8th asean+3 bond market forum (abmf) meeting

8th ASEAN+3 Bond Market Forum (ABMF) Meeting Makati ShangriLa Hotel, Metro Manila, Philippines,

17 18 April 2012

1 of 2

DATE & TIME PROGRAM

17 Apr 2012 DAY 1: ABMF Sub Forum 1 (SF1)

08:30 – 09:00 Registration

ABMF SF 1

09:00 – 09:10 Welcome Remarks by Commissioner Ma. Juanita E. Cueto, Securities and Exchange Commission, Philippines

09:10 – 09:20 Opening Remarks by SF1 Chair (Mr. Tetsutaro Muraki, Tokyo-AIM)

09:20 – 10:20

Session 1: Developing common bond issuance program (Part 1) - Presentations by Prof. Shigehito Inukai, ADB consultant, and others on the

issues and approaches - Comments on Research and Discussion Issues by KOFIA

10:20 – 10:40 Coffee break

10:40 – 12:00 Session 2: Developing common bond issuance program (Part 2) - Q and A

12:00– 13:30 Lunch Break (hosted by BAP, Makati A-B)

13:30 – 15:00

Session 3: (Information session) : Mapping National Scale Ratings Across Sovereigns in Asia - Presentation by Mr. Faheem Ahmad, ACRAA - Q and A

15:00 – 16:00

Session 4: (Information session) : European Experience on developing cross-border bond transactions’ post-trade harmonisation - Presentation by Boon-Hiong Chan, Deutsche Bank - Q and A


16:20 – 17:20

Session 5: (Information session) : Information on Other Issues - Case Study on TPBM: ING N.V by Mr. Kazuhiro Iida, Tokyo AIM, Inc. - Current Issuance Window in the Japanese Bond Market by Ms. Reiko

Nobuhiro, Nomura Securities, Co., Ltd. - Q and A

17:20 – 17:50

Session 6: Other issues of SF1 - Updates and management of phase 1 reports (Mr. Seung Jae Lee) - Dissemination of the phase 1 reports (Mr. Matthias Schmidt) - Q and A

17:50 – 18:00 Wrap up by ADB Secretariat (Mr. Seung Jae Lee, ADB Secretariat)

18:00 – 18:10 Closing Remarks by SF1 Chair (Mr. Tetsutaro Muraki, Tokyo-AIM)

18:30 – 20:30 Cocktail dinner hosted by PDS Group (Banquet Hall & Mabini, Milkyway Restaurant)

8th ASEAN+3 Bond Market Forum (ABMF) Meeting Makati ShangriLa Hotel, Metro Manila, Philippines,

17 18 April 2012

2 of 2

DATE & TIME PROGRAM

18 Apr 2012 DAY 2: ABMF Sub Forum2 (SF2)

08:30 – 09:00 Registration

ABMF SF2

09:00 – 09:10 Welcoming Remarks by Mr. Noritaka Akamatsu, Deputy Head of OREI, ADB

09:10 – 09:20 Opening Remarks by SF2 Chair (Mr. Jong Hyung Lee, KSD)

09:20 – 10:40

Session 7: Focus of Phase 2 activities (Part 1) - Presentation by Dr. Taiji Inui, ADB consultant - Others on the issues and approaches (Mr. Shinji Kawai, ADB secretariat) - Philippine transaction flow by Mr. Antonino A. Nakpil, PDS Group


11:00 – 12:00 Session 8: Focus of phase 2 activities (Part 2) - Q and A

12:00 – 13:30 Lunch Break (hosted by ADB, Manila A-B)

13:30 – 14:30

Session 9: (Information session) : Database for managing standards and market practice - Presentation by Alexandre Kech, SWIFT - Q and A

14:30 – 15:30

Session 10: (Information session) : Information on other issues - Recent progress in LEI discussion by Mr. Taketoshi Mori, The Bank of

Tokyo Mitsubishi UFJ Ltd. - Supplementary information on LEI by Ms. Rebecca Turner, Asia Securities

Industry & Financial Markets Association (ASIFMA) - Q and A


15:50 – 16:20

Session 11: Other issues of SF2 - Updates of phase 1 reports (Mr. Seung Jae Lee, ADB Secretariat) - Dissemination of the phase 1 reports (Mr. Matthias Schmidt) - Q and A

Wrap up session

16:20 – 16:50 Future work plan and Wrap up (Mr. Seung Jae Lee, ADB Secretariat) - Q&A

16:60 – 17:00 Closing remarks by SF2 Chair (Mr. Jong Hyung Lee, KSD)

17:30 – 20:30 Dinner hosted by Bureau of the Treasury (Plaza Moriones, Fort Santiago,Intramuros)

18th April 2012, Manila, Philippines

8th ABMF SF2 - Phase2 Questionnaire

Attachments

Taiji Inui

NTT DATA Corporation

ADB Consultant - Financial Information Technology Specialist

Agenda of SF2 Manila Meeting

1

3

Trading

Trade matching

CCP

Settlement match.

Bond settlement

Cash settlement

JASDEC (PSMS)

JGBCC

BOJ

(BOJ-NET JGB Services)

BOJ (BOJ-NET Funds Transfer System)

BOJ: Bank of JapanJGBCC: Japanese Government Bond Clearing CorporationJSCC: Japan Securities Clearing CorporationJASDEC: Japan Securities Depository Center, Inc.

1.1 Bond Market Infrastructure Diagram(Government Bond)

TSE

JSCC

Tokyo OTC market

JASDEC

(PSMS)

Tra

n. Flo

w for

JGB

Tra

n. Flo

w for

JGB (

via P

SM

S)

Tra

ns.

Flo

w for

Fore

ign I

nve

stors

JGB: Japanese Government BondOTC: Over the CounterPSMS: Pre-Settlement Matching SystemTSE: Tokyo Stock Exchange

JP

4

Trading

Trade matching

CCP

Settlement match.

Bond settlement

Cash settlement

JASDEC (PSMS)

JASDEC

(Book-Entry Transfer System)

BOJ (BOJ-NET Funds Transfer System)

BOJ: Bank of JapanJASDEC: Japan Securities Depository Center, Inc.

1.2 Bond Market Infrastructure Diagram(Corporate Bond)

Note1: Non fixed income bonds such as convertible bonds are not included here.

Tokyo OTC market

JASDEC (PSMS)

Tra

ns.

Flo

w for

Fore

ign I

nve

stors

Tra

n. Flo

w for

Corp

ora

te B

ond

OTC: Over the CounterPSMS: Pre-Settlement Matching System

JP

JASDEC

(PSMS)

(Book Entry Transfer System)

Sell Side Buy Side1. Trade

2. Trade Report

4. Notice of Matching

Status


Status

2. Trade Report

14.Bond Settlement

13.Settlement Report

(Cash) 13. Settlement Report

(Cash)

15. Settlement Report

(Bond)

BOJ(BOJ NET)

12.Cash Settlement

8. Holding Bonds

9.Fund Settlement Data

for DVP

12. Notice of Receipt

Completion (Cash)

3. Trade Matching

6. Settlement Matching

10. Payment Request

(Cash)

11. Payment Instruction

(Cash)


Status


Status

15. Settlement Report

(Bond)

5

5. Standing Settlement

Instruction

2. Corporate Bond Transaction Flow JP

1. The sell side and buy side trade corporate bond over-the-counter.

2. Both sell side and buy side send Trade Report data into PSMS (Pre-Settlement Matching System).

3. PSMS performs trade matching.

4. PSMS sends the Notice of Matching Status to both sides of trade.

5. PSMS produces Standing Settlement Instruction.

6. PSMS performs settlement matching and sends the data to Book Entry Transfer System.

7. PSMS sends Notice of Matching Status to sell side and buy side.

8. Book Entry Transfer System holds bonds..

9. Book Entry Transfer System sends Funds Settlement Data for DVP to BOJ-NET.

10. BOJ-NET sends Payment Request (Cash) to buy side.

11. Buy side sends Payment Instruction (Cash) to BOJ-NET.

12. BOJ-NET performs Cash Settlement and sends Notice of Receipt Completion (Cash) to Book Entry Transfer

System.

13. BOJ-NET sends Settlement Report (Cash) to sell side and buy side.

14. Book Entry Transfer System performs bond settlement.

15. Book Entry Transfer System sends Settlement Report (Bond) to sell side and buy side.

2. Description of Corporate Bond Transaction Flow

6

JP

Sample Answer, Japan

3.1.1 Interest Payment of Government bond

3.2.1 Interest Payment of Corporate bond

3.3.1 Redemption Payment with final interest payment of

Government bond

3.4.1 Redemption Payment with final interest payment of

Corporate bond

7

3.1.1 Interest Payment Flow of Government Bond

Bond Issuer

SideCSD

Bond Holder

Side

MOF

(Ministry of

Finance)

Account

Management

Institution

Tax Office

9. Tax payment (local tax)

BOJ

as

CSD

Bond Holder

7.Interest payment

8

BOJ

as

Paying

Agent

1.Payment

request 2.Approval

5.Interest Payment via BOJ-NET

8.Tax payment (income tax)

6. Notification of Payment Details (settled)

Same Entity

(No confirmation

necessary)

3. Notification of Payment Details (estimated)

4. Notification of Payment Details (final)

JP

1. Bonk of Japan (BOJ) as a paying agent sends a request of interest payment to Ministry of Finance (MOF).

2. MOF approves the request of interest payment from BOJ.

3. BOJ as a paying agent notifies estimated details of interest payment to account management institutions. Since BOJ also functions as CSD of government bond, no confirmation is necessary before this process.

4. BOJ as a paying agent notifies final details of interest payment to account management institutions.

5. BOJ as a paying agent makes interest payments, deducting income tax if applicable, to account management institutions via BOJ-NET.

6. BOJ as a paying agent notifies details of a settled interest payment to account management institutions.

7. Account management institutions credit to bondholder’s accounts with interest paid by BOJ, deducting local tax if applicable.

8. BOJ as a paying agent pays income tax to the tax office if applicable.

9. Account management institutions pay local tax to the tax office if applicable.

Process of Interest Payment

9

3.1.1 Interest Payment Flow of Government Bond JP

3.2.1 Interest Payment Flow of Corporate Bond

Bond Issuer Side CSD Bond Holder Side

Bond Issuer Bond Holder

JASDEC

Tax Office

1.Payment

request

2.Fund

payment

3.Bondholder’s

tax status data

3.Bondholder’s tax

status data

4.Payment

request

5.Approval

6.Interest Payment (via BOJ Net)

7.Interest payment

8.Tax payment (income tax) 9.Tax payment (local tax)

Paying

Agent

Account

Management

Institution

10

JP

1. A paying agent sends a payment request of interest to a bond issuer.

2. A bond issuer makes fund payment to a paying agent.

3. Account management institutions of bond holders send the tax status data of bondholders to JASDEC.

4. JASDEC sends a payment request of interest to a paying agent.

5. A paying agent approves the request from JASDEC.

6. A paying agent makes interest payments, deducting income tax if applicable, to account management institutions via BOJ-NET.

7. Account management institutions credit to bondholder’s accounts with interest paid by a paying agent, deducting local tax if applicable.

8. A paying agent pays income tax to the tax office if applicable.

9. Account management institutions pay local tax to the tax office if applicable.



11

JP

3.3.1 Redemption Payment Flow with final Interest Payment of Government Bond

Bond Issuer

SideCSD

Bond Holder

Side

MOF

(Ministry of

Finance)

Account

Management

Institution

Tax Office

9. Tax payment (local tax)

BOJ

as

CSD

Bond Holder

3. Notification of Payment Details (estimated)

7.Redemption

payment

BOJ

as

Paying

Agent

1.Payment

request 2.Approval

5a.Redemption Payment via BOJ-NET(DVP)

8.Tax payment (income tax)

6. Notification of Payment Details (settled)

Same Entity

(No confirmation

necessary)

12

5b.Redemption

(DVP)

4. Notification of Payment Details (final)

JP

1. Bonk of Japan (BOJ) as a paying agent sends a payment request of redemption to Ministry of Finance (MOF).

2. MOF approves the request of redemption payment from BOJ.

3. BOJ as a paying agent notifies estimated details of a redemption payment to account management institutions. Since BOJ also functions as CSD of government bond, no confirmation is necessary before this process.

4. BOJ as a paying agent notifies final details of a redemption payment to account management institutions.

5a. BOJ makes redemption payments, principal and last interest, deducting income tax if applicable, to account management institutions via BOJ-NET on DVP basis.

5b. BOJ makes bond redemption on DVP basis.

6. BOJ as a paying agent notifies settled details of a redemption payment to account management institutions.

7. Account management institutions credit to bondholder’s accounts with principal and last interest paid by BOJ, deducting local tax if applicable.

8. BOJ pays income tax (for final interest payment) to the tax office if applicable.

9. Account management institutions pay local tax (for final interest payment) to the tax office if applicable.

Process of Redemption Payment

13

3.3.1 Redemption Payment Flow with final Interest Payment of Government Bond JP

3.4.1 Redemption Payment Flow with final Interest Payment of Corporate Bond



Tax Office

1.Payment

request

2.Fund

payment

3.Bondholder’s

tax status data

3.Bondholder’s tax

status data

4.Payment

request

5.Approval

6a.Redemption Payment via BOJ-Net (DVP)

9.Redemption

payment

10.Tax payment (income tax) 11.Tax payment (local tax)

Account

Management

Institution

7.Redemption notice

6b.Redemption(DVP)

JASDEC

8.Delete bond registration

Paying Agent

14

JP

1. A paying agent sends a payment request of redemption to a bond issuer.

2. A bond issuer makes fund payment, principal and last interest, to a paying agent.

3. Account management institutions of bond holders send the tax status data of bondholders to JASDEC.

4. JASDEC sends a payment request of redemption to a paying agent.

5. A paying agent approves the request from JASDEC.

6a. A paying agent makes redemption of principal and last interest to account management institutions via BOJ-NET on DVP basis, deducting income tax if applicable.

6b. JASDEC makes bond redemption on DVP basis.

7. JASDEC notifies a paying agent and account management institutions of redemption.

8. A paying agent deletes the registration of redeemed bond.

9. Account management institutions credit to bondholder’s accounts with principal and last interest paid by a paying agent, deducting local tax if applicable.

10. A paying agent pays income tax (for final interest payment) to the tax office if applicable..

11. Account management institutions pay local tax (for final interest payment) to the tax office if applicable.


15

3.4.1 Redemption Payment Flow with final Interest Payment of Corporate Bond JP

Sample Answer, Indonesia


3.4.1 Redemption Payment of Corporate bond

16



Bond Holder

Tax Office

3.DGT Forms*2. Tax docs*

(DGT Forms)

8.Interest

payment

9.Tax docs

& tax payment

KSEI’s Payment

Bank

Custodian

Bank

1.Announcement

4b.List of bondholders

7.Interest

Payment

(net of tax)10.Proof of tax

payment

6.Fund payment

(gross before tax)

12.Proof of tax payment

*only if the foreign investors would like to enjoy the tax treaty benefits

4a. Member

Entitlement

5. DGT FormsBond Issuer

KSEI

11.Proof of

Tax Payment

17

ID

1. KSEI announces payment of interest to custodian banks.

2. Bond holders send tax docs in DGT forms for investors who want to enjoy tax teat benefit to custodian banks.

3. Custodian banks send tax docs in DGT forms to KSEI.

4a. KSEI entitles custodian banks as members.

4b. KSEI sends the list of bond holders to a bond issuer.

5. KSEI sends tax docs in DGT forms to a bond issuer

6. A bond issuer makes fund payment to KSEI’s payment bank.(gross before tax)

7. KSEI’s payment bank makes interest payments to custodian banks.

8. Custodian banks credit to bondholder’s accounts with interest paid by KSEI’s payment bank.

9. A bond issuer sends tax docs and makes tax payment to the local tax office.

10. The local tax office sends a proof of tax payment to a bond issuer.

11. A bond issuer sends a proof of tax payment to KSEI.

12. KSEI sends a proof of tax payment to custodian banks.



18

ID

3.4.1 Redemption Payment Flow of Corporate Bond



Tax Office

3.DGT Forms*2. Tax docs*

(DGT Forms)

10.Interest

payment

11.Tax docs

& tax payment

Custodian

Bank

1.Announcement

4b.List of bondholders

7.Interest

Payment

(net of tax)12.Proof of tax

payment

11.Proof of

Tax Payment

6.Fund payment

(gross before tax)

13.Proof of tax payment

*only if the foreign investors would like to enjoy the tax treaty benefits

4a. Member

Entitlement

5. DGT Forms

8. Redemption


KSEI

KSEI’s Payment Bank

19

ID

1. KSEI announces payment of interest to custodian banks.

2. Bond holders send tax docs in DGT forms for investors who want to enjoy tax teat benefit to custodian banks.

3. Custodian banks send tax docs in DGT forms to KSEI.

4a. KSEI entitles custodian banks as members.

4b. KSEI sends the list of bond holders to a bond issuer.

