How did 'security' semantically shift to signify 'tradable financial asset'?
What semantic notions underlie the Latinate meanings of 'security' (quoting Etymonline first)
mid-15c., "condition of being secure," from Latin securitas, from securus "free from care" (see secure).
secure [16] Something that is secure is etymologically ‘carefree’. The word was borrowed from Latin sēcūrus, a compound adjective formed from the prefix sē- ‘without’ and cūra ‘care’ (source of English curate, cure, etc). The metaphorical extension from ‘free from care’ to ‘free from danger, safe’ took place in post-Augustan Latin. Sure is in effect a telescoped version of secure.1
to its financial meanings? I first quote OED.
e. Chiefly in plural. Originally: a document held by a creditor as a guarantee of the right to payment, or attesting ownership of property, stock, bonds, etc.; (hence) the financial asset represented by such a document. Also (orig. and chiefly U.S.): such a document issued to investors to finance a business venture.2
Oxford Advanced Learner's Dictionary
6. [uncountable, countable] a valuable item, such as a house, that you agree to give to somebody if you are unable to pay back the money that you have borrowed from them
- securities [plural] (finance) documents proving that somebody is the owner of shares, etc. in a particular company.
I read these quotations to try to answer this question myself, but I still don't grok the semantic shift. Jonathan Davis B.S. Finance, The Ohio State University at Quora:
They are called securities because there is a secure financial contract that is transferable, meaning it has clear, standardized, recognized terms, so can be bought and sold via the financial markets.
Morris Pearl at Quora:
“securities” is really just a word referring to certain things that are bought and sold in the financial markets.
The origin (not really relevant to today’s usage) is that the word “security” referred to the actual paper documents. The papers had no intrinsic value, but were evidence that the owner had a secure interest in receiving something (the payments on the bonds or the dividends on the stocks, etc.)
Benjamin Schak BA Mathematics (Swarthmore), JD magna cum laude (NYU). at Quora.
The original meaning of "security," which dates back to the mid-15th century, was property pledged to guarantee some debt or promise of the owner. Starting in the 17th century, the word came to be used for a document evidencing a debt, and eventually for any document representing a financial investment. By the late 19th century, the word could refer to any tradeable investment — fixed income or equity or otherwise, and collateralized or not.
When used as a mass noun ("I pledged Blackacre and Greenacre as security on my mortgage"), "security" still has the older definition. The newer definition uses "security" as a count noun ("XYZ Company's stock is a volatile security" or "She usually holds securities for a long time").
Our modern usage doesn't quite make sense etymologically, but the same can be said of plenty of words. We don't usually sit on benches to deal with "banks," people who hold bonds don't literally cut "coupons," "preferred equity" is an obvious oxymoron, I can buy a "Eurodollar" contract in Chicago, "hedge funds" take directional views, etc.
1Word Origins (2005 2e) by John Ayto, p 445, first entry at the top on the right column.
1 answer
Let's look at the described phenomena, as they changed over the years.
First we have ownership: the idea that a particular person has a right to determine what is done and not done with a physical object. An owner worries over their property: is this carved stick still with me? They care about it. In order to relieve their frustration, they do something to the physical object that makes it less likely to be taken: they tie it to their belt. Now they are free(r) from caring about the stick, the stick is secure and it has been secured by the loop of string.
Now the owner loans the stick to a neighbor. How can they be sure it will be returned? A long string is impractical. Instead, the neighbor leaves behind a painted rock: as long as the stick is gone, the rock remains, providing security for the neighbor's good behavior. And if the stick does not return, the agreement is that the rock is now the property of the stick's owner.
Investopedia is a good resource here:
https://www.investopedia.com/terms/s/security.asp
"The term "security" refers to a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation via stock; a creditor relationship with a governmental body or a corporation represented by owning that entity's bond; or rights to ownership as represented by an option."
An instrument means that it is an agreement, just like the one that governs the rock-string relationship. "Negotiable" means that it is subject to exchange: it can be traded for a painted rock, and then the ownership of the carved stick is traded in return. "Fungible" is, perhaps, the most interesting part: it is one of many that are so like it, any of them are perfect substitutes for the others. There is no personal attachment to this painted rock or this carved stick, because there are many carved sticks that are so exactly alike we only care that the right number are exchanged, not for which particular sticks they are.
There are agreements which are not fungible but can be negotiated: the ownership of a unique sculpture, for instance. We care a lot about the particular sculpture, so we will make arrangements to reduce our worries -- security.
There are agreements which are not negotiable: a will establishes ownership of parts of an estate, and though the parts can be traded later, the will itself is not an agreement that one can sell.
So, security is the amelioration for worries over ownership, and it can mean anything on this spectrum:
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actions taken to protect an object
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items to hold hostage against the return of your own object
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agreements to exchange hostage objects
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agreements that represent ownership of immaterial objects (equity) or valid debts (bonds), so that these documents can be traded
Does that help?
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