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Welcomethe 2003 ACG Newsletter
Secretariat: Thailand Securities Depository Co.,Ltd.
ACG Asia-Pacic
Central SecuritiesDepositories Group
Vol. 1, 2003
2003 ACG Newsletter
Message from the Secretariat2
Royal Palace
Dear ACG Members
We would like to welcome all of you to the first issue of the ACG Newsletter. It is with a great pleasure to have a chance to communicate with the ACG members again through this newsletter since we last met in November last year at the 6th General Meeting of the Asia Pacific CSD Group held in Bangkok.
In addition to the Annual Meeting and the Cross Training Seminar, which are organized once a year, we believe the ACG Newsletter will be another forum for us to share information, news and developments and certainly will help us keep us in touch with each other. The success of this newsletter will heavily depend upon the strong support on this regard from all ACG members.
Inside this issue, you will find information on the members and a task force update as well as the articles and news updates from our members; Central Depository Services (India) Ltd., Hong Kong Securities Clearing Co., Ltd., Japan Securities Depository, Inc., National Securities Depository Ltd. and, of course, Thailand Securities Depository Co., Ltd.
We sincerely hope that all of you will find the first issue of ACG Newsletter will be informative to all the members.
Thailand Securities Depository Co., Ltd.2003 ACG Secretariat
Contents
Contents
1. ACG Members 42. ACG Task Force Update 6
· Best Practice Task Force · Settlement Risk Management Task Force · Exchange of Information Task Force · Cross Border Linkage Task Force · Technical Task Force
3. ACG News 9· Central Depository Services (India) Ltd. 9
· T+2 Rolling Settlement · Advantage CDSL in T+2 Scenario · CDSL’s internet service “easi” to be further enhanced · Government Securities · Convenient “Single” Slip for Delivery and Receipt Instructions · A Status Update
· Hong Kong Securities Clearing Corporation 11· CCASS/3 Stage 2 Rollout · Extension of Tick Rule Exemption
· Japan Securities Depository Center, Inc. 13· Recent Development · Activities of the Exchange of Information Task Force
· National Securities Depository Ltd. 14· STEADY – An STP initiative by NSDL - India
· Thailand Securities Depository Company Limited 15· Media Clearing Services · Back Office Service Bureau for Fund Management Business
ACG Members
thai pagodas
4Country Acronym Organization Website Contact Person
Australia ASTC ASX Settlement & Transfer Corporation Pty Ltd.
www.asx.com.auMr. Angus RichardsManaging Director
Bangladesh CDBL Central Depository Bangladesh Ltd.
Mr. A R SarkerSr. Executive,
Finance & [email protected]
China SD&CChina Securities Depository and Clearing
Corporation Ltd.www.chinaclear.com.cn
Ms. Rae LuManager of Administrative Dept.
Hong Kong HKSCC Hong Kong Securities Clearing Co., Ltd. www.hkex.com.hk
Mr. Derrick Ping Yin FungVice President, Cash Clearing
Division,Clearing Business Unit,HKEx
Hong Kong HKMA Hong Kong Monetary Authority www.info.gov.hk/hkmaMr. Esmond Lee
Head, Market [email protected]
India NSCCL National Securities Clearing Corporation Ltd www.nseindia.comMr. Ravi Narain
India NSDL National Securities Depository Ltd. www.nsdl.co.inMr. Jayesh SuleVice President
India CDSL Central Depository Services (India) Ltd. www.cdslindia.com
Mr. Hitendra PatilVice President-Business
Development & [email protected]
Indonesia PT KSEIIndonesian Central Securities Depository
(PT Kustodian Sentral Efek Indonesia)www.ksei.co.id
Mr. Josef PrasetyoCorporate Communication
Indonesia KPEI Indonesian Clearing & GuaranteeCorporation Inc.
www.kpei.co.idMr. Hoesen
Division [email protected]
Japan JSSC Japan Securities Settlement & Custody,Inc.