5. KSEI sends tax docs in DGT forms to a bond issuer

6. A bond issuer makes fund payment to KSEI’s payment bank.(gross before tax)

7. KSEI’s payment bank makes interest payments to custodian banks.

8. KSEI makes bond redemption.

9. KSEI’s payment bank deletes the registration of redeemed bond.

10. Custodian banks credit to bondholder’s accounts with interest paid by KSEI’s payment bank.

11. A bond issuer sends tax docs and makes tax payment to the local tax office.

12. The local tax office sends a proof of tax payment to a bond issuer.

13. A bond issuer sends a proof of tax payment to KSEI.

14. KSEI sends a proof of tax payment to custodian banks.



20

ID

Sample Answer, Korea


3.4.1 Redemption Payment of Corporate bond

21



Bond Holder

KSD

KFTC

(KOREA FINANCIAL TELECOMMUNICATIONS & CLEARINGS INSTITUTE)

4.Fund payment

(deposit interest)

8.Interest payment

Payment BankKSD

Participant

5.Interest

Payment

(via BOK-

Wire+)

RegisterBond Issuer

6.Interest

Payment

(via BOK-

Wire+)

KSD’s Bank

1.Application for Exchange

2.Submit Bonds3.Exchange Confirmation

Notification of

bond holder’s list7.Interest payment list

notification

22

KR

1. KSD sends an application for exchange to KSD’s bank.

2. KSD’s bank submit bonds to KFTC.

3. KFTC sends an exchange confirmation to a payment bank of a bond issuer.

4. A bond issuer makes fund payment for interest to a payment bank.

5. A payment bank makes netted fund payment to KSD’s bank.

6. KSD’s bank makes interest payment to KSD participants.

7. KSD notifies KSD participants of interest payment list.

8. KSD participants make interest payments to bondholders.


3.2.1Interest Payment Flow of Corporate Bond

23

KR



Bond Holder

KFTC

(KOREA FINANCIAL TELECOMMUNICATIONS & CLEARINGS INSTITUTE)

4.Fund payment

(deposit principal)

10.Redemption

payment

KSD

Participant

5.Redempti

on payment

(via BOK-

Wire+)

RegisterBond Issuer

KSD’s Bank

1.Application for Exchange

2.Submit Bonds3.Exchange Confirmation

Notification of

bondholder’s list

6.Redempti

on payment

(via BOK-

Wire+)

9.Redemption payment

list notification

7. Redemption

KSD


Payment Bank

24

KR

1. KSD sends an application for exchange to KSD’s bank.

2. KSD’s bank submit bonds to KFTC.

3. KFTC sends the exchange confirmation to a payment bank of a issuer.

4. A bond issuer makes fund payment for interest to a payment bank.

5. A Payment bank makes netted fund payment to KSD’s bank.

6. KSD’s bank makes redemption payment to KSD participants.

7. KSD makes bond redemption.

8. A payment bank deletes the registration of redeemed bond.

9. KSD notifies KSD participants of redemption payment list.

10. KSD participants make redemption payments to bondholders.



25

KR

4.1 Model of Cross-Border Bond Transaction FlowCustomer Side Street Side

Investment

Manager

Local

Broker/

Dealer

Local

Broker

/

Dealer

D: CSD

E: Central

Bank

OTC Market

or

Trading System

CSD

Central

Bank

Global

Custodian

Local

Custodian

C3.Instruction

C11.Settelemnt Data(DVP)

International

BrokerB: Post-trade

Matching

Cross-Border

allocation

C4.CreateInstruction

C6.Accept&

SendInstruction

C9.Accept&

SendInstruction

C.7Instruction And

Matching status

C.7Instruction

And

Matching

status

C8.Pre

Matching

Status

C5.

Instruction

C10.Instruction

And

Settlement

ConfirmationC10.Instruction And

Settlement Confirmation

C1.Order C1.Order

C2.AffirmationC2.

Affirmation

C1.Order

C2.

Affirmation

S1.

Order

S1.

Order

C12.

Settlement

Confirmation

C14.

Settlement

Confirmation

C13.

Settlement

Confirmation

C13.Settlement

Confirmation

Cross-Border

C: Pre-

Settlement

Matching

As

Correspondent

Bank

Correspondent

Bank

S5.Settelemnt Data(DVP)

S6.

Settlement

Confirmation

S6.

Settlement

ConfirmationCorrespondent

Bank

C11.Settelemnt Data S5.Settelemnt Data

S4.Instruction

And

Settlement

Confirmation

S4.Instruction

And

Settlement

Confirmation

F: CCP

S2.Instruction

And

Settlement

Data

S2.Instruction

And

Settlement

Data

S3.Settelemnt Data

C3-2.Instruction

(From Post-trade Matching)

C9-2.Instruction

(From Pre-settlement Matching)

A: OTC Market

or

Trading System

26

4.3 Network between market infrastructures and

participants

27


participants

28


participants

29

Business elements Additional information

1. Instruction Identification 16x / Max 35 text

2. Trade Date ISO 8601 Date/Time

3. Settlement Date ISO 8601 Date/Time

4. Quantity of Financial Instrument Expressed as units (equities) or face amount

(Fixed Income)

5. Financial Instrument ISO 6166 International Securities Identification

Number [ISIN]

6. Settlement Amount Currency and amount

7. Safekeeping Account to be credited or debited 35x / Max 35 text

8. Place of Settlement ISO 9362 Business Identifier Codes [BIC] taken

from the list of PSET’s BIC published on

www.smpg.info. See also Place of Settlement MP.

9. Receiving/Delivering Agent ISO 9362 Business Identifier Codes [BIC] or CSD

Local Code

10. Client of Receiving/Delivering Agent ISO 9362 Business Identifier Codes [BIC]

11. Country specifics as per local market practice

(if any)

Country specifics as per local market practice (if

any)

5.1 Message Elements of 10 Common Elements in Settlement Instruction

Source: SWIFT (Ms. Morioka), original source SMPG

30

5.2 Message Elements of 10 common elements in Settlement Confirmation

10 Common Elements in Settlement Instruction

Source: SMPG (Settlement Common Elements) 31

6． 16Patterns of cross-border DVP(presented at Hong Kong Meeting)

Case Bond Cash Seller Buyer Market Comments

1 KOR KOR KOR KOR KTB is traded in Seoul market and settled in KSD.

Cash is settled in BOKWire for KRW.

Seoul (Domestic) market

2 KOR KOR KOR HKG KTB is traded in “cross-border market” and settled

in KSD. Cash is settled in BOKWire for KRW.

Buyer remotely accesses to Seoul

market from Hong Kong

3 KOR KOR HKG KOR KTB is traded in “cross-border market” and settled

in KSD. Cash is settled in BOKWire for KRW.

Seller remotely accesses to Seoul

market from Hong Kong

4 KOR KOR HKG HKG KTB is traded in Hong Kong market and settled in

KSD. Cash is settled in BOKWire for KRW.

Both seller and buyer remotely access

to Seoul market from Hong Kong

5 KOR HKG KOR KOR KTB is traded in Seoul market and settled in KSD.

Cash is settled in CHATS for HKD.

Seoul market but cash settlement

currency is HKD.

6 KOR HKG KOR HKG KTB is traded in “cross-border market” and settled

in KSD. Cash is settled in CHATS for HKD.

Sell KTB in Seoul to buyer in Hong Kong.

Cash settlement currency is HKD.

7 KOR HKG HKG KOR KTB is traded in “cross-border market” and settled

in KSD. Cash is settled in CHATS for HKD.

Local subsidiary of Korean bank gets

liquidity in Hong Kong by selling KTB to

buyer in Seoul

8 KOR HKG HKG HKG KTB is traded in Hong Kong market and settled in

KSD. Cash is settled in CHATS for HKD.

Local subsidiary of Korean bank gets

liquidity in Hong Kong by selling KTB in

Hong Kong.

32

Case Bond Cash Seller Buyer Market Comments

9 HKG KOR KOR KOR EFBN is traded in Seoul market and settled in CMU.

Cash is settled in BOKWire for KRW.

Subsidiary of Hong Kong bank gets

liquidity in Seoul by selling EFBN in

Seoul.

10 HKG KOR KOR HKG EFBN is traded in “cross-border market” and

settled in CMU. Cash is settled in BOKWire for KRW.

Local subsidiary of Hong Kong bank

gets liquidity in Seoul by selling EFBN to

buyer in Hong Kong

11 HKG KOR HKG KOR EFBN is traded in “cross-border market” and

settled in CMU. Cash is settled in BOKWire for KRW.

Sell EFBN in Hong Kong to get KRW in

Seoul. Settlement currency is KRW.

12 HKG KOR HKG HKG EFBN is traded in Hong Kong market and settled in

CMU. Cash is settled in BOKWire for KRW.

Hong Kong market but cash settlement

currency is KRW.

13 HKG HKG KOR KOR EFBN is traded in Seoul market and settled in CMU.

Cash is settled in CHATS for HKD.

Both seller and buyer remotely access

to Hong Kong market from Seoul.

14 HKG HKG KOR HKG EFBN is traded in “cross-border market” and

settled in CMU. Cash is settled in CHATS for HKD.

Seller remotely accesses to Hong Kong

market from Seoul.

15 HKG HKG HKG KOR EFBN is traded in “cross-border market” and

settled in CMU. Cash is settled in CHATS for HKD.

Buyer remotely accesses to Hong Kong

market from Seoul.

16 HKG HKG HKG HKG EFBN is traded in Hong Kong market and settled in

CMU. Cash is settled in CHATS for HKD.

Hong Kong (domestic) market

33

6.1 16Patterns of cross-border DVP(presented at Hong Kong Meeting)

Cross-border DVP (cross-border market: case 6)

34

KSD

Book-entry System

KTB a/c

BA

BOKWire

CMU

CHATS

HKD a/c

AB

Seller

Bank A

Buyer

Bank B

KOR HKG

Cross-

border

market

Cross-border DVP (Hong Kong market: case 8)

35

KSD

Book-entry System

KTB a/c

BA

BOKWire

CMU

CHATS

HKD a/c

AB

Seller

Bank A

Buyer

Bank B

KOR HKG

6.1 Cross-Border Bond Transaction Flow (Case6)

Economy-A Economy-B

Sell

side

Bond Market

（Exchange or OTC）

Buy

sideSeller → Buyer

Buyer → Seller

CSD-A

Central Bank-B

CSD-B

Book-Entry System

RTGS System

Cross-Border

Trade 1.Trade

instruction instruction

result

result

result

DVP

result

result

instruction

Access

Control

36

6. 2 Cross-Border Bond Transaction Flow (Case8)

Economy-A Economy-B

Sell

side

Bond Market

Buy

sideSeller → Buyer

Buyer → Seller

CSD-A

Central

Bank-B

CSD-B

Book-Entry System

RTGS System

Cross-Border

Trade Trade

instruction

instruction

result

result

DVP

result

result

instructionAccess

Control

37

Sell

side

result

instruction

7. Roadmap

Could you refer to the page 41 of handout

“Questionnaire for Phase2 of ABMF SF2 (draft)”,

please?

8. Follow-up of Phase 1 Survey

Could you refer to the page 60 of handout

“Questionnaire for Phase2 of ABMF SF2 (draft)”,

please?

8.2 Protocols and Message Formats in ASEAN+3 Bond Markets

Market①Between CSD and seller/buyer

②Between Cash Settlement System

and a seller/a buyer

Linkage Protocol Message Format Protocol Message Format

CN OTC direct link・TCP/IP

・HTTP, SOAP・XML and Text ・TCP/IP －

HK OTC direct link ・TCP/IP ・ISO15022 ・TCP/IP ・SWIFT

ID OTC terminal access・SNA. TCP/IP

will be adopted

・Proprietary.

SWIFT will be

adopted.

・SNA. TCP/IP will

be adopted.

Proprietary.

SWIFT will be

adopted.

JP OTC direct link ・TCP/IP

・Proprietary.

ISO20022 will be

applied (CSV and

XML)

・TCP/IP

Proprietary.

ISO20022 will be

adopted.

KR OTC direct link ・TCP/IP －・TCP/IP －MY OTC terminal access ・TCP/IP －・TCP/IP －

PHOTC

GSEDterminal access

・TCP/IP

・HTTPS・Proprietary ・TCP/IP ・SWIFT

SG OTC terminal access ・TCP/IP －・TCP/IP －

TH OTC terminal access・TCP/IP

・HTTPS－・TCP/IP －

VN OTC terminal access ・TCP/IP ・XML －－

40

8.2 Reporting Rules in ASEAN+3 Markets

Economy Entity Which Receive a Report Reporting Rule

CNChina Foreign Exchange Trade System

(CFETS)

The trade data are entered to CFETS for price

transparency.

HK - -

ID Indonesia Stock Exchange (IDX)

The seller or buyer have to report trade data to Centralized

Trading Platform (CTP) of Indonesia Stock Exchange (IDX)

within 30 minutes of trade.

JP - -

KR Korea Financial Investment Association (KOFIA)

A financial investment company engaged in bond trading

should report the details to KOFIA.

MY Bursa Malaysia(BM)

BM runs Electronic Trading Platform (ETP), and the seller

and buyer have to input all trades to ETP.

PHPhilippine Dealing and Exchange Corporation

（PDEx）The seller or buyer have to report trade data to Philippine

Dealing and Exchange Corporation（PDEx）.

SG - -

TH ThaiBMA

All debt securities trading transactions, wherever it is done,

must be reported to the ThaiBMA. The ThaiBMA monitors

the reported price data to ensure that disseminated prices

are efficient to be used as market reference.

VN - -

41

8.2 Matching Types in ASEAN+3 Markets

Trade matching Pre-settlement matching Settlement matching

CN CFETS - Central/Local

HK CMU Central/Local

ID - Telephone, facsimile, etc. Central

JP PSMS PSMS Local

KR B-TRis - Central/Local

MY (BMS ETP) RENTAS Local

PHFI trading system

/RoSSTelephone, facsimile, etc. Central /Local

SG - PTI, Telephone, etc. Local

TH - Telephone, facsimile, etc. Central

VN HNX - Central

42

8.2 Operating Hours

ＣＳＤ Operating Hour (ASEAN time)

Open Cut off Time

CN CCDC - -

CSDCC - -

HK CMU 8:30 (7:30) 18:30 (17:30)

ID BI 6:30 (6:30) 19:00 (19:00)

JP BOJ 9:00 (7:00) 16:30 (14:30)

JASDEC 9:00 (7:00) 17:00 (15:00)

KR KSD 9:00 (7:00) 17:00 (15:00)

MY MyClear - -

PH BTr-RoSS 9:30 (8:30) 15:30 (14:30)

PDTC 8:00 (7:00) 18:00 (17:00)

SG MAS - -

TH TSD - -

VN VSD - -

43

8.2 Numbers and Codes in ASEAN+3 Markets

MarketSecurities

numbering

Financial Institution

IdentificationSecurities account Cash account

Character code and

language

CN OTC Proprietary code Proprietary code Proprietary code Proprietary code UNICODE (UTF8)

HK OTCISIN and proprietary

code(CMU issues） Proprietary code Proprietary code Proprietary codeCode supported by

SWIFT

ID OTCISIN and proprietary

code

BIC and proprietary

codeProprietary code Proprietary code -

JP OTCISIN and proprietary

code

BIC and proprietary

codeProprietary code Proprietary code UNICODE (UTF8)

KR OTCISIN and proprietary

code

Proprietary code

(account number)Proprietary code

・KSC5601 for

Korean

MY OTC - - - - -

PH OTC

ISIN and proprietary

code for

government

securities

Proprietary code

(PDS-assigned firm

codes)

Proprietary code Proprietary code UNICODE (UTF8)

SG OTC - - - - UNICODE (UTF8)

TH OTC ISIN BIC Proprietary code Proprietary code UNICODE (UTF8)

VN OTCISIN and proprietary

codeN/A Proprietary code N/A UNICODE (UTF8)

44

8.4.1 Account Structure of Government Bond JP

Account Structure

BOJ

JGB Account Book

Direct Participant X Direct Participant YAccount of

BOJ・・・

Own

Account

Customer’s

Account

Own

Account

Customer’s

Account

Own

Account

Customer’s

Account

Direct Participant X

Account Book

Indirect Participant A

Custo

mer’s

AccountOwn

Account

Customer’s

Account

Custo

mer’s

Account

Indirect Participant A

Account Book

Custo

mer’s

Account

Custo

mer’s

Account

Custo

mer’s

Account

Custo

mer’s

Account

Direct Participant X

Account Book

Foreign

Indirect Participant B

Custo

mer’s

AccountOwn

Account

Customer’s

Account

Foreign

Indirect Participant B

Account Book

Custo

mer’s

Account

Custo

mer’s

Account

Custo

mer’s

Account

Custo

mer’s

Account

Code Structure

Participant Code

４ Digits Numeric

Participant Type

４ Digits Numeric

Account Type

2 Digits Numeric

Account code of JGB Account Book (8Digits）

X X X X X X X X

Cu

sto

me

r Ⅰ

Participant type 01

・・

Cu

sto

me

r Ⅱ

Pro

prie

tary

Ⅰ

Pro

prie

tary

Ⅱ

Pro

prie

tary

Ⅲ

Cu

sto

me

r Ⅰ

Pro

prie

tary

Ⅳ

Participant type 02

Participant Account 1234Participant

Account 2345

11 12 01 02 03 11 04

Example of Participant’s Account

45

People’s Republic of China (PRC)

Hong Kong , China

Indonesia

Japan

Republic of Korea

Malaysia

Philippines

Singapore

Thailand

Viet Nam

Lao, PDR

ISO 3166-1 alpha-3ISO 3166-1 alpha-2 ADB 3 letter code

BRNBN (BRN)

Cambodia

Brunei Darussalam

Myanmar

KHMKH (KHM)

CHNCN PRC

HKGHK HKG

IDNID INO

JPNJP JPN

KORKR KOR

LAOLA (LAO)

MYSMY MAL

MMRMM (MMR)

PHLPH PHI

SGPSG SIN

THATH THA

VNMVN VIE

8.5 Country Code Scheme

46

People’s Republic of China (PRC)

Hong Kong , China

Indonesia

Japan

Republic of Korea

Malaysia

Philippines

Singapore

Thailand

Viet Nam

Lao, PDR

ISO 4217

BND (Brunei Dollar)

Cambodia

Brunei Darussalam

Myanmar

KHR (Cambodian Riel)

CNY (Chinese Yuan)

HKD (Hong Kong Dollar)

IDR (Indonesia Rupiah)

JPY (Japanese Yen)

KRW (Korean Won)

