book entry systems and critical to ensure liquidity of issues.

In all the countries with a CDS participating in this report, the rights of a depositor with respect to the deposited securities are clearly defined. Generally, the deposited securities are held in a fungible pool in the name of the CDS. The securities are deemed to be held by the CDS on trust on behalf of the depositor who is the beneficial owner. The concept of fungibility seems to be well established in these countries, with adequate legislative backing.