Custodial Receipt

DEFINITION of 'Custodial Receipt'

A receipt representing a security held by a custodian or transfer agent. As such, it represents ownership of the security by the depositor. A security in custodial receipt form is usually non-transferable.

BREAKING DOWN 'Custodial Receipt'

In the municipal bond market, custodial receipts refer to securities that represent the right to receive future principal and interest payments on municipal obligations underlying these receipts. In a typical custodial receipt arrangement in this market, an issuer or owner of a municipal obligation deposits it with a custodian in exchange for two or more classes of receipts.