LAK (Lao Kip)

MYR (Malaysian Ringgit)

MMK (Myanmar Kyat)

PHP (Philippine Peso)

SGD (Singapore Dollar)

THB (Thai Baht)

VND (Vietnamese Dong)

8.6 Currency Code Scheme

47

8.6 Detail business flowchart of government bond DVP transaction

Buyer

PSMS

(Pre-Settlement

Matching System)

Seller

Clearing System

(Japan Government

Bond Clearing

Corporation- JGBCC)

Trade execution Trade Matching

T

Notice of

Execution

1

Order Allocation

AllocationTrade

Report Data

Investment

Instruction

Data

Trade

Matching

Notice Data

of Trade

Matching

Status

Notice Data

of Trade

Matching

Status

Matched Trade

Report

48

JP


Buyer

PSMS

(Pre-Settlement

Matching System)

Seller

Clearing System

(Japan Government

Bond Clearing

Corporation- JGBCC)

PSMS

(Pre-Settlement

Matching System)

CSD

(The BOJ-Net)

T ～（T ＋ 2 ）

Clearing

2

S － 1

Approval of

Obligation

Notice Data of

Approval of

Obligation

Notice Data of

Approval of

Obligation

Novation

Notice Data of

Novation

Notice Data of

Novation

Netting

Notice Data of

Netting

Notice Data of

Netting

DVP

Order

JGB Transfer Instruction

for DVP (For Deliverer

and Receiver of JGB)

1

49

JP


Sender of Funds

Clearing System

(For Receiver of JGB)

Receiver of Funds

Clearing System

(For Deliverer of JGB)

CSD

(The BOJ-Net)

Deliverer of JGB

Receiver of JGB

Settlement

SS － 1

2

Notice of Acceptance

of JGB Transfer

Instruction for JGB

Notice of Acceptance

of JGB Transfer

Instruction for DVP

Notice of

Acceptance

of JGB Transfer

Instruction for DVP

Notice of Acceptance of JGB

Transfer Instruction for DVP DVP

Request

Data

DVP Request

Data

DVP

Request

Data

Acceptance of

DVP Request

Data

Notice of

Acceptance of

DVP Request

Data

Notice of

Acceptance of

DVP Request

Data

Notice of

Acceptance of

DVP Request

Data

(DVP

Request

Data)

DVP

Settlement

Notice Data of

DVP Settlement

(Fund)

Notice Data of

DVP Settlement

Notice of credit to

current account

for DVP

Notice Data of

DVP Settlement

Notice of

Acceptance of

DVP Request

Data

Notice Data of

DVP Settlement

(Fund)

Notice of JGB Transfer

Instruction for DVP

Acceptance of

DVP Request

Data

Notice of credit to

current account

for DVP

Notice of JGB Transfer

Instruction for DVP

Notice Data of

DVP Settlement

Notice of credit to

current account for

DVP

50

JP

9. Other issues

9.1 LEI

9.2 Data collection

9.3 Contribution to ISO

9.4 Challenges and future issues

9.5 Any other issues related to SF2

10. How do you think to foster cross-border STP?

Date Tasks

24th Apr. ? Dissemination of Questionnaire

31st May Reply deadline of Questionnaire

Jun. Summary of Questionnaire (by ADB Team)

Jun. – Aug. Country Visit

Sep. 9th ABMF Meeting

Schedule of Sub Forum2 (Draft)

52

Country visit schedule (draft plan)

1st visit : Malaysia (11-12 Jun) Singapore (14-15 Jun)

2nd visit :Thailand (25-26 Jun)/ Indonesia (28-29Jun)

3rd visit : Korea (8-10 Jul)/ Japan (11-13 Jul)

4th visit : China Shanghai (23-24 Jul)/ Beijing (26-27 Jul)

5th visit : SF2 Philippines (6-7 Aug) Hong Kong (9-10 Aug)

6th visit : SF2 Vietnam (20-21 Aug)

9th ABMF (@Seoul) (5-6 Sep)

7th visit : Loa / Cambodia / Myanmar / Brunei (16-22 Sep)

Note: Market infrastructure related organization including central banks, CSDs, CCPs, Trading system operators, global custodians, and local custodian will be visited mainly by SF2 members.

Supporting the countries which are trying to develop bond markets are very important issue for phase 2.

54

Preaching

to Buddha

+3

Thank you so much

Taiji Inui ADB consultant

NTT DATA Corporation

Phone: +81-50-5547-1282

E-mail: [email protected]

This PowerPoint slides are made solely for the discussions at the 8th ABMF on 18 April 2012. Views

expressed are those of the presenter and do not necessarily reflect those of the Asian Development Bank,

NTT DATA CORPORATION or any other organizations.

SF2_Questionnaire(NM_NE)_33withoutSampleAnswer.doc

Questionnaire for Phase2 of ABMF SF2 (draft)

8th ABMF-SF2, 18 April 2012, Manila

For all ABMF SF2 members and experts

Economy or country

Contact person

Institution

Mailing address

Phone number

e-mail address

Alternate person

Institution

Mailing address

Phone number

e-mail address

Notes:

National members (and experts) are expected to answer following questions as much as

possible.

If International Experts could voluntarily answer the following questions for all possible

economies, ADB Consultant for SF2 will be extremely appreciate it. Also, could you

comment on the draft contents of the Report of phase 2 (Appendix), please?

ADB consultant for SF2 does understand the above are extremely demanding request, but

very much appreciate kind support of SF2 members and experts where possible in order to

develop efficient and smooth cross-border bond trades and settlement for liquid and stable

bond markets in ASEAN+3.

Could you post the answer on the ADB site for phase 2 answer, or send the answer back to

Taiji Inui, ADB Consultant for SF2 by the end of May, please? Any questions and comments

are appreciated. Taiji Inui, e-mail: [email protected], phone:+81-80-5547-1282 (office),

+81-80-1103-6145 (mobile)

1

mailto:[email protected]


Introduction

Scope of the phase 2 activities of ABMF SF2, reported to and approved by ABMI TF3 Meeting

on 2 March in 2012 in Siem Reap, Cambodia. is as follows:

A) Continue identification of transaction flows, messaging and market practices.

DVP flows and procedures for corporate bonds

Interest payment and redemption of government bonds

Interest payment and redemption of corporate bonds

B) ISO 20022 Fit-and-gap analysis

C) Propose a roadmap and policy recommendations to standardize and harmonize

transaction flows

D) Information sharing: LEI, data collection,…

General explanations of the questionnaire

1) As a result of ABMF SF2 phase 1 survey, Government Bond Market Infrastructure

Diagram in ASEAN+3 was reported to ABMI TF3 and published. Corporate Bond

Market Infrastructure Diagram in ASEAN+3 will be presented as a result of phase 2

survey of ABMF SF2.

Phase 1 report of ABMF SF2 has discussed mainly about government bond

markets in ASEAN+3 and each market. But, as for the phase2 survey and

report of ABMF SF2, corporate bond markets will also be discussed.

SF2 members are expected to provide government bond market infrastructure

diagram and corporate bond market infrastructure diagram separately.

2) ABMF SF2 report to ABMI TF3 will be expanded including corporate bond market

description. DVP flows of corporate bonds will also be surveyed and analyzed as a

phase 2 activity.

SF2 members are expected to update and refine the phase 1 report based on

the new contents shown in Appendix describing government bond markets and

corporate bond markets separately.

ADB Consultant of SF2 will try to include bond markets and settlement

infrastructures including future plans and initiatives in Brunei Darussalam,

Cambodia, Lao PDR, and Myanmar as much as possible for the phase 2 report

with kind support of the 4 countries.

2


3) During the phase1 of ABMF activities, ABMF SF2 had discussed mainly DVP transaction

of government bonds. As a phase 2 activity, the SF2 will survey the processes of

interest payment and redemption of government and corporate bonds in each

economy.

Some members and experts have expressed the intentions that corporate

actions should be included of the scope of phase 2 activities. The importance of

corporate actions has been pointed out from the standpoint of enhancing

straight-through-processing (STP). For example, “Statement on the Need for

Universal, Standardized Messaging in Corporate Actions”, written by the

Association of Global Custodians (AGC), recommended that issuers should

comply with international standard, ISO 15022, when they contact with market

participants.

In this regard, if market participants conform to ISO 20022, information

distributions about various types of corporate actions will become more flexible

because of using XML. Also, issues about corporate actions have been

discussed in various institutional frameworks. Therefore, discussions of ABMF

need to be focused on the main purposes of the ABMF.

Considering the current situation of ASEAN+3 and our outcome of the Phase 1,

interest payment and redemption of government and corporate bond would be

appropriate topics to start our survey on corporate action.

4) In terms of DVP transaction of government bond, SF2 shows a “Model message flow”

based on the discussions during Phase 1. SF2 members and experts are expected to

discuss characteristics of each bond market based on the “Model message flow”.

Barriers and impediments of cross-border DVP transaction in each market will also be

discussed based on the “Model message flow”.

5) SF2 will try to conduct gap analysis of message instructions and confirmations of

government bond DVP transaction. SF2 will compare messages between ISO20022

and proprietary message of each CSD. This fit & gap analysis will be made based on

the 10 common elements provided by SMPG. Further detailed analysis which is out

of the scope of SF2 phase 2 activities will be necessary when actually migrating bond

market infrastructures to be compliant with ISO20022.

6) As for a phase 2 activity, cross-border DVP flow directly connecting a CSD and a RTGS

locating different economies will be discussed. This will provide some information for

future possibilities of new types of bond related trades and settlements such as

cross-border collateral and cross-border repo in an automated real-time manner.

“Model cross-border DVP flow” is presented as an example of such a trade and

3


settlement. SF2 members and experts are expected to point out some issues and

challenges related to market practices and standardization. Related cases are shown

in the Attachment.

As a result of phase1 survey, there are some extra transaction flows for foreign

exchange (FX) control in many countries as shown in the cross-border bond

transaction flows. This FX control barriers may be removed by direct connections

between CSD and RTGS systems utilizing cross-border DVP, cross-border

collateral, and cross-border repo. Also, by implementing such cross-border direct

connections, direct cross-border payments without relying on a vehicle currency

may be realized.

7) Regarding roadmap, SF2 will try to draw the roadmap. SF2 will rearrange the barriers,

which are pointed out from gap analysis of phase2 activity and “GoE Report of Task

Force 4” and will discuss how to overcome these barriers. Members and experts need

to argue the short, mid- and long term solutions for these barriers.

Practical issues such as settlement related barriers including market practices

regulated by SROs will be discussed mainly.

Laws and regulations, including tax, will be discussed as long as the issues are

related to message flows of government and corporate bonds.

8) SF2 will continue to follow up the phase 1 activities by refining and updating the

issues identified by GOE and ABMF SF2.

9) In terms of Legal Entity Identifier (LEI), SF2 will collect and update information for

SF2 members and experts to further discuss this issue and find out some direction in

each economy (possibly having some consensus in ASEAN+3).

10) In order to enhance cross-border bond transaction, transparency of market

information, such as listed bonds, limitation of non-residents, pricing and interest rate,

is important. SF2 will try to share information to discuss some infrastructures for data

collection and dissemination.

4


1 Bond Market Infrastructure Diagram

Could you draw the following diagrams, please?

If you have some relevant information, documents, and websites (URL), please

provide and share them with the ADB consultant.

ADB Consultant for SF2 would very much appreciate it if Brunei Darussalam,

Cambodia, Lao PDR and Myanmar could draw these diagrams as much as

possible.

1.1 Government Bond Market Infrastructure Diagram

ANSWER

（Please use PowerPoint template）Also, could you refer to case of Japan, please?

Could you describe (update) government bond market in your economy, please?

ANSWER

（Could you refer to phase 1 report, please?）

1.2 Corporate Bond Market Infrastructure Diagram

ANSWER

（Please use PowerPoint template）Also, could you refer to case of Japan, please?

Could you describe (update) corporate bond market in your economy, please?

ANSWER

（Could you refer to phase 1 report, please?）

5


2 Delivery-versus-Payment (DVP) flows of corporate bond in each market

Identifying DVP flow and procedure of corporate bond in each market to discuss

cross-border STP.

Draw the typical business flowchart of corporate bonds, domestic DVP transactions

and cross-border DVP transactions, based on the template of phase1 activities.

If you have some relevant information, documents and websites, please provide

and share with the ADB consultant.

ANSWER

（Please use PowerPoint template）When you draw them, please use sample

answers as a reference.

6


3 Interest payment & redemption

3.1 Interest payment of government bond

3.1.1 Draw the typical business flowchart for interest payment of typical

government bond to domestic investors.

ANSWER

(Please use PowerPoint template)

3.1.2 In case of investment by non-residents, are there any different procedures or

market practices in your economy comparing with domestic investor’s ones?

If yes, please write down details of differences.

ANSWER

3.1.3 Present issues and challenges including barriers, short-term solutions, and

medium- to long- term solutions.

ANSWER

3.2 Interest payment of corporate bond

3.2.1 Draw the typical business flowchart for interest payment of typical corporate

bond to domestic investors.

ANSWER

（Please use PowerPoint template）




ANSWER



ANSWER

7


3.3 Redemption of government bond (with final interest payment)

3.3.1 Draw the typical business flowchart for redemption of typical government

bond to domestic investors. If redemption includes final interest payment,

please write the comments in the process definition.

ANSWER





ANSWER



ANSWER

3.4 Redemption of corporate bond (with final interest payment)

3.4.1 Draw the typical business flowchart for redemption of typical corporate bond

to domestic investors. If redemption includes final interest payment, please

write the comments in the process definition.

ANSWER





ANSWER



ANSWER

8


3.5 Other issues

If there is any issues and challenges including barriers, could you explain it

and provide us with short-term solutions, and medium- to long- term

solutions, please?

ANSWER

9


4 Fit and gap analysis for a channel using global custodians1 to settle cross-border trades

In ASEAN+3 most prevalent cross-border bond transactions are through global

custodians and settled as a DVP transaction in same market (country) domestically.

Therefore, cross-border line is located between global custodian and local custodian as

shown in Figure 4.1.

Purpose of fit & gap analysis of business flows and market practices is to identify gap of

DVP flow of government bond in each market with model cross-border DVP flow to

realize cross-border STP. In order to analyze, discuss the solutions against barriers and

to enhancement of cross-border DVP on each market, based on the phase1 survey of

DVP transaction flows. Output of analysis is to identify technical barriers including

market practices preventing the flow from cross-border STP.

4.1 Fit and gap analysis between typical cross-border DVP transaction and local

procedures

Based on the model cross-border DVP transaction flow (refer to Figure 4.1),

challenges and barriers in each market in terms of market practices and business

processes will be discussed from cross-border STP perspective.

Could you focus on new issues and issues related to each infrastructure,

please?

4.1.1 OTC Market (including exchange market) or trading system

A. Do you have a trading system for OTC Market handling cross-border

transactions in your economy? If yes, could you describe it, please?

What is the name of the system? Who developed the system? What are

specific characteristics (differences) of the system from conventional

and/or standard processes? When the system started production

operation? What are current challenges?

ANSWER

1 “Channel using global custodians” means that settlement processes go through not only

global custodians but also local custodians in each economy instead of directly connecting CSD with ICSD or other CSDs.

10


B. How you process allocation between investors and brokers for cross-border

bond transactions? What are challenges for cross-border transactions?

ANSWER

C. Do you have SSI (standing settlement instruction) database? If yes, who is

maintaining it? Also, how it is maintained? What are challenges from

cross-border transaction perspective?

ANSWER

4.1.2 Trade and post-trade Matching

Do you have trade and/or post-trade matching system other than trading

system? If yes, what is the name of the system? Also, could you

describe the system, please? Who developed the system? What are specific

characteristics (differences) of the system from conventional and/or

standard processes? When the system started production operation? What

are current challenges?

In general, when trading system is already implemented,

trade/post-trade matching is one of the functions of the trading

system.

ANSWER

4.1.3 Pre-Settlement Matching

Are there any system infrastructures for pre-settlement matching in your

economy? If yes, what is the name of the system? Also, could you describe

the system, please? When pre-settlement matching is carried out? For what

purposes the pre-settlement matching needs to be done? Do you have any

other alternative measure to conduct pre-settlement matching such as using

future date data entry of book-entry system? If there is no pre-settlement

matching system infrastructure, how pre-settlement matching is conducted

11


(telephone, facsimile, or e-mail)?

ANSWER

4.1.4 CSD (book-entry system)

What are the characteristics and differences of practices from other CSD

systems?

During the phase 1 survey, CSDs and its book-entry systems were mainly

discussed. 10 economies have book-entry systems.

ANSWER

4.1.5 Central Bank (RTGS system)

What are the characteristics and differences of practices from other RTGS

systems?

During the phase 1 survey, central banks and its RTGS systems were

mainly discussed. 9 economies have RTGS systems.

ANSWER

4.1.6 CCP

Are there any system infrastructures of CCP in your economy? If yes, please

describe the name of system(s) and explain the details of the system. In

addition, are there any intentions to apply the clearing procedures to the

non-residential transaction?

ANSWER

4.2 Details of message flows (refer to Figure 4.1)

Please make specifications of each message listed below.

C.1 / C.2 Order and Affirmation (between “OTC Market or Trading System”

12


and “Investment Manager and International Broker ”)

Answer

Manual operation or system interface

Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

C.3-2 Instruction (between Post-trade Matching system and pre-settlement

matching system)

Answer


Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

C.7 Instruction and Matching status

Answer


Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

C9-2.Instruction (From Pre-settlement Matching)

Answer


Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

C10.Instruction and Settlement Confirmation

Answer

13



Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

C11.Settelemnt Data (DVP)

Answer


Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

C13. Settlement Confirmation (Cash)

Answer


Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

S2.Instruction and Settlement Data

Answer


Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

4.3 Network between market infrastructures and the infrastructures and participants

Could you discuss how to connect each other by referring to the “Figure 4.4

Network Between Market Participants”, “Table 4.1 Settlement Instructions

and Confirmation of Bond and Cash”, and “Table 4.2 Protocols and Message

14


Formats in ASEAN+3 Bond Markets” of ABMF SF2 Report Part 1, please?