www.jssc.co.jpMr. Kazuhiro Nishimukai
Head, Global Depository [email protected]
Australia Austraclear Limited www.sfe.com.au
Mr. David MonkHead of Business Relations
SFEClearing
Japan JASDEC Japan Securities Depository Center Inc. www.jasdec.com
Mr. Toshiharu KumakuraSenior Manager
ACG Members5Country Acronym Organization Website Contact Person
Korea KSD Korea Securities Depository www.ksd.or.kr
Mr. H.S. YooHead of International
Cooperation [email protected]
Malaysian Central Depository Sdn BhdMalaysia MCD www.klse.com.myMr. Fathi Ridzuan Ahmad Fauzi
General [email protected]
Malaysia SCANSSecurities Clearing Automated Network
Services Sdn Bhdwww.klse.com.my
Mr. Fathi Ridzuan bin Ahmad FauziAssistant General Manager
New Zealand NZCSD New Zealand Central Securities Depository www.rbnz.govt.nzMr. Peter Katz
Director [email protected]
Pakistan CDC Central Depository Company of Pakistan Ltd. www.cdcpakistan.comwww.cdcpak.com
Mr. Aftab DiwanGeneral Manager
Philippines PCD Philippine Central Depository Inc. www.pcd.com.ph
Ms. Nellie C. DagdagPresident & CEO
Singapore CDP The Central Depository (Pte) Ltd. www.sgx.com
Ms. Serene GohVice President, Depository
Management [email protected]
Sri Lanka CDS Central Depository Systems (Pvt) Ltd. www.lanka.net/cse
Mr. Renuke WijayawardhaneManager, Clearing & Settlement,
Colombo Stock [email protected]
Taiwan TSCD Taiwan Securities Central Depository Co., Ltd. www.tscd.com.tw
Ms. Kay H. C. LinManager
Thailand TSD Thailand Securities Depository Co. ,Ltd. www.tsd.co.th
Mrs. Kongkeaw PiamduaythamVice President, Planning and Products
Development [email protected]
Uzbekistan UzSCSD Uzbekistan State Central Securities Depository www.deponet.uzMr. Umid Khodjaev
Head, External Relations [email protected]
ACG Task Force Update
Best Practice Task ForceMembers:
· Austraclear Limited, Australia· Central Depository Company of Pakistan Limited· National Securities Depository Limited, India· New Zealand Central Securities Depository Limited· Philippine Central Depository Incorporated· Securities Clearing Automated Network Services Sdn. Bhd. (SCANS), Malaysia· The Central Depository (Pte) Limited, Singapore
Convenor: Hong Kong Securities Clearing Company Limited Email Contact: [email protected]
Objectives:-Continue to develop best practice guidelines for ACG members.-Monitor best practice goals and Key Performance Indicators (KPIs) of members.-Monitor and disseminate information on fee structures.
Settlement Risk Management Task ForceMembers:
· Central Depository of Bangladesh
· Central Depository of Pakistan
· Central Depository System (Sri Lanka)
· China Securities Depository & Clearing Corp.
· Hong Kong Securities Clearing Corp.
· Korea Securities Depository
· National Securities Clearing Corp, India
· Taiwan Securities Central Depository
· Thailand Securities Depository Company Limited
· Securities Clearing Automated Network Services Sdn. Bhd. (SCANS), Malaysia
· The State Central Depository of Securities of the Republic
of Uzbekistan
6
ACG Task Force UpdateConvenor: Korea Securities Depository Email Contact: [email protected]:
-To develop the understanding of risk management practices.-To examine the impact of new trends on settlement risk management.
Exchange of Information Task ForceMembers:
· Central Depository Bangladesh Limited· Central Depository Services (India) Limited· Japan Securities Depository Center, Incorporated· Japan Securities Settlement & Custody, Inc.· Malaysian Central Depository SDN BHD· National Securities Depository Limited, India· PT Kustodian Sentral Efek Indonesia· Securities Clearing Automated Network Services Sdn Bhd, Malaysia· Uzbekistan State Central Securities Depository
Convenor: Japan Securities Depository Center, Incorporated Email Contact: [email protected]
Objectives:-Facilitate the exchange of information concerning the securities market of ACG members. -Facilitate and promote the mutual assistance and cooperation among members of ACG.