ANSWER

4.4 Market practices on government bond settlement

On the basis of assuming the observance of the government bond trade and

settlement related regulations, practices that the market participants must follow

to ensure a fair and efficient trades, to reduce settlement risks in changing

environment, and to facilitate smooth settlements in government securities

transactions are to be compared market by market.

Harmonization of market practices which are not stipulated by laws or acts

but agreed as rules by stakeholders such as SRO members will be an

important issue for cross-border STP.

4.4.1 Limitation on size of settlements

The upper limit on size of bond settlements

Each market participant should set an upper limit on size of settlements

processed in order to curb the daytime accumulation of settlements

outstanding and to resolve the delay of settlements by reducing the

amounts of government securities and funds necessary per settlement.

Do you have an upper limit on size of bond settlement? If yes, what is the size

and reason of the limit? How to handle transactions with face value exceeding

the upper limit? Do you have exceptions to the upper limit on size of

settlements? If yes, what kinds of transactions are exceptions?

ANSWER

4.4.2 Establishment of Cut-off time and Reversal time

A. Establishment of Cut-off time

For the purpose of recognizing Fails etc. aimed at completing all

settlements on the day, Cut-off time shall be the deadline decided by

market participants for government securities settlements prior to the

closing time of book-entry system of the CSD.

15


Do you have a cut-off time in your market? If yes, what time is cut-off time in

your market? What is the definition of cut-off time? Could you explain it,

please?

ANSWER

B. Establishment of Reversal time

Reversal time is the period during which parties executing the relevant

transaction can resolve fails if they have agreed to extend the delivery

deadline over Cut-off time, and correct errors in the case of any errors in

settlement procedures.

Do you have reversal time in your market? If yes, what time is reversal time?

What is the definition of reversal time? Could you explain it, please?

ANSWER

4.4.3 Guidelines for activities of market participants on the settlement day

Do you have any other guidelines and/or market practices for market

participants to observe? If yes, could you explain them, please?

ANSWER

4.4.4 Guidelines concerning Fails

A. Definition of a Fail

In general a fail means a situation whereby a party receiving government

securities has not received delivery of the relevant securities from the

delivering party after the end of the scheduled settlement date.

What is the definition of Fail in your market? What is the concept such as

good-faith efforts to resolve Fails? What are conditions to Guidelines

concerning Fails?

ANSWER

B. Guidelines related to Fails

16


Do you have guidelines related to Fails? If yes, what are guidelines related to

Fails?

ANSWER

C. Cost of Fails

Could you explain your policy regarding costs incurred under Fails?

ANSWER

D. Fails Charges

Could you explain how you handle Fails Charges, please?

ANSWER

E. Other issues related to Fails

ANSWER

4.4.5 Guidelines concerning bilateral netting

Do you have bilateral netting scheme? If yes, what is the netting scheme such

as netting structure, face value applicable to netting, settlement type (DVP or

not), contract time of original transactions (by what time), transaction types,

mode of possession (only book-entry transfer government securities),

transaction accounts applicable to netting, pairing method, effective timing of

netting in the case of the same settlement amount, and the account for fund

settlement?

ANSWER

What are operational procedures in netting such as pairing instructions,

exchange of comparison notices, deadline for comparisons, method to send

comparison notices, principle for sending of comparison notices, notice of

objection, and sections in charge of comparison?

ANSWER

17


Do you have prior confirmation, prior notice, and their relation with the

comparison notice?

ANSWER

4.5 Any other market practices

Any other market practices related to DVP transaction flows may be discussed. If

you have any ideas, please mention them.

ANSWER

18


5 Fit and gap analysis for government bond DVP transaction

Purpose of Fit & gap analysis of message items is to identify gap of government bond

settlement instruction (sese 023.001.01 of ISO 20022 and MT541,MT543 of ISO15022)

and confirmation (sese 025.001.01 of ISO 20022 and MT545, MT547 of ISO15022).

Comparing the messages between international standards and local proprietary, SF2 will

provide information about similarities and uniqueness of each market. In some cases,

market practices in ASEAN+3 may be better than that in other regions outside

ASEAN+3. In such a case, ASEAN+3 may contribute to forming international standard

positively though ABMF activities. Also, when each economy will develop new book

entry system complying with ISO20022, this analysis may help creation of requirement

definition document of new system.

Regarding ISO15022, following sites are referred:

http://www.iso15022.org/UHB/uhb2006/finmt543.htm

http://www.iso15022.org/UHB/UHB2005/finmt545.htm

Regarding ISO20022, following site is referred:

http://www.iso20022.org/documents/general/Securities_SnR_Maintenance_2011.zip

Goals of fit and gap analysis are to identify message items in each market different from

international standard. Dissolution of gaps will lead to enhance the interoperability and

promote straight-through-processing of cross-border bond transaction.

The scope of fit and gap analysis is government bond messages only. If there are some

CSDs of government bond, please mention in respective CSD.

5.1 Fit and gap analysis of 10 Common Elements for securities settlement instruction

between ISO 20022 and local practices in terms of business element name,

definition, format, multiplicity, optional or mandatory and others. 10 Common

Elements are listed below.

Elements of answer:

Business Element Name

Please specify the element name of each CSD in accordance with each

19

http://www.iso15022.org/UHB/uhb2006/finmt543.htm

http://www.iso15022.org/UHB/UHB2005/finmt545.htm

http://www.iso20022.org/documents/general/Securities_SnR_Maintenance_2011.zip


ISO20022 message item

Definition & Explanation

Please describe the definition and explanation of business elements in

each CSD

Message Format

Please answer the massage format in your market, ISO20022 compliant

or proprietary. If it’s ISO20022 compliant, please describe further details

about tag structure.

Element Format

Please describe the format of each message item, text or number types

and length (minimum and maximum) of each message item.

Multiplicity

Please check each message item, single or multiple.

Optional or mandatory

Please check each message item, optional or mandatory.

Others

Other relevant information, if any.

5.1.1 Instruction Identification (16x)

Reference assigned by the Sender to unambiguously identify the message.

(MT 543: Mandatory Sequence A General Information>Sender's Message

Reference)

ISO20022(sese.023.001.02)

Element Name TransactionIdentification

Tag Structure <SctiesSttlmTxInstr>

<TxId>

Element Format Text maxLength: 35 minLength: 1

Multiplicity Single

Optional /Mandatory Mandatory

20


Answer

Element Name

Definition&Explanation

Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.2 Trade Date (Date/Time)

Date/time at which the trade was executed.

(MT 543: Mandatory Sequence B Trade Details> Trade Date/Time)

ISO20022(sese.023.001.02)

Element Name TradeDetails

>TradeDate


<TradDtls>

<TradDt>

<Dt>/<DtTm>

Element Format ISODate:YYYY-MM-DD

ISODateTime: UTC time format (YYYY-MMDDThh:mm:ss.sssZ),

local time with UTC offset format (YYYY-MM-DDThh:mm:ss.sss

+/-hh:mm), or local time format (YYYY-MM-DDThh:mm:ss.sss)

Multiplicity Single

Optional /Mandatory Optional

Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.3 Settlement Date (Date/Time)

Date/time at which the financial instruments are to be delivered or received.

21


(MT 543: Mandatory Sequence B Trade Details> Settlement Date/Time)

ISO20022(sese.023.001.02)


>SettlementDate


<TradDtls>

<SttlmDt>

<Dt>/<DtTm>





Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.4 Quantity of Financial Instrument (Expressed as face amount)

Original par or nominal value of a financial instrument.

(MT 543: Optional Subsequence B1 Financial Instrument Attributes>Quantity of

Financial Instrument> Original Face Amount)

ISO20022(sese.023.001.02)

Element Name QuantityAndAccountDetails

>SettlementQuantity


<QtyAndAcctDtls>

<SttlmQty>

<Qty>

<FaceAmt>

22


Element Format fractionDigits: 5 minInclusive: 0 totalDigits: 18

Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.5 Financial Instrument (International Securities Identification Number: ISIN)

This field identifies the financial instrument. (MT 543: Optional Subsequence B1

Financial Instrument Attributes>Identification of the Financial Instrument)

ISO20022(sese.023.001.02)

Element Name FinancialInstrumentIdentification>ISIN


<FinInstrmId>

<ISIN>

Element Format [A-Z0-9]{12,12}

Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.6 Settlement Amount (Currency and amount)

Total amount of money to be paid or received in exchange for the financial

instrument (MT 543: Repetitive Mandatory Sequence C Financial

23


Instrument/Account>Settlement Amount)

ISO20022(sese.023.001.02)

Element Name Settlement Amount

>Amount


<SttlmAmt>

<Amt>

Element Format ActiveCurrencyAndAmount

fractionDigits: 5 minInclusive: 0 totalDigits: 18

ActiveCurrencyCode

[A-Z]{3,3}

Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.7 Safekeeping Account to be credited or debited (35x)

Account where financial instruments are maintained.

(MT 543:Repetitive Mandatory Sequence C Financial

Instrument/Account>Account >Safekeeping Account)

ISO20022(sese.023.001.02)

Element Name DeliveringSettlementParties/ReceivingSettlementParties

>Party1

>SafekeepingAccount

>Identification


<DlvrgSttlmPties/RcvgSttlmPties>

<Pty1>

<SfkpgAcct>

24


<Id>


Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.8 Place of Settlement (ISO9362 Bank Identifier Codes (BIC) )

Place of settlement. (MT 543:Repetitive Mandatory Subsequence E1 Settlement

Parties> Party> Place of Settlement)

ISO20022(sese.023.001.02)

Element Name StandingSettlementInstructionDetails

> Delivering/ Receiving SettlementParties

>Depository

> Identification

> AnyBIC


<StgSttlmInstrDtls>

<DlvrgSttlmPties/ RcvgSttlmPties >

<Dpstry>

<Id>

<AnyBIC>

Element Format [A-Z]{6,6}[A-Z2-9][A-NP-Z0-9]([A-Z0-9]{3,3}){0,1}

Multiplicity Single


Answer

Element Name


25


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.9 Receiving/Delivering Agent (ISO9362 Bank Identifier Codes (BIC) or CSD

Local Code)

Receiving/Delivering party that interacts with the Place of Settlement.

(MT 543: Repetitive Mandatory Subsequence E1 Settlement

Parties>Receiving/Delivering Agent)

ISO20022(sese.023.001.02)

Element Name CashParties

>DebtorAgent/CreditorAgent

>Identification

>AnyBIC/ProprietaryIdentification

>Identification


<StgSttlmInstrDtls>

<CshPties>

<DbtrAgt/CdtrAgt>

<Id>

<BICFI>

<SctiesSttlmTxInstr>

<StgSttlmInstrDtls>

<CshPties>

<DbtrAgt/CdtrAgt>

<Id>

<PrtryId>

<Id>

Element Format BICFI <BICFI>

[A-Z]{6,6}[A-Z2-9][A-NP-Z0-9]([A-Z0-9]{3,3}){0,1}

Id <Id>

Text maxLength: 35 minLength: 1

Multiplicity Single


26


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.10 Client of Receiving/Delivering Agent (ISO9362 Bank Identifier Codes

(BIC) )

Party that receives/delivers the financial instrument.

(MT 543: Repetitive Mandatory Subsequence E1 Settlement Parties> Party>

Buyer/Seller)

ISO20022(sese.023.001.02)


>Debtor/Creditor

>Identification


>Identification


<StgSttlmInstrDtls>

<CshPties>

<Dbtr/Cdtr>

<Id>

<AnyBIC>

<SctiesSttlmTxInstr>

<StgSttlmInstrDtls>

<CshPties>

<Dbtr/Cdtr>

<Id>

<PrtryId>

<Id>

Element Format AnyBIC

[A-Z]{6,6}[A-Z2-9][A-NP-Z0-9]([A-Z0-9]{3,3}){0,1

27


}

Id


Multiplicity single

Optional /Mandatory mandatory

Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.1.11 Country specifics as per local market practice (if any)

If there are any messages which are specific in each economy, please write down

the details in matrix below.

Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

Reason and

background why the

specific messages are

necessary

5.2 Fit and gap analysis of 10 Common Elements for securities settlement confirmation

between ISO 20022 and local practices in terms of business element name,

definition, format, multiplicity and optional or mandatory. 10 Common Elements

are listed below.

5.2.1 Instruction Identification (16x)

Reference assigned by the Sender to unambiguously identify the message.

28


(MT 545: Mandatory Sequence A General Information> Sender's Reference)

ISO20022(sese.025.001.02)

Element Name TransactionIdentificationDetails

>AccountOwnerTransactionIdentification

Tag Structure <SctiesSttlmTxConf>

<TxIdDtls>

<AcctOwnrTxId>


Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.2 Trade Date (Date/Time)

Date/time on which the deal was agreed

(MT 545: Mandatory Sequence B Trade Details> Trade Date/Time)

ISO20022(sese.025.001.02)


>TradeDate


<TradDtls>

<TradDt>

<Dt>/<DtTm>





Multiplicity Single


29


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.3 Effective Settlement Date (Date/Time)

Date/time on which the settlement effectively took place.

(MT 545 Receive A(MT 545: Mandatory Sequence B Trade Details>Effective

Settlement Date/Time)

ISO20022(sese.025.001.02)

Element Name TradeDetail

>EffectiveSettlementDate


<TradDtls>

<FctvSttlmDt>

<Dt>/<DtTm>





Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.4 Effectively Settled Quantity of Financial Instrument (Expressed as face

30


amount)

Quantity of financial instrument deposited into specified account (MT 545:

Repetitive Mandatory Sequence C Financial Instrument/Account>Quantity of

Financial Instrument> Quantity of Financial Instrument Settled)

ISO20022(sese.025.001.02)

Element Name QuantityAndAccountDetails

>SettledQuantity

>Quantity

> FaceAmount


<QtyAndAcctDtls>

<SttldQty>

<Qty>

<FaceAmt>

Element Format fractionDigits: 5 minInclusive: 0 totalDigits: 18

Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.5 Financial Instrument (International Securities Identification Number:

ISIN) This field identifies the financial instrument.

(MT 545:Mandatory Sequence B Trade Details> Identification of the Financial

Instrument)

ISO20022(sese.025.001.02)

Element Name FinancialInstrumentIdentification

> ISIN


<FinInstrmId>

31


<ISIN>

Element Format [A-Z0-9]{12,12}

Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.6 Effectively Settled Amount (Currency and amount)

Amount effectively settled and which will be credited to / debited from the

account owner's cash account. It may differ from the instructed settlement

amount based on market tolerance level. (MT 545: Repetitive Mandatory

Sequence C Financial Instrument/Account>Amount>Settled Amount)

ISO20022(sese.025.001.02)

Element Name SettledAmount>


<SttldAmt>

<Amt>

Element Format ActiveCurrencyAndAmount

fractionDigits: 5 minInclusive: 0 totalDigits: 18

ActiveCurrencyCode

[A-Z]{3,3}

Multiplicity Single


Answer

Element Name


Message Format

Element Format

32


Multiplicity

Optional /Mandatory

5.2.7 Safekeeping Account to be credited or debited (35x)

Safekeeping account held by the party specified in this sequence.

(MT 545:Repetitive Mandatory Subsequence E1 Settlement Parties>Account>

Safekeeping Account)

ISO20022(sese.025.001.02)

Element Name DeliveringSettlementParties/ReceivingSettlementParti

es

>Party1

>SafekeepingAccount

>Identification


<DlvrgSttlmPties/RcvgSttlmPties>

<Pty1>

<SfkpgAcct>

<Id>

Element Format Text maxLength: 35minLength: 1

Multiplicity single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.8 Place of Settlement (ISO9362 Bank Identifier Codes (BIC) )

Place of Settlement.

(MT 545:Repetitive Mandatory Subsequence E1 Settlement

Parties>Party>Place of Settlement)

ISO20022(sese.025.001.02)

33


Element Name StandingSettlementInstructionDetails

> Delivering/ Receiving SettlementParties

>Depository

> Identification

> AnyBIC


<StgSttlmInstrDtls>

<DlvrgSttlmPties/ RcvgSttlmPties >

<Dpstry>

<Id>

<AnyBIC>

Element Format [A-Z]{6,6}[A-Z2-9][A-NP-Z0-9]([A-Z0-9]{3,3}){0,1}

Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.9 Receiving/Delivering Agent (ISO9362 Bank Identifier Codes (BIC) )

Receiving/Delivering Agent. (MT 545:Repetitive Mandatory Subsequence E1

Settlement Parties>Party> Receiving/Delivering Agent)

ISO20022(sese.025.001.02)


>DebtorAgent/CreditorAgent

>Identification


>Identification


<StgSttlmInstrDtls>

<CshPties>

34


<DbtrAgt/CdtrAgt>

<Id>

<BICFI>

<SctiesSttlmTxConf>

<StgSttlmInstrDtls>

<CshPties>

<DbtrAgt/CdtrAgt>

<Id>

<PrtryId>

<Id>

Element Format BICFI <BICFI>

[A-Z]{6,6}[A-Z2-9][A-NP-Z0-9]([A-Z0-9]{3,3}){0,1}

Id <Id>


Multiplicity single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.10 Client of Receiving/Delivering Agent (ISO9362 Bank Identifier

Codes (BIC) )

Buyer/Seller. (MT 545:Repetitive Mandatory Subsequence E1 Settlement

Parties>Party> Buyer/Seller)

ISO20022(sese.025.001.02)


>Debtor/Creditor

>Identification


35


>Identification


<StgSttlmInstrDtls>

<CshPties>

<Dbtr/Cdtr>

<Id>

<AnyBIC>

<SctiesSttlmTxConf>

<StgSttlmInstrDtls>

<CshPties>

<Dbtr/Cdtr>

<Id>

<PrtryId>

<Id>

Element Format AnyBIC

[A-Z]{6,6}[A-Z2-9][A-NP-Z0-9]([A-Z0-9]{3,3}){0,1}

Id


Multiplicity Single


Answer

Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

5.2.11 Country specifics as per local market practice (if any)

If there are any messages which are specific in each economy, please write

down the details in matrix below.

Answer

36


Element Name


Message Format

Element Format

Multiplicity

Optional /Mandatory

Reasons and

background why the

specific message items

are necessary

5.3 Fit and gap analysis for securities settlement instruction (sese 023) and

confirmation (sese025) between ISO 20022 and local practices. Through the

survey of all message items, identify country specifics as per local market

practices and unsupported mandatory message items of ISO 20022.

ANSWER

5.4 Fit and gap analysis other than securities settlement instruction and securities

settlement confirmation. SF2 may analyze other message items or not.

ANSWER

37


6 Cross-border Transaction Flow (Case6 and 8)

In ASEAN+3 most prevalent cross-border bond transactions are through global

custodians and settled as a DVP transaction in same market (country) domestically.

Therefore, cross-border line is located between global custodian and local custodian as

shown in Figure 4.1.

In this section, a cross-border DVP transaction settling bond and cash in different

countries simultaneously (bond should be settled when and only when cash is settled) is

to be discussed as a model cross-border DVP transaction as shown in Figure 6.1.

Possible barriers and impediments including market practices will be discussed.

There are 16 possible cross-border DVP patterns. In case 6, which was presented

at Hong Kong Meeting and there are some premises: bond issued by economy-A

must settle in the system of CSD in economy-A, and currency issued by

economy-B must settle in cash settlement system in economy-B. Offshore trading

is out of scope in case6.

6.1 Cross-border OTC market (including Repo market)

Currently there may be no significant cross-border bond OTC market in ASEAN+3

though a few companies are providing trading systems.

Could you explain current situation of cross-border OTC market relating to your

economy, please? What are the barriers to foster such market? What are

benefits to promote cross-border OTC market from your perspective (investor

perspective, issuer perspective, international broker perspective, local broker

perspective, global custodian perspective, local custodian perspective, trading

system provider perspective, CSD perspective, and central bank perspective)?

ANSWER

6.2 Linkage between CSD and CSD

38


In case of connection between CSD in your economy and other CSD located in

another economy, please mention issues and impediments as much as possible

(refer to Figure 6.1 and 6.2). A buyer approved by the access control of CSD-B

needs to be allowed to access to CSD-A. Do you think it is acceptable? What

kinds of authentication system to mutually accept access control will be

necessary? What kinds of communication protocol will be appropriate? Who will

control settlement matching? How do you handle queue and offsetting?

Answer

General comment

*Access control

(Pre-settlement) Matching

Operating Hour

System Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

Priority of queue or offsetting

Any other issues and impediments

*Access control: CSD can admit to participation of non-residents which are

approved or registered by other countries’ CSD.

6.3 Linkage between CSD and Central Bank

In case of connection between CSD in your economy and a central bank located in

another economy, please mention impediments as much as possible. When

conducting DVP for government bond, seller’s bond is locked (earmarked, blocked,

or transferred to a temporary account) and released when cash payment is

completed. What kind of status of the locked bond has? Who is the owner of the

locked bond? Does CSD have its own securities account in the book-entry

system? If yes, for what purposes does the CSD have the account? What kinds

of communication protocol will be appropriate? How do you handle queue and

offsetting?

Issues and Impediments

Types of BIS DVP Model

General comment

Operating Hour

39


System Type of line(s)

Protocol(s)

Interface(s)

Message Format(s)

Any other issues and impediments

40


7 Roadmap

When answering this section (Roadmap) of questions, please refer to Table 10.2

Summary of Market Barriers Assessment of ASEAN+3 Bond Market Guide Volume 1

Part2 and Re-assessment of ABMI Group of Experts Report on legal and regulatory

feasibility. In the GOE Report one of General recommendations encourages to produce

and publish a roadmap for reducing the barriers in each market. Having said that this

does not necessary means that those barriers remain as barriers for ever. Also, the

GOE Report recommend to refine the assessment. As a matter of fact, technological

advancement could make the barriers to be advantages.

When discussing a roadmap, followings are definitions of terms here:

Short term means by 2015 or without having any system infrastructure;

Medium term means from 2016 to 2020; and

Long term means more than 2020.

Could you share information on current activities and plans addressing the barriers and

list-up all the plans (in particular related to “7.4 Regulatory barriers pointed by GoE

Report”, please?

7.1 ISO 20022 migration plan

Registration agency is expected to explain migration plan of ISO 20022 world

wide and each country for each message type.

ANSWER

7.2 Follow up and refinement of barriers

7.2.1 Messaging standards

A. Trading system (including trade and post-trade matching system)

Do you have a trading system in your economy? If yes, what kind of messaging

standard does the system use, proprietary standard, ISO 15022, or ISO 20022? If

the message standard is not ISO 20022, please describe short term, medium

term and long term plans. When the current system started production

41


operation? Could explain this issue generally, please?

ANSWER

System Name

Standard (proprietary, ISO 15022, or ISO 20022)

Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

General description

of the system

B. Clearing system or CCP

Do you have a clearing system or CCP in your economy? If yes, what kind of

messaging standard does the system use, proprietary standard, ISO 15022, or

ISO 20022? If the message standard is not ISO 20022, please describe short term,

medium term and long term plans. When the current system started production


ANSWER

System Name


Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

General description

of the system

C. Pre-settlement matching system

Do you have a pre-settlement matching system in your economy? If yes, what

kind of messaging standard does the system use, proprietary standard, ISO

15022, or ISO 20022? If the message standard is not ISO 20022, please describe

short term, medium term and long term plans. When the current system started

42


production operation? Could explain this issue generally, please?

ANSWER

System Name


Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

General description

of the system

D. CSD Book-entry system

Do you have a book-entry system in your economy? If yes, what kind of

messaging standard does the system use, proprietary standard, ISO 15022, or

ISO 20022? If the message standard is not ISO 20022, please describe short term,



ANSWER

System Name


Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

General description

of the system

E. RTGS system

Do you have a RTGS system in your economy? If yes, what kind of messaging

standard does the system use, proprietary standard, ISO 15022, or ISO 20022? If

the message standard is not ISO 20022, please describe short term, medium

term and long term plans. When the current system started production

43



ANSWER

System Name


Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

General description

of the system

F. Bond trading and settlement system of market participants

This question is for International Experts (and National Experts). Do you have

bond trade and settlement related system of your company? If yes, what kind of

messaging standard does the system use, proprietary practice, ISO 15022, or ISO

20022? If the message standard is not ISO 20022, please describe short term,


operation? Could you explain this issue generally, please?

ANSWER

System Name


Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

General description

of the system

7.2.2 Settlement cycle as a market rule

A. Settlement cycle as a domestic market rule

Do you have a settlement cycle made as a common rule by a neutral

44


organization such as a SRO (self-regulatory organization) in your

market? If yes, please describe it for government bond and corporate

bond. If no, please describe future plan to have such a rule.

ANSWER

Current rule if any

for domestic players

Government bond:

Corporate bond:

Current rule if any

for non-residents

Government bond:

Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

B. Settlement cycle as an ASEAN+3 market rule

Do you think common settlement cycle as a rule in ASEAN+3 market

for cross-border transactions is necessary? If yes, what is an

appropriate period (such as T+3 or T+2) for government bond trade

and corporate bond trade? How do you set up this kind of common

settlement cycle in the region?

Settlement cycles for cross-border transactions with out-side

ASEAN+3 such as with Europe and North America may be different

from those inside ASEAN+3 considering time differences. Could

you also comment on this issue, please?

ANSWER

Possible goal Government bond:

Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

7.2.3 Securities numbering

A. ISIN (International Securities Identification Number) issuance

45


In many economies, domestic securities identification numbers are still

widely used. In some countries, significant period is necessary to

disseminate the information. What is current situation of acceptance

of ISIN in the market? What is your short, medium, and long term

plans?

ANSWER

Current situation Government bond:

Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

B. Migration to ISIN for related infrastructures

Adopting ISIN is one of the important steps to implement cross-border

STP in ASEAN+3. Could you describe migration plans from proprietary

numbering to ISIN, for trading, clearing, pre-settlement matching,

book-entry, and RTGS systems, please?

ANSWER


Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

C. ANNA (Association of National Numbering Agencies)

In 10 economies which have already bond markets, there is a full

member in each economy. But, 4 countries which do not have

full-fledged bond market yet, may need to establish a numbering

agency. What is your plan related to numbering agency? What is

your short, medium, and long term plans?

ANSWER


46


Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

7.2.4 Party identification

A. BIC (Business Identifier Code)

In many economies, domestic securities identification numbers are still

widely used. In some countries, significant period is necessary to

disseminate the information. What is current situation of acceptance

of BIC in the market? What is your short, medium, and long term

plans?

ANSWER


Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

B. Migration to BIC for related infrastructures

Adopting BIC is one of the important steps to implement cross-border

STP in ASEAN+3. Could you describe migration plans from proprietary

code to BIC, for trading, clearing, pre-settlement matching, book-entry,

and RTGS systems, please?

ANSWER


Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

47


General description

7.2.5 Matching

Please refer to the Table 6.1 Matching types in ASEAN+3 Markets of

SF2 report Part1 page 25.

A. Trade matching including matching system and post-trade matching

Trade matching including trading system functions is very important to

develop cross-border STP. What is current situation of trade

matching? What is your short, medium, and long term plans?

ANSWER


Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

B. Pre-settlement matching

What is current situation of pre-settlement matching? What is your

short, medium, and long term plans?

ANSWER


Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

7.2.6 Dematerialization

Please refer to the Table 1.5 Exchangeability of Scripless Bonds to

Physical Bonds of SF1 report Part1 page 5.

Only China and Japan have complete dematerialization policy.

48


What is current and future policy of dematerialization? What is your

short, medium, and long term plans?

ANSWER


Corporate bond:

Short-term plan

Medium-term plan

Long-term plan

General description

7.2.7 Omnibus account or segregated account

If IT capacity such as database capacity, processing power, and

network speed increases, segregated accounts can be handled without

any system performance problem. Segregated account may be more

transparent than omnibus account. Refer to Re-assessment of ABMI

Group of Experts Report on legal and regulatory feasibility.

A. Beneficial ownership

How beneficial ownership is recognized?

ANSWER

B. Omnibus account or segregated account

What is current and future policy on omnibus account or segregated

account? What is your short, medium, and long term plans?

ANSWER

Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

7.3 Events in ASEAN+3

7.3.1 Members and experts present the events, projects and other plans which may

have some impacts on bond trading and settlement.

49


ANSWER

7.3.2 Members and experts explain purposes and polices of each events and

projects.

ANSWER

7.3 Technology advancement related to bond trading and settlement

7.3.1 Members and experts express their ideas about technology advancement:

available schedule, merits of using these technologies. If possible, they

illustrate the grounds and reasons.

ANSWER

7.4 Regulatory barriers pointed by GoE Report

7.4.1 Foreign investor quota

The existence of a quota implies an application process and period of

waiting for a quota to become available.

ANSWER

Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

7.4.2 Foreign investor registration

The requirement for investor registration may potentially cause problems

such as: onerous or unclear documentation requirements, length of time

needed to gain approval and uncertainty of timing or outcome.

ANSWER

Current situation

Short-term plan

Medium-term plan

50


Long-term plan

General description

7.4.3 Currency Exchange controls

Market participants may potentially experience difficulties caused by:

Delays or uncertainty in the time taken to secure such approval, onerous

documentation or lack of flexibility in the amount.

ANSWER

Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

There are some FX related transaction flows for DVP trade and settlement.

Could you answer FX related future plans, if possible, please?

7.4.3.1 Convertibility

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.4.3.2 Rate management

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.4.3.3 Reporting by non-residents

ANSWER

51


Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.4.3.4 Spot and tri-party repo

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.4.3.5 Repatriation

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.4.3.6 Any other barriers related to foreign exchange

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.4.4 Cash controls – credit balances

Rules setting a limit on the local currency balances that may be held by

non-resident investors, restrictions on investment in money market

instruments or restrictions on interest-bearing accounts.

ANSWER

52


Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

7.4.5 Cash control – overdrafts

The restrictions or prohibitions on non-residents borrowing in local

currency.

ANSWER

Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

7.4.6 Tax

A. Withholding tax

ANSWER

Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

B. Capital gain tax

ANSWER

Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

C. Transaction tax

53


ANSWER

Current situation

Short-term plan

Medium-term plan

Long-term plan

General description

7.5 Roadmap of payment related infrastructures

A. Trading system (including trade and post-trade matching system)

What is current platform of Trading system? What is short, medium, and long

term plans of the platform? When the current system (platform) started


ANSWER

System Name

Platform

Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

General description

of the system

B. Clearing system or CCP

What is current platform of Clearing system? What is short, medium, and long



ANSWER

System Name

Platform

Short-term plan

Medium-term plan

54


Long-term plan

Inauguration year

of the system

C. Pre-settlement matching system

What is current platform of Pre-settlement matching system? What is short,

medium, and long term plans of the platform? When the current system

(platform) started production operation? Could explain this issue generally,

please?

ANSWER

System Name

Platform

Short-term plan

Medium-term plan

Long-term plan

Inauguration year of

the system

D. CSD Book-entry system

What is current platform of Book-entry system? What is short, medium, and long



ANSWER

System Name

Platform

Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

E. RTGS system

What is current platform of RTGS system? What is short, medium, and long term

55


plans of the platform? When the current system (platform) started production


ANSWER

System Name

Platform

Short-term plan

Medium-term plan

Long-term plan

Inauguration year

of the system

7.6 Connection with other CSDs

7.6.1 Plans for connection with other CSDs in ASEAN+3

ANSWER

7.6.2 Plans for connection with other CSDs of outside ASEAN+3

ANSWER

7.6.3 Plans for connection with ICSDs（Euroclear or Clearstream）

ANSWER

7.6.4 Plans for cross-border collateral

ANSWER

7.6.5 Plans for development of reporting system

ANSWER

Date

New functions

New Technologies

56


7.7 Connection with a Central Bank RTGS system in other country

7.7.1 Plans for connection with RTGS systems in ASEAN+3

ANSWER

7.7.2 Plans for connection with RTGS systems of outside ASEAN+3

ANSWER

7.8 Other barriers related to bond transaction

7.8.1 Allocation

In case of cross-border bond transaction, allocation may be executed by

manual operation.

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.8.2 SSI (Standing Settlement Instruction)

In case of cross-border bond transaction, SSI may be handled by manual

operation.

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.8.3 Direct participant of CSD

Foreign institutions cannot be direct participants of some CSDs.

ANSWER

57


Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.8.4 Settlement tolerance level

Settlement tolerance lever differ from each CSD.

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.8.5 Disclosure requirement

Some economies stipulate the report to authority trade by trade basis.

ANSWER

Current conditions

Short-term plan

Mid-term plan

Long-term plan

General comment

7.8.6 Changes in rules and regulations for bond market (From the standpoint of

STP)

ANSWER

7.8.7 Changes in rules and regulations for non-residents transaction

ANSWER

7.8.8 Measurements for enhancement of secondary market transaction

ANSWER

58


Note:

1. Policy recommendation relating to barriers on technical aspects and business

processes including market practices will be focused on and discussed mainly.

2. Policy recommendation relating to regulatory changes including tax and foreign

exchange regime will not be main issues but shared as reference information.

Information on regional infrastructures will also be shared.

59


8 Follow-up of phase 1 surveys

8.1 Filling in the blank spaces in Phase 1 report

ADB Consultant for SF2 would very much appreciate it if national members and

experts could fill in the blank spaces of tables in Phase 1 report as much as

possible. Could you check the attachment file (Figure 8.2) and fill in the blanks,

please, if possible?

ANSWER

Please use PowerPoint template

8.2 Review and update the bond market diagrams and flowcharts

In phase 2 surveys, we will study corporate bond markets: overview of market,

related organization, trading, CCP and security and cash settlement. For

comparison to corporate bond market, members and experts will update phase

1 surveys as necessary.

ANSWER


8.3 Cross-border STP

8.3.1 In order to identify business processes (such as cross-border repo,

securities lending and cross-border collateral) with higher priority from

cross-border STP viewpoint, further input from members and experts will be

appreciated.

ANSWER

8.3.2 Cut-off time of each market may be surveyed and discussed from

cross-border STP perspective.

ANSWER

8.3.3 Remote accesses: Sell side or buy side accesses from one country to other

60


country’s CSD.

ANSWER

8.4 Structure of accounts

8.4.1 Securities account

8.4.1.1 Members provide the information about structure of securities

account in each CSD. (E.g. structure of registry)

ANSWER


8.4.2 Cash account

8.4.2.1 Does central bank have its own account(s) in central bank?

ANSWER

8.4.2.2 In your economy, other economies are possible to open their own

cash account in your economy’s central bank or not.

ANSWER

8.5 Country codes

Could you comment on using international standard (ISO 3166-1 alpha2) as

country codes for the Phase 2 report to the ABMI TF3, please?

ANSWER

8.6 Currency code

Currency code is also important for market harmonization. SF2 also

recommends adopting ISO4217. If you have any idea, please present your

ideas and backgrounds.

ANSWER

8.7 Detailed Transaction Flowchart of Government Bond

61


During the phase1 activities, SF2 drew "Typical business flowchart for

government bond DVP transaction". In order to promote cross-border DVP

and cross-border STP, SF2 would like to clear up the detail process of

government bond DVP transaction flow in each market. Try drawing the

detailed transaction flowchart as much as possible.

ANSWER

(Please use PowerPoint template)

62


9 Other issues

9.1 LEI (Legal Entity Identifier)

What is your policy on LEI? What is your current situation on LEI? How do you

identify investors, currently?

ANSWER

9.2 Data collection

What is your policy on Data collection? What is your current situation on Data

collection? In order to enhance cross-border bond transaction, transparency of

market information, such as listed bonds, limitation of non-residents, pricing and

interest rate, is important. Infrastructures for data collection and dissemination

could be a topic for ABMF. If you have any ideas, could you share it with members,

please?

ANSWER

9.3 Contribution to ISO

Contribution to ISO activities

Followings are current situation of ASEAN+3 countries contributing ISO meetings:

Registration Management Group: CN, JP, KR, SG

Payment Standards Evaluation Group: JP, KR

Securities Standards Evaluation Group: JP, SG

Foreign exchange Standards Evaluation Group: none

How do you think you can contribute to the ISO activities

How you can contribute to sharing cost of standardization?

ANSWER

9.4 Challenges and future issues

63


Could you describe current challenges and future issues relating to bond market,

trade, clearing (CCP), and settlement including cash settlement, please?

ANSWER

9.5 Any other issues related to SF2

If there are any other issues to be discussed as a topic of phase 2 of ABMF SF2

studies, could you propose it, please?

ANSWER

64


10 Foster cross-border STP

How do you think to foster cross-border STP in ASEAN+3?

ANSWER

65


<APPENDIX: Report Index (Draft)>

Part1 (Summary and ASEAN+3 wide description)

Part2 (country Report for each economy)

1 Bond Market and their infrastructure

1.1 Overview of Bond Market: Government Bond and Corporate Bond

1.2 Description of related organization

2 Government Bond

2.1 Trading(OTC/Exchange Market)

2.2 CCP

2.3 Bond Settlement

2.4 Cash Settlement

2.5 Interest Payment

2.6 Redemption

3 Corporate Bond

3.1 Trading(OTC/Exchange Market)

3.2 CCP

3.3 Bond Settlement

3.4 Cash Settlement


3.6 Redemption

4 ISO20022 Fit & Gap Analysis of Government Bond DVP Transaction

4.1 Government Bond Settlement Instruction (From Seller Side and Buyer Side)

4.2 Government Bond Settlement Confirmation

5 Roadmap

5.1 Settlement related issues

5.2 Regulations and Rules

5.3 Market Practices

5.4 New Systems/Infrastructures

5.5 Information technologies

66


67

Part3 (Diagrams and chart for each economy)

1 Government Bond Market Infrastructure Diagram

2 Corporate Bond Market Infrastructure Diagram

3 Government Bond Transaction Flow


3.2 Redemption

4 Corporate Bond Transaction Flow

4.1 DVP


4.3 Redemption

If National members could voluntarily write Part 2 and Part 3 of phase 2 Report in

accordance with the contents shown above, ADB Consultant for SF2 will very much

appreciate it. Also, could you comment on the above draft contents of the Report of

phase 2, please?

Philippine Bond Market OverviewPhilippine Bond Market OverviewPhilippine Bond Market OverviewPhilippine Bond Market Overview

For 8For 8thth ABMF SF2 Phase 2ABMF SF2 Phase 2

11

ContentContent

Philippine Bond Market

Market Profile

Pre-Trading Environment

Trading Environment

Clearing & Settlement Environment

Post Settlement Environment

Moving ForwardMoving Forward

22

Philippine Bond Market Key ParticipantsPhilippine Bond Market Key Participants

Regulators Role

Securities & Exchange Commission (SEC) Securities Market Regulator

Bangko Sentral ng Pilipinas (BSP) Central Bank / Monetary Authority

Banking Supervisor

N ti l IN ti l INational IssuerNational Issuer

Department of Finance (DoF) Global Issuances

Bureau of the Treasury (BTr) Domestic Issuancesy ( )

National National Market Utility OperatorsMarket Utility Operators RoleRole

BSP Philippine Payments & Settlement National Cash Payment (RTGS)BSP Philippine Payments & Settlement System (PhilPaSS)

National Cash Payment (RTGS)System

BTr Registry of Scripless Securities (RoSS) Electronic Registry for PhP Government Securities

33

Government Securities

Philippine Bond Market Key ParticipantsPhilippine Bond Market Key Participants

FinancialFinancial Market Utility OperatorsMarket Utility Operators RoleRole

Philippine Dealing System Holdings Corp. Holding Company

Philippine Dealing & Exchange Corp. Registered Securities Market Operator

(OTC & Exchange)(OTC & Exchange)

FX Trading System Provider

Philippine Securities Settlement Corp. Domestic Dollar Transfer System Operatorpp p y p

Payment-Versus-Payment System Operator

Philippine Depository & Trust Corp. Central Securities Depositorypp p y p p y

Electronic Registry (Corporate Bonds)

Delivery-Versus-Payment System Operator

44

Philippine Bond Market ProfilePhilippine Bond Market Profile

Government Bonds PDEx‐ListedCorporate Bonds

Data inPhP Billions

‐‐ Treasury BondsTreasury Bonds 2,432 B2,432 B‐‐ TaxTax‐‐WithheldWithheld 1,844 B1,844 B‐‐ TaxTax‐‐ExemptExempt 578 B578 BT BillT Bill 268 B268 B

‐‐ Corporate BondsCorporate Bonds 150 B150 B‐‐ Bank IssuesBank Issues 42 B42 B

TypesTypes

‐‐ Treasury BillsTreasury Bills 268 B268 B

‐‐ Regular AuctionRegular Auction‐‐ TAP FacilityTAP Facility

‐‐ Underwriting & Underwriting & DistributionDistribution

Issuance Issuance PP

TAP FacilityTAP Facility‐‐ Bond Exchange/sBond Exchange/s

DistributionDistributionProcessesProcesses

Licensed Market ParticipantsLicensed Market Participants

InvestorsInvestors

Licensed Market ParticipantsLicensed Market ParticipantsUnderwriters Dealers Brokers

55

InvestorsInvestorsQualified Investors Public Investors

PrePre--Trading EnvironmentTrading Environment

Philippine Government Bond Issuance ProcessPhilippine Government Bond Issuance Process

i dGSGS

BTr Issuance Program announced quarterlyBTr Issuance Program announced quarterlyBill Auctions on Mondays; Bond Auctions on TuesdaysBill Auctions on Mondays; Bond Auctions on Tuesdays

Auction Tenders(Electronic System)

Auction Awards

BTrBTr

Auction Auction SystemSystem

BTr BTr AuctionAuction

GS GS DealersDealers

Auction Awards(Electronic System)

Bond Settlement

SystemSystem Auction Auction CommitteeCommittee

Settlement

(T+2)

BTrBTr

RegistryRegistry

Cash Settlement

(T+2)

Bangko Sentral ng Bangko Sentral ng PilipinasPilipinas

66

(BSP(BSP‐‐PhilPaSSPhilPaSS))

PrePre--Trading Trading EnvironmentEnvironment

Corporate Bond Issuance ProcessCorporate Bond Issuance Process

Pre SEC Registration(Issuer Appointments)

Corporate Corporate Bond IssuerBond Issuer

Underwriter/sUnderwriter/s

TrusteeTrustee

PDTC RegistryPDTC Registry

Credit Rating

Paying AgentPaying Agent


Credit Rating

Agency

SEC Registration

Bond IssuerBond Issuer g y

SECSECCorporate Corporate Bond IssuerBond Issuer

Issuance & Settlement

RegistryRegistryCorporate Corporate Bond IssuerBond Issuer

SecuritiesSecurities

Li ti

Selling Agent’s Selling Agent’s BanksBanks

Corporate Corporate Bond IssuerBond Issuer CASHCASH

CorporateCorporateListing

77


Philippine Bond Market Structure:Philippine Bond Market Structure:

Trading EnvironmentTrading Environment

Hybrid Market Hybrid Market in in Single Electronic SystemSingle Electronic System

With Multiple Modes of ExecutionWith Multiple Modes of ExecutionWith Multiple Modes of ExecutionWith Multiple Modes of Execution

Quote Driven SystemQuote Driven System“OTC“OTC‐‐Like”Like”

Order Driven SystemOrder Driven System“Exchange“Exchange‐‐Like”Like”

DealersDealers

Institutional Institutional

DealersDealers

PublicPublicMarketMarketMarketMarketInstitutional Institutional

BrokersBrokers

PublicPublic

BrokersBrokers

PUBLICPUBLIC

Market Market MakersMakers

Market Market MakersMakers

QUALIFIED QUALIFIED PUBLICPUBLIC

INVESTORSINVESTORS

QUALIFIED QUALIFIED

INVESTORSINVESTORS

Consolidated Price and Transaction DataConsolidated Price and Transaction Data


Clearing & Settlement EnvironmentClearing & Settlement Environment

Consolidated Transaction Data Consolidated Transaction Data

Settlement

PDS Centralized Clearing PDS Centralized Clearing Bilateral, Gross (Model 1 DVP)Bilateral, Gross (Model 1 DVP)

Settlement

BTr RegistryBTr Registry

PDTC DepositoryPDTC Depository

Central BankCentral BankDVPLinkLink

PDTC DepositoryPDTC Depository

CashCashSecuritiesSecurities

99

CashCashSecuritiesSecurities


Foreign Investment ProcessForeign Investment Process

Foreign Investment Process Flow Trade ExecutionTrade Execution

FOREIGN FOREIGN

QUALIFIED QUALIFIED Trade Order & Trade Order &

QUALIFIED QUALIFIED

INVESTORSINVESTORS(Direct or Brokered)(Direct or Brokered)

PDExPDExDealerDealer

PDExPDExBrokerBroker

ExecutionExecution

Settlement Settlement InstructionInstruction

Settlement Settlement InstructionInstruction

DepositoryDepository

BTrBTr

BSPBSP

Global Global

CustodianCustodian

F diF di

FX InstructionFX InstructionDomestic Domestic

CustodianCustodian

BSRD*BSRD*

* ( )

FundingFundingFundingFunding

1010

*Bangko Sentral Registration Document (BSRD) used to support application to purchase USD from Authorized Agent Banks when investment or profits are repatriated


Post Settlement EnvironmentPost Settlement Environment

GS Coupon Payment & Bond Redemption Flows

1. BTr withholds tax from 1. BTr withholds tax from 11BTrBTr

2. BTr instructs to BSP to credit GS 2. BTr instructs to BSP to credit GS Holders Payment Banks Cash AcctsHolders Payment Banks Cash Accts

Coupon PaymentCoupon Payment

BSPBSP

22Holders Payment Banks Cash AcctsHolders Payment Banks Cash Accts

GS HoldersGS Holders GS InvestorsGS Investors

CASH Payment Payment

Bank Bank

AccountAccount33

CASH Cash Cash

Settlement Settlement

Bank AccountBank Account

4433

3.3. BSP credits GS Holders’ BSP credits GS Holders’ Payment Bank’s Acct.Payment Bank’s Acct.

44

4.4. Payment Bank credits GS Payment Bank credits GS Investor’s Cash AccountInvestor’s Cash Account

1111


Post Settlement EnvironmentPost Settlement Environment

Corporate Bond Coupon Payment & Bond Redemption Flows

11 1. Registry advises Issuer of Withholding 1. Registry advises Issuer of Withholding T A t b d Li t f H ldT A t b d Li t f H ld

22 2. Issuer instructs its Bank to 2. Issuer instructs its Bank to remit payment to PDTC remit payment to PDTC Issuer’s Issuer’s

IssuerIssuerTax Amount based on List of HoldersTax Amount based on List of Holders

BSPBSPPDTCPDTC

Payment Bank via RTGSPayment Bank via RTGSBankBank

Settlement Settlement InvestorsInvestors

CASH

33

PDTCPDTC

Payment Payment

BankBank44

CASH BanksBanks

BSP BSP

AccountsAccounts

InvestorsInvestors

Bank Bank

AccountAccount

CASH

55

3.3. BSP credits PDTC BSP credits PDTC Payment BankPayment Bank

4.4. PDTC Payment Bank PDTC Payment Bank sends instruction to sends instruction to Investors’Investors’ CashCash

5.5. Cash Settlement Bank Cash Settlement Bank credits Investor Cash credits Investor Cash AcctAcct

1212

Investors Investors Cash Cash Settlement BanksSettlement Banks

AcctAcct

Moving ForwardMoving ForwardMoving ForwardMoving Forward

1313

Metric of Market Depth: Level of Real Metric of Market Depth: Level of Real

Investment Flows in Secondary MarketInvestment Flows in Secondary Market

Share of Trading Volume 2011

Observed Distribution of Activity in UK

RealReal InvestorInvestor

2011 Activity in UK2011*

InvestorInvestorReal Real Investment Investment

FlowsFlows

Investor Investor Volume Volume 35%35%

Investor Investor Volume Volume 54%54%

T diT diDealer Dealer Dealer Dealer

Trading Trading FlowsFlows

Volume Volume 65%65%

ealerealer

Volume Volume 46%46%

14

Moving Forward: Integrating the Investor BaseMoving Forward: Integrating the Investor Base

Key EnhancementsKey Enhancements

Trading of Government Securities TaxTax‐‐Withheld Withheld HoldersHolders

TaxTax‐‐Exempt Exempt HoldersHoldersacross Tax Categories HoldersHolders

PhP 1,844 BPhP 1,844 BHoldersHoldersPhP 578 BPhP 578 B

Integrated HoldingsIntegrated HoldingsPhP 2 432 BPhP 2 432 BPhP 2,432 BPhP 2,432 B+ 31.34% + 31.34%

SubSub--RegistryRegistry

Corp ActionCorp Action

Tax Exempt Tax Exempt

InvestorsInvestors

Tax WithheldTax Withheld

Enhanced Sub‐Registry Corporate Action Service that can track holding periods of GS Holders and

“Tax“Tax--TreatiedTreatied” ”

Foreign InvestorsForeign Investors

Corp. ActionCorp. Action

ServiceServiceInvestorInvestor

‐ Applicable to Foreign Investors with Tax Treaty Rates

auto‐adjust coupon payments

ggwith Tax Treaty Rates

Bond Market Structure Bond Market Structure After EnhancementAfter Enhancement

I t t dI t t d H b id M k t H b id M k t i i Si l El t i S tSi l El t i S t

Consolidated Transaction Data Consolidated Transaction Data

IntegratedIntegrated Hybrid Market Hybrid Market in in Single Electronic SystemSingle Electronic System

With Multiple Modes of ExecutionWith Multiple Modes of Execution

Centralized Clearing & SettlementCentralized Clearing & SettlementBilateral, Gross (Model 1 DVP)Bilateral, Gross (Model 1 DVP)

ALL GS Trades and All Corp. BondsALL GS Trades and All Corp. Bonds

Central BankCentral Bank

SubSub--RegistryRegistry

&& DVP Central BankCentral Bank&&

DepositoryDepository

DVP

1616

CASHCASHSecuritiesSecurities

End of PresentationEnd of PresentationEnd of PresentationEnd of Presentation

Thank YouThank You

1717

Philippine Bond Market Key RegulationsPhilippine Bond Market Key Regulations

RegulationRegulation AreaArea of Focusof Focus

Securities Regulation Code 2000 Securities Market Regulations

SEC Implementing Rules & Regulations for OTC Markets 2006 (SEC “OTC Rules”)

Framework for Registered OTC Market

• Segregation of Dealers & Brokers• Self Regulatory Organization

oversight of OTC Market

• Investor Protection• Soundness of Settlement (DVP)

National Internal Revenue Code 1997 Applicability of Final Withholding Tax on Interest Income on Fixed Income Securities

BSP Manual of Regulation for Banks (MORB)

Separation of Commercial Banking andInvestment House Activities (Securities)

BSP Circulars Post Settlement Disposition of Securities

1818

BSP Circulars Post Settlement Disposition of Securities

MyStandards

Better standards management for the community

How can it help ABMF

2

How will we easily analysethe impact of an ISO standards release and update all ABMF market

practices

If all Market Practice and the

ISO 20022 standards could be in one place, it would be easier

We do not want the ABMF

market practices to be only in XLS or word document , it will be difficult to maintain and

compare

Standards and Market Practices related issues

Creating and discussing our market practices is a lot

of work.

Obtaining feedback on draft market practices and share them is cumbersome

How are we going to compare the different ABMF countries MP and

identify differences?

What about other market practices like the SMPG? How

are we going to compare?

MyStandards

… a collaborative

web platform

to better manage standards definitions

and market practices in the financial industry

Content

Features

Managing standards with MyStandards

3

Base Standards:MT/MX/ISO 20022

Global market practices

Local market practices

Bilateral guidelines

Internal specifications

SWIFT

ISO

20022

Market

practice

groups

Financial

institutions

Market

infrastructures

Contributors

Content

Centralize all of your standards-related

information on-line

4

Value for market practice groups

5

final version

Explore

opportunities for

harmonizationShare and publish

market practices

on-line

Formally capture

and maintain your

market practices

Share and

centralize feedback

on-line

Streamline

your

market practice

management

From draft to

Standards Presentation – March 2011 – Confidentiality: For External Use 6

MyStandards for ABMF fit and gap analysis

MyStandards for ABMF feedback gathering

1/2

MyStandards

Analyst

Creates draft specification

Draft market

practices

ABMF

Country

sends MP

info to

analyst

Internet

ABMF Countries would send MP info

in a simplified template or existing

documentation to an Analyst

7

8

The offline Standards

Editor makes it easy to

create precise, formal

specifications.

9

The offline Standards

Editor works, eg, for

ISO 15022 and ISO

20022, and can handle

comments in all

languages for local

specifications.


1/2

MyStandards

Analyst

Creates draft specification

Draft market

practices

ABMF

Country

sends MP

info to

analyst

þþ

ABMF community giving

precise feedback on all

detail levels

Internet

Browser-based access

It is possible to give feedback at every

level of the practice, making

collaboration much more efficient.

10

11

A unified, single

window to all practices,

ABMF, SMPG and ISO

20022 standards


2/2

MyStandards

Analyst

Reviews feedback

Market

Practice

group

Consolidated

feedback

þþ

þþ

Internet

Browser-based access 16

Consolidated feedback can

be viewed by other ABMF

members and shared

during ABMF meetings


MyStandards for comparing

ABMF practices

Comparisons and gap analysis c

done in just a few clicks, saving w

work.

18


MyStandards for ABMF Market

practices vs future ISO 20022

standards release

20

MyStandards features an integrated

database of all Change Requests (and their

reasons). Immediate impact analysis will

look similar to the comparison feature.

Commercial approach

Approach 1 - Recommended

• SWIFT will provide the MyStandards tool which is FREE for market practice groups. The ABMF community can freely

create, share, and maintain practices of each country’s Bond Market.

• MyStandards will be used to create and document each country’s Market Practice and to complete the Fit-and-Gap analysis.

• MyStandards can be easily used for identifying areas for Harmonisation

• The community will be able consult these practices for free in MyStandards, in the same consistent way as they can

consult other market practices.

• ADB would engage SWIFT as a consultant for a limited period to work with the existing ABMF consulting team and:

– Coordinate all aspects of use of MyStandards

– Input of the relevant information into MyStandards to ensure consistency and timeliness assisted by each country’s

ABMF representatives with input of their relevant information into the tool

– Provide basic training on MyStandards to the ABMF community to facilitate the Market Practice review and

agreement process

– Coordinate discussion and agreement on Market Practice

– Create Market Practice documentation from the tool

– Conduct the Fit-and-Gap analysis using the tool

– Identify areas for Harmonisation

Commercial approach (cont)

Approach 2 - Alternative

• SWIFT will provide the MyStandards tool which is FREE for market practice groups. The ABMF community can freely create, share, and maintain practices of each country’s Bond Market.

• MyStandards will be used to create and document each country’s Market Practice and to complete the Fit-and-Gap analysis.

• MyStandards can be easily used for identifying areas for Harmonisation

• Each County Representative will be responsible for input of relevant information into MyStandards

• The community will be able consult these practices for free in MyStandards, in the same consistent way as they can consult other market practices.

• ADB would not formally engage SWIFT as a consultant and so SWIFT would provide the following:

– Support on a best endeavours basis the discussion and agreement on Market Practice

– Support on a best endeavours basis the creation of Market Practice documentation from the tool

– Support on a best endeavours basis the Fit-and-Gap analysis using the tool

– Support on a best endeavours basis the identification of areas for Harmonisation

Industry groups or MIs currenlty piloting the

tool

23

and also banks…

18th April 2012

8th ASEAN+3 Bond Market Forum Meeting

Direction and Implementation f L l E tit Id tifi (LEI)

8 ASEAN+3 Bond Market Forum Meeting

of Legal Entity Identifier (LEI)

Bank of Tokyo-Mitsubishi UFJ

T ti B ki Di i iTransaction Banking Division

Taketoshi Mori

Agenda

1 B i C t d O i f L l E tit Id tifi (LEI) f FSB1.Basic Concept and Overview of Legal Entity Identifier (LEI) from FSB

2.Scope of LEI reference data

3.Operational Model

4.Funding Model

5.Governance framework for a global LEI

6.Implementation and phasing6.Implementation and phasing

2

1.Basic Concept and Overview of LEI from FSB

(1) LEI f b i id(1) LEI for basic idea

� A simple and obvious

� Offers clear benefits to the private sector and to global regulators

Improved risk management in firms (and lower costs)– Improved risk management in firms (and lower costs)

– Better assessment of firm-level and system-wide risks

– Containing market abuse and curbing financial fraud

– Facilitating orderly resolutionFacilitating orderly resolution

– Improving the quality and accuracy of financial data

(2)Why have previous attempts failed

� Market failures

– Collective action and co-ordination problems

– LEI is a public good - market incentives insufficient to overcome issues

– Regulatory intervention to break down such problems

3


(3) G-20 mandate in Cannes Summit Declaration last November(3) G 20 mandate in Cannes Summit Declaration last November

“We support the creation of a global legal entity identifier (LEI) which uniquely

identifies parties to financial transactions. We call on the FSB to take the lead in h l i di t k th l t it thelping coordinate work among the regulatory community to prepare recommendations for the appropriate governance framework, representing the public interest, for such a global LEI by our next Summit.”

(4)FSB Expert Group Mandate – December 2011

� To deliver clear recommendations with respect to the implementation of a global LEI system to the FSB Plenary for endorsement.

� Specific recommendations or principal should be presented for the following package� Specific recommendations or principal should be presented for the following package

– Scope for LEI reference data, access and confidentiality

– Operational model

– Funding model

G f k f l b l LEI– Governance framework for global LEI

– Implementation and phasing

� Deadline – end April for consideration by FSB in May

� Submission to G-20 Summit in June 2012

4


(5)Protecting the public interest(5)Protecting the public interest

� Many areas where public and private interests aligned (unique identification, high quality reference data etc)

� LEI framework provides substantial power to the providers to the systemLEI framework provides substantial power to the providers to the system and incentives to exploit privileged position.

– Strong governance framework required to control monopoly power (anti-trust), ensure open and free access, prevent bundling of services etc

(6)A global framework

� Maximum benefits from universal adoption

R t i t t f ll t ti l t k h ld� Represent interests of all potential stakeholders

� Build on local system, expertise, and constraints ( language characteristics, local knowledge/registers, confidentiality and privacy restrictions)

� Flexible and stretchable (new jurisdictions new uses as markets adapt)� Flexible and stretchable (new jurisdictions, new uses as markets adapt)

5


(7)Wh t i FSB(7)What is FSB

� Bring together senior officials (supervisors, central banks, finance ministries) from 24 jurisdictions

� Key Standard setters ( banking securities markets insurance payments� Key Standard setters ( banking, securities markets, insurance, payments etc)

� Major international financial institution (IMF, OECD, BIS, World Bank ect)

� Objective to develop and promote effective regulatory supervisory and� Objective to develop and promote effective regulatory, supervisory and other financial policies

� LEI Expert Group includes other key stakeholders ( CFTC, ESMA)

� Outreach to 65 additional jurisdictionsj

6

Structure of Financial Stability Board/FSB

G20 Summit

Financial Stability Board (FSB)

Institutions in Member Countries(MOF; Central Bank; Regulatory

Authorities )

Institutions to Establish Global

Standards International Institutions

Basel Committee on Banking Supervision (BCBS)Bank for International Settlements (BIS)

*Ministry of Finance (MOF)

Committee on Payment and Settlement Systems

(CPSS)

International Organization of Securities

Commissions (IOSCO)

International Monetary Fund (IMF)

World Bank

Organization for

Economic Co-operation and Development (OECD)・To Establish Basel III

Ministry of Finance (MOF), Financial Services Agency (FSA), and BOJ are members of the board in Japan.

Commissions (IOSCO)

International Accounting Standards Board (IASB)

Committee on the Global Financial System (CGFS)

・To Establish principles for financial markets

infrastructures

・Implementation status of

global standards evaluated

through FSAP (Financial Sector

Assessment Program) by IMF

International Accounting Standards Board (IASB)

International Association of Insurance Supervisors (IAIS)

FSB’s roles are as follows: 1) evaluating a vulnerability to affect international financial systems and examining to adopt

necessary measures against it; 2) promoting cooperation and information sharing between authorities responsible for a financial

77

necessary measures against it; 2) promoting cooperation and information sharing between authorities responsible for a financial

stability; and 3) providing advice and supervision on best practices in compliances of regulatory standards. Given the

declaration in the London Summit 2009, the former Financial Stability Forum (FSF) is reconstituted as an organization that

possesses a firmer organizational base and more enhanced ability.


(1)Definition of Scope(1)Definition of Scope

� ISO Definition of Scope– The purpose of the standard is to identify the legal entities relevant to any

financial transaction. ISO17442 specifies the elements of an unambiguous Legal E tit Id tifi h B f it t ti li ti ff t iEntity Identifier scheme. Because of its strong rationalization effect, a unique identification scheme substantially supports and facilitates the financial industry business.

– Investment vehicles ( Hedge Funds, Private Equities, etc) will also be identified by means of an LEI regardless of whether they are incorporated or constituted inby means of an LEI regardless of whether they are incorporated or constituted in some other way (e.g. Trust, partnership, contractual, etc)…

(2) Draft Scope Definition

� All legal entity is eligible to apply for an LEI. The term ”legal entity” includes, but is not limited to– Legal person ( excluding natural persons)

– Association of legal entities bestowed the capacity to carry rights and obligationsAssociation of legal entities bestowed the capacity to carry rights and obligations

– Asset pools or other segregated parts of a legal entity bestowed the capacity to carry rights and obligations at a sufficient level of independence pf that legal entity which are prescribed by their jurisdiction

– Contractual arrangements such as trusts when bestowed the capacity to carry

8

Co ac ua a a ge e s suc as us s e bes o ed e capac y o ca yrights and obligation which are prescribed by their jurisdiction


(3)Reference data� Level 1� Level 1

– 20 character dumb number– Address of the headquarters– Address of legal formation– Date of LEI assignmentg– Date of LEI update– Date of expiry– Organization type phase 2 or 3

� Level 2Business Register data– Business Register data

– LEI Disposition data– Direct parent data phase 2 or 3 – Ultimate parent data phase 2 or 3 – Liability relationships other than ownership phase 2 or 3– Problem indicator phase 2 or 3– Conglomerate flag phase 2 or 3– Corporate events flag phase 2 or 3– Industrial classification phase 2 or 3

(4)LEI disposition� The reference data is designed to capture what happens to an LEI when it goes out

of business. To capture this, it may be necessary a couple of pieces of reference data– LEI’s reason for closure

9

– Acquiring entity’s LEI– Acquiring entity’s name if no LEI


(5) Hi h d t(5) Hierarchy data

� Ownership:

– Any entity, regardless of the legal form, that owns at least XX percent of an entity is deemed to have ownership.entity is deemed to have ownership.

– Less than XX percent but substantially controlled by the other entity (IFAS account policy)

� Immediate parent:

– The lowest level relationship in an organizational hierarchy that owns, directly or indirectly at least XX percent of another entity.

� Ultimate parent:

The highest level relationship in an organizational hierarchy that does not have a– The highest level relationship in an organizational hierarchy that does not have a parent with at least XX percent of ownership. Each level within the hierarchy should meet the XX percent of ownership threshold or.

– This should exclude entities outside of the scope such as individuals and l t k ti l (ESOP )employee stock option plans (ESOPs)

10


(6) Business register(6) Business register

� Many countries have a business register（eg, NNA)

� Propose to record, where feasible– Jurisdictions business register identifier

– Which business register is the identifier from

� Benefits– Helps end users with linkages and map to more beneficial information

– Data quality and verificationData quality and verification

– Help with implementation

� Challenges– Not all countries have good registers

– proprietary data

(7) Business registry definitions

� Business registry: name of business registry� Business registry: name of business registry

� Business registry ID: Identifier of the legal entity as defined in Business registry

� Date of business registry ID update: Date on which this Business registry ID was lat update on the LEI system

11


(8)Confidentiality(8)Confidentiality

� Confidentiality issues of LEI data must be jurisdiction dependent.

� Most business registers contain public information, but the data in the various business registers can differ, especially about hierarchical data

� Legal entities other than banks and corporate enterprises such as foundations and associations who are engaging in financial transactions may, in some jurisdictions, not be registered in public business registers.

� Verification of publicly available information is different from verification ofVerification of publicly available information is different from verification of non-public data

(9)Reference Data - Phase 2 or 3

� Distinction between legal entities and legal relationships – how to record each consistently remains an issue

� CPSS-IOSCO report on OTC derivatives data reporting and aggregation requirements (P 64):requirements (P 64):– Authorities may also require other relationship information concerning an entity

receiving an LEI, such as information on relationships created by master agreements, credit support agreements or guarantee agreements. Information of all these types may be necessary to enable authorities to aggregate data across

12

yp y y gg gentities and markets for the purpose of monitoring systemic risk.


(10)Subdivisions of Legal Entities – Phase 2 or 3(10)Subdivisions of Legal Entities – Phase 2 or 3

� Branches

� Departments

� Trading desks or booking place� Trading desks or booking place

(11) Other reference data – Phase 2 0r 3

� The country risk can differ from the location of headquarters/legal formation� The country risk can differ from the location of headquarters/legal formation

� Differentiate between attribute data of the legal entity and legal relationship data

– Attributes examples: Organization Type, Industrial classificationbu es e a p es O ga a o ype, dus a c ass ca o

– Relationship examples: Guarantees, Ownership, Liability relationship

13

3.Operational Model

(1)Basic idea of Operations(1)Basic idea of Operations

� A sustainable public good built on agreed global governance principles

� An faithful, global infrastructure for public and industry use

� Accurate, standardized, up-to-date reference data on legal entities and theirAccurate, standardized, up to date reference data on legal entities and their relationships with the necessary historical record

� For users, a one-stop-shop and fair, well-controlled access

� An ability to learn and grow along user needs and innovation

S f f b i h h h bli i� Safety from capture by interests other than the public interest.

(2)A global LEI system requires local operations

� Tailored to language culture economy and the legal and political framework� Tailored to language, culture, economy, and the legal and political framework

� Leveraging good local operational legacy( e.g. national business registers)

(3)LEI system design will need to consider

� Flexibility and diversity in the design of local operations

� Ability to onboard a stream of newcomers in the network of local operations

� Development towards better practices, stronger alignment and cooperation

B fit f ti d i b di it / titi it t

14

� Benefit from creativeness driven by diversity / competition among its parts

� Balance between scale and value of local fit & flexibility

3.Operational Model

(4)A globally local LEI system needs a central “Node” system(4)A globally local LEI system needs a central Node system

� Hold it together and under control

� Drive and manage its development

� Functions grid with a hierarchical structure: all that must be done� Functions grid with a hierarchical structure: all that ,must be done

� Analyzed for feasibility, value, control, economics, sustainability

� Packaged in organizational design and allocated to actors

� Layer 1 functions:� Layer 1 functions:

– Management and administration

– LEI system development

– Data managementg

– System management

– Data service management

– Service other than data management

15

3.Operational Model

(5)Architecture( )

Functions of the ‘ Node’: CentralLEI system development / Utility administrationLEI system development / Utility administration

LEI process guidelines / LEI business model & funding

Registry operations / LEI performance monitoring

Administration

Registry Operations

Administration

Registry OperationsLocalg y p

Registrar Operations

Registrants

g y p

Registrar Operations

Registrants

Local

Users might access and be served from a central or local registrar

� Local registrars may be independent organizations from Node=Central bound by contract

Di it fl ibilit i l l l l ti

16

� Diversity, flexibility in local legacy solutions

� Rigorous control fundamental to ensure high quality, reliability

4.Funding Model

(1) Concept(1) Concept

� Key principals

– Cost recovery/ non-profit, prevention of monopoly rents, no bundling of services, fair and open access

(2) Potentially two components

� Central component (central node/governance) uniformity, common element per LEI

� Local component: flexibility and discretionp y

(3) Fee

� Initial registration and maintenance fees may differ

� Who will pay initial cost for LEI framework? ( heavy users or regulators)

(4) Other items

� Provisions (anti-trust etc) to prevent monopoly rents� Provisions (anti-trust etc) to prevent monopoly rents

� Efficient collection/ enforcement of payment

� Responsibilities ( technologically/ legally)

� How could it be secured for late mover?

17

4.Funding Model

(5)Initial investment costs(5)Initial investment costs

� Central ‘Node’ (platform) to integrate local registry systems and provide

seamless global LEI

� Sources of initial funding:Sources of initial funding:

– Public or private company

– Hybrid

� Return on and repayment of initial investment with transition to sustainable p ysteady state model

� Tracking of initial investment and develop system for efficient collection/ enforcement of registration and maintenance payments.

18


(1) Structure of initial idea / Charter(1) Structure of initial idea / Charter

� Accession to Principles

� Governing Documents– Plenary Membership

– CommitteeCommittee� Executive Committee/ Steering Committee

� Standards subcommittee

(2)Regulatory Control – Regulatory Oversight committee (ROC)( ) g y g y g ( )

� Membership/ plenary– Finance ministry or regulators

– Jurisdictions assent to charter in some manner

– Criteria for joiningj g

– Observer category

– Regulators work cooperatively Steering Committee

– Regional representation

– Representation by economic factors (finance, insurance, banking)

� ROC powers– Identify LEI standard

– Nominate/ appoint/ Veto Board of Director nominees

– Set policies for the node and for servicers/ contractors

19

– Budgets and fee-setting

– Audits Oversee Recognition Registry Authority


(3)Structure of Node

� Board of Directors (BoD)

– BOD nominates Directors

– Populated by Stakeholder- must be balanced in terms of interests, geography

P ibl f l– Possible presence of regulators

– Self-organizing ( select executives, committees)

– Governing documents approved by ROC

– BoD oversees NodeBoD oversees Node

� BoD powers

– Establish licenses/ contracts/

– Audit and RA/ service providers

– Invalidate an LEI

– Enter into and enforce contracts

– Fees and payments

20


R l t O i ht itt (ROC)Regulatory Oversight committee (ROC)

Plenary Public

S tSteering Committee

subcommittee subcommittee subcommittee

Sector

Node

Board of Directors (BoD)Board of Directors (BoD)

Utility OperationsPrivate Sector

Local Registrar Local Registrar Local Registrar

y p

21

Structure of the BoD and its interaction with ROC

6.Implementation and phasing

(1)Organizing Principles(1)Organizing Principles

� Federated system with a plug in architecture

� Local procedures locally determined, subject to overall principles and content constraintscontent constraints

� Local Registrars are required to use the same “network card” to connect to

the system

� Consistency and accuracy of common data are paramounty y p

(2)Phasing is the practical solution

� Phase 1: when, scope and instrument , p

� Phase 2: Is it necessary to phase 3 or 4

(3)Set up proto-type and expand or( ) p p yp p

� CFTC start to use CICI (The CFTC Interim Compliant Identifier )

� Trial introduce 2 or 3 countries in each region and expand globally

22

6.Implementation and phasing

(4)R f D t(4)Reference Data

� Basic reference data is phase 1

� Details or undisclosed data ( parent or liability relationship etc)

(5)Instrument and scope

It t t OTC D i ti t d fi t d d� It may start OTC Derivative trade first and expand.

� Financial Institutions at the beginning and Corporate and other may introduce later. (Collective Investment Vehicles?)

All of this presentation is preliminary one.

The content is just the image and changeable.j g g

23

Questions ＆ Answers

Thank you!

24

Taketoshi MoriTaketoshi Mori

( Head of Securities Market Infrastructure )( Head of Securities Market Infrastructure )

Transaction Services DivisionTh B k f T k Mit bi hi UFJ LtdThe Bank of Tokyo-Mitsubishi UFJ . Ltd.

+

FSB LEI Industry Advisory PanelFSB LEI Industry Advisory Panel

++++

Asian Regional Director & Steering Committee Member of Asian Regional Director & Steering Committee Member of Securities Market Practice Group Securities Market Practice Group

++++

ISO 20022 SEG Member ISO 20022 SEG Member

++

ISSA Corporate Actions WG MemberISSA Corporate Actions WG MemberISSA Corporate Actions WG MemberISSA Corporate Actions WG Member

E- mail : [email protected][email protected]

Phone : 81-3-3245-9443

25

Phone : 81-3-3245-9443F a x : 81-3-3245-9385

The information herein is provided for information purposes only, and is not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. Neither this nor any other communication prepared by The Bank of Tokyo- Mitsubishi UFJ, Ltd. (collectively with its various offices and affiliates, "BTMU") is or should be construed as investment advice, a recommendation to enter into a particular transaction or pursue a particular strategy, or any statement as to the likelihood that a particular transaction or strategy will be effective in light of your business objectives or operations Before entering into any particularstrategy will be effective in light of your business objectives or operations. Before entering into any particular transaction, you are advised to obtain such independent financial, legal, accounting and other advice as may be appropriate under the circumstances. In any event, any decision to enter into a transaction will be yours alone, not based on information prepared or provided by BTMU. BTMU hereby disclaims any responsibility to you concerning the characterization or identification of terms, conditions, and legal or accounting or other issues or risks that may arise in connection with any particular transaction or business strategy. Note that BTMU may have issued, and may in the future issue, other reports that are inconsistent with or that reach conclusions different from the information set pforth herein. Such other reports, if any, reflect the different assumptions, views and/or analytical methods of the analysts who prepared them, and BTMU is under no obligation to ensure that such other reports are brought to your attention.

In addition, information on companies and other entities outside the group that is recorded in this document has been obtained from publicly available information and other sources. The accuracy and appropriateness of that information has not been verified by the group and cannot be guaranteed.

Notification on Risks and Fees for Our Custody Services

Adverse changes to the operational and/or financial condition of a financial service provider of securities services could directly result in a potential loss to clients.

Custody fees are typically calculated by applying a certain fee rate to the asset balance under custody and a t i t t th b f t ti Oth f l i dditi t ti l t f t ticertain amount to the number of transactions. Other fees apply, in addition, to particular types of transactions.

Please contact us for further details.

BTMU Profile (This notification complies with the Japanese “Financial Instruments and Exchange Law” as of

September 30th, 2007):TypeⅡ Financial Instruments Firms Association

Corporate Name: The Bank of Tokyo-Mitsubishi UFJ LtdCorporate Name: The Bank of Tokyo Mitsubishi UFJ, Ltd.

Registration Number: Director General of the Kanto Local Finance Bureau Registration Number 5

Head Office: 7-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo 100-0005 Japan

Main business areas: Banking business, Registered financial institution business

M b f J S iti d l A i ti Th Fi i l F t A i ti f J

26

Member of Japan Securities dealers Association, The Financial Futures Association of Japan

Designated institution for ADR

Japanese Bankers Association: +81-(0)570-017109 +81-(0)3-5252-3772

Financial Instruments Mediation Assistance Center: +81-(0)120-64-5005

S pplementar Information on LEI for 8th ASEAN+3Supplementary Information on LEI for 8th ASEAN+3 Bond Market Forum (ABMF) Meeting

18 April 2012 – Manila, Philippines

Rebecca TernerExecutive Director, Policy and Regulatory Affairs

Asia Securities Industry & Financial Markets Association (ASIFMA)

Phone: +852‐2537‐3246Email: [email protected]

Website: www.asifma.org

What Will a Legal Entity Identifier (LEI) Look Like?

ISO 17442 Data Fields ‐ Example

1. Legal Name: Echo Street Capital Partners, LP

2 Address: One Hong Kong Road2. Address: One Hong Kong RoadBank of China Building, 28th FloorCentral, Hong Kong SAR

3. Entity Status : Active3. Entity Status : Active

4. Legal Form: Limited Partnership

5. Record State: Validated

6 Certification State: Not Certified6. Certification State: Not Certified

ZPY1QN3K1A1C2R3JL544

2

Q

GFMA – LEI Resource with Test File Download

• http://www.gfma.org/initiatives/legal‐entity‐identifier‐(lei)/legal‐entity‐identifier‐(lei)/identifier (lei)/legal entity identifier (lei)/

• www.gfma.orgg g

3

Asia Regional LEI Regulatory Update

Recent LEI inclusion in regional OTC derivatives consultation papers

Hong Kong: HKMA consultation closed on 30 November 2011

Singapore:MAS consultation closed 26 March 2012

Australia: ASIC consultation on derivatives trade reporting will commence shortly and will cover the usage of LEI

Malaysia: PIDM released a “Concept Paper on Recordkeeping and Reporting i f O h C i i ” 26 h 20 2 hRequirement for Over‐the‐Counter Derivatives” on 26 March 2012. The

consultation closes on 30 April. The Trade Association Group will submit comments recommending that the global LEI be used as part of Malaysia's recordkeeping and reporting requirementsrecordkeeping and reporting requirements.

Asia LEI regulatory consideration

India: Dr. KC Chakrabarty, Deputy Governor of the Reserve Bank of India, public comments covering LEI delivered on 13 February 2012 in New Delhi.

4

Any Questions?Any Questions?

Rebecca [email protected]

+852‐2537‐3246

5

ASIFMA’s Mission

ASIFMA promotes the development of liquid, efficient p p q ,

and transparent capital markets in Asia and facilitatestheir orderly integration into the global financial system.

6February 2012

Dissemination of the

ABMF Report

Matthias Schmidt

ADB ConsultantADB Consultant

8th ABMF Meeting, Manila, Philippines

17 / 18 April 201217 / 18 April 2012

1

① Publication / Press Release① Publication / Press Release

• Published 4 April 2012Published 4 April 2012

• ADB press release

• PDF format

• 1,532 pages

• 9.4 MB

• Available online2

② Distribution of ABMF Report (1)

o 46 (SF1) and 34 (SF2) ABMF Members


( ) ( )

o 16 Observers, plus ABMI via TF3 Chairs

o 14 Finance Ministerso 14 Finance Ministers

o 23 Market Visit Participants/Groups (non-

members: law firms, financial institutions, , ,

regulators…)

o Plus, professional contacts of members

3


• 9 Channels, Feeder or Mirror Sites:


o ASIFMA

o BPAM

o Euroclear

o KSD (announcement in Korean)

NTT Data Japan (announcement in Japanese)o NTT Data Japan (announcement in Japanese)

o Omgeo

o SMPGo SMPG

o SWIFT

o Waseda University (announcement in Japanese)

4

Euroclear

Waseda U

5

KSD


• 7 International Experts, via client communication,


p , ,

and/or organisational websites

o Bank of Tokyo-Mitsubishi UFJ

o BNP Paribas

o Citibank

D t h B ko Deutsche Bank

o Hong Kong and Shanghai Banking Corporation

o J P Morgano J.P. Morgan

o State Street Bank and Trust

6

③ Introduction to Public at large

o Wider dissemination of key messages, both from

③ Introduction to Public at large

o Wider dissemination of key messages, both from

ABMF Report and planned Phase 2 activities

o Use market/business contacts!

o Engagement with trade press, where suitable

o Market Visits from June to August

o 9th ABMF Meeting in Seoul (?!)o 9 ABMF Meeting in Seoul (?!)

o SIBOS 2012 in Osaka (29 Oct – 2 Nov)

7

Thank you all for a successful,ytimely and comprehensive

distribution of the ABMF Report!distribution of the ABMF Report!

8

Other Issues of SF1 and SF2

- Update / management of Phase 1 Report –

ADB Secretariat

8th ABMF MeetingManila, Philippines, 17-18 Apr 2012

Update : Basic Procedure

Collecting Information/Data

Revising/Updating

Confirmation by ABMF member

Publishing (ABMF Web)

Update : Ad-hoc updating team

Participation

ADB secretariat team

SWIFT ( to utilize SMPG network and other resources)

Other experts appropriate and available

Provide key support for Step 1 and Step 2

Facilitating information collection from various sources

Directly and indirectly revising and updating the reports

Update : Procedure and Responsibility

Collecting Information/Data

Revising/Updating

Confirmation by ABMF member

Publishing (ABMF Web)

Updating Team

(ADB Secretariat, SWIFT, & Others)

- Support collecting info/date

- Support revising/updating

- Facilitate ABMF member confirmation

ABMF members

- Provide inputs for Info/data

- Provide revision/update

- Confirm the revision/update

ADB Secretariat

Mirror system (Optional, ex: SWIFT)

Update : Schedule

Ad hoc and partial revision

When directly requested by respective ABMF members with revisions made by themselves

When respective ABMF members confirmed the revisions made by updating team

Regular update

By annually

ABMF members review and check the need of revision of respective market guide at the end of every year

Updating team provides collected information and facilitates regular update process

Translation into local languages

Several members showed interests in translation

Due to copy right issue, there should be translation license agreement (TLA) between ADB and interested institution before translation

Common template of TLA is available to all ABMF members upon request

After TLA, translation could be done in part or full report without any copyright charge

However, the only official report is the English version posted on the ABMF website

Welcome comments and Feedback

Many thanks!

ADB Secretariat

WORK PLAN FOR PHASE 2WORK PLAN FOR PHASE 2WORK PLAN FOR PHASE 2WORK PLAN FOR PHASE 2

AADB Secretariat teamDB Secretariat team

88thth ABMF MeetingABMF MeetingManila, Philippines, 17Manila, Philippines, 17--18 April 201218 April 2012

* Contents of the presentation could be changed subject to the members’* Contents of the presentation could be changed subject to the members’ Contents of the presentation could be changed subject to the members Contents of the presentation could be changed subject to the members

discussion during the meetingdiscussion during the meeting

Phase 2 ABMF Phase 2 ABMF –– Progress to DateProgress to Date

77thth Hong Kong meeting (7~8 Feb) Hong Kong meeting (7~8 Feb) : Kick: Kick--off Phase 2off Phase 2

1st reporting of phase 2 to ABMI TF3 (2 Mar 2012)

Publication of the report : 4 Apr 2012Publication of the report : 4 Apr 2012

Revisions will be followed periodically

Ad-hoc Updating Team will facilitate the revision

88thth M il ti (17 18 A 2012)M il ti (17 18 A 2012)88thth Manila meeting (17~18 Apr 2012)Manila meeting (17~18 Apr 2012)

Clarified remaining issues of phase 2 activities

Discussed questionnaire of SF1 and SF2Discussed questionnaire of SF1 and SF2

Information sharing on ACCRA study, European experience, Tokyo Pro-bond, MyStandards, and LEI

* 1st SRO meeting on 19 Apr 2012


<Key discussion during Manila meeting <Key discussion during Manila meeting ––SF 1>SF 1>

Reviewed the final outputReviewed the final output

AMBIP : regional program that makes bond issuanceAMBIP : regional program that makes bond issuance possible in any locations with standardized documentation procedure

It is not limited to any specific issuance scheme but open to several possible options (On-shore or off-shore, 144a type or Reg. D type or Reg. S type, etc)

With gathering information through questionnaire, we will clarify further the details of the AMBIP

Welcome inputs and suggestions from members



QuestionnaireQuestionnaire

Will reflect comments from members during the Manila meeting and additional comments after the meeting

Provide additional available information before countryProvide additional available information before country visits

Need to have a key contact person (Hub person or y p ( pMarket Champion) in each jurisdiction



Reviewed the details of phase activitiesReviewed the details of phase activities

K ti iti fi dKey activities confirmed

Fit and Gap analysisGovernment bonds - IP and RedemptionspCorporate bonds - DVP flows, IP and Redemption

Priorities will be considered (Fit and Gap analysis)

Big picture for SF2 : to be discussed further

Roadmap ill be ealistic and p acticalRoadmap will be realistic and practical



QuestionnaireQuestionnaire

Comprehensive / repetitive / both technical and policyComprehensive / repetitive / both technical and policy oriented items : No need of too much stress (!)

Will reflect comments from members during the Manila gmeeting and additional comments after the meeting

Additional available information before country visits

Need to have a key contact person in each economy

Schedule for 2012Schedule for 2012

25 Apr 2012 : Distribution of final questionnaires 25 Apr 2012 : Distribution of final questionnaires (common template) of SF1 and SF2 to members(common template) of SF1 and SF2 to members(common template) of SF1 and SF2 to members(common template) of SF1 and SF2 to members

22--3 May 2012 : AFDM+3 and AFMM+3 (Manila, PH)3 May 2012 : AFDM+3 and AFMM+3 (Manila, PH)

Progress reporting on ABMI (ABMF)Progress reporting on ABMI (ABMF)

30 May 2012 : Members submit questionnaire30 May 2012 : Members submit questionnaire30 May 2012 : Members submit questionnaire 30 May 2012 : Members submit questionnaire answers to ADB secretariat answers to ADB secretariat

Jun ~ Aug 2012 : Conducting the surveys throughJun ~ Aug 2012 : Conducting the surveys throughJun ~ Aug 2012 : Conducting the surveys through Jun ~ Aug 2012 : Conducting the surveys through country visitscountry visits


<Plan for country visits>

1st: MAL (11-12 Jun) VIE (14-15 Jun)

2nd: THA (25 26 Jun) SIN (28 29 Jun)2nd: THA (25-26 Jun) SIN (28-29 Jun)

3rd: KOR (9-10 Jul) JAP (12-13 Jul)

4th: PRC-SH (23-24 Jul) PRC-BE (26-27 Jul)

5th: INO (2-3 Aug) HKG (9-10 Aug)5 : INO (2 3 Aug) HKG (9 10 Aug)

6th: PHI (20-21 Aug)


5 ~6 Sep 2012 : 95 ~6 Sep 2012 : 9thth ABMF meeting in SeoulABMF meeting in Seoul

Reporting the survey results

Discuss key contents of proposal for AMBIPy p p

Additional survey, if necessary

* I it ti f l t th iti ith ABMI TF3 b* Invitation of regulatory authorities with ABMI TF3 members

* Separate SRO meeting (tentative)* Separate SRO meeting (tentative)


Oct 2012 : 2Oct 2012 : 2ndnd reporting to ABMI TF3reporting to ABMI TF3

29 Oct 29 Oct –– 1 Nov : SIBOS Osaka 20121 Nov : SIBOS Osaka 2012

Public conference to disseminate key ABMF activitiesPublic conference to disseminate key ABMF activities

Nov 2012 : AFDM+3Nov 2012 : AFDM+3

Nov 2012 : 10Nov 2012 : 10thth ABMF meetingABMF meeting

Preparing and discussing the draft reportepa g a d d scuss g t e d a t epo t

Dec 2012 Dec 2012 –– Jan 2013 : Off meeting activitiesJan 2013 : Off meeting activities

T d fi l i f tTo produce final version of report


Feb 2013 : 11Feb 2013 : 11thth ABMF meetingABMF meeting

Approving the draft report to ABMI TF3

Mar 2013 : 3Mar 2013 : 3rdrd reporting to ABMI TF3reporting to ABMI TF3Mar 2013 : 3Mar 2013 : 3rdrd reporting to ABMI TF3reporting to ABMI TF3

Apr 2013 : 12Apr 2013 : 12thth ABMF meetingABMF meeting

Finalizing the report to AFDM+3

A 2013 S b itti th t t AFDM 3A 2013 S b itti th t t AFDM 3Apr 2013 : Submitting the report to AFDM+3Apr 2013 : Submitting the report to AFDM+3

May 2013 : Recommendations approved by AFMM+3May 2013 : Recommendations approved by AFMM+3May 2013 : Recommendations approved by AFMM 3May 2013 : Recommendations approved by AFMM 3


Jun or Jul 2013 : 13Jun or Jul 2013 : 13thth ABMF meetingABMF meetingJun or Jul 2013 : 13Jun or Jul 2013 : 13 ABMF meetingABMF meeting

Discussion on pilot issues

Publication of the reportPublication of the report

Q 2013 1Q 2013 1 thth ii4Q 2013 : 144Q 2013 : 14thth ABMF meetingABMF meeting

Work plan for phase 3

Thank youThank youyy

Comments are welcomeComments are welcome

ADB S t i t TADB S t i t TADB Secretariat TeamADB Secretariat Team