Cross Border Linkage Task ForceMembers:
· ASX Settlement and Transfer Corporation Pty Limited, Australia· Austraclear Limited, Australia· Hong Kong Securities Clearing Company Limited· Japan Securities Settlement & Custody, Inc.· Korea Securities Depository· New Zealand Central Securities Depository Limited· Securities Clearing Automated Network Services Sdn. Bhd., Malaysia· Taiwan Securities Central Depository Company Limited· The Central Depository (Pte) Limited, Singapore· The State Central Depository of Securities of the Republic of Uzbekistan· Indonesian Clearing & Guarantee Corporation
Convenor: Japan Securities Settlement & Custody, Inc. Email Contact: [email protected]
Objective: Develop a model of multilateral cross-border linkages based on research of European
models and best practices for linkages.
7
ACG Task Force Update
Technical Task ForceMembers: · Austraclear Limited, Australia · Central Depository of Bangladesh Limited · Hong Kong Securities Clearing Company Limited · Malaysian Central Depository Sdn. Bhd. · National Securities Depository Limited, India · New Zealand Central Securities Depository Limited · Securities Clearing Automated Network Services Sdn. Bhd., Malaysia · China Securities Depository and Clearing Corporation Limited · Taiwan Securities Central Depository Company Limited · Thailand Securities Depository Company Limited.
Convenor: National Securities Depository Limited, India Email Contact: [email protected]
Objective: Investigate business proposals in relation to technical issues such as e-commerce and
security of system networks.
8
ACG News
Bor Sang’s Umbrella
9CENTRAL DEPOSITORY SERVICES (INDIA) LIMITED
T+2 Rolling Settlement
The unparalleled success of the depository concept in the Indian capital markets is reflected in the on-going reduction in settlement cycle period. In July, 2001, a T+5 rolling settlement cycle was introduced for the equities market. That was shortened to T+3 settlement cycle with effect from April, 2002. The Securities and Exchange Board of India (SEBI) has issued directives for the introduction of T+2 rolling settlement from April, 2003.
Advantage CDSL in T+2 Scenario
CDSL has made available to Clearing Members/brokers (CMs) and investors, several convenient pay-in options like early pay-in, auto pay-in and investor-level pay-in. CMs can deliver securities from their depository accounts to the Clearing Corporation (CC)/Clearing House (CH) of the stock exchanges through the early pay-in module, immediately after the trade has been executed. Investors can also deliver the securities to the CC/CH directly from their account i.e. without the need of transferring them first to a CM account and then to CC/CH. This enables the saving of valuable time - which is one of the objectives of the shorter settlement cycles. The CDSL system also has a facility to pick up the balance available in the investor’s account at the time of pay-in, even if the available balance is insufficient to meet the pay-in obligation in full. This reduces the amount of loss, if any, which may arise on account of failure to deliver full quantity. Further, information on such shortfall is made available to CMs through reports and even through CDSL’s internet facility – “easi” on an almost real time basis, continuously.
CDSL’s internet service “easi” to be further enhanced
CDSL’s popular internet facility “easi” makes available to CDSL system users, the following facilities virtually at their fingertips:1. Getting up-to-date balances of their holdings in their CDSL demat accounts and the status about
execution of their instructions.2. Getting details of transactions done during the past seven days. 3. Getting a print of statements of their demat accounts.
easi offers a novel facility of providing daily valuation of the stocks held in a demat account. The valuation is done at the preceding day’s closing price at The Stock Exchange, Mumbai (BSE). This helps investors to plan their investments and/or trading activities more systematically.
ACG News10CDSL will soon radically enhance its internet service facility in its on-going effort to achieve customer success.
1. Investors will be able to effect transfer of securities using CDSL’s internet services. 2. CMs will be provided a platform to deliver electronic contract notes through the internet to their institutional clients and custodians. Further, institutional clients and custodians will be able to exchange confirmations of contact note and success/failure reports. At a later stage, this facility will be extended to individual investors as well.3. Customers who register for both the above facilities will have the convenience of converting contract note confirmations into securities delivery instructions.
Government Securities
Government Securities (G-Secs) can now be bought and sold like shares and debentures on the stock exchanges in India. Presently, only G-Secs issued by the Central Government can be traded. Settlement of G-Sec trades has to be in the dematerialised form. Beneficial Owners (investors) can receive, hold and deliver G-Secs through their existing depository accounts with CDSL. Thus, CDSL now extends depository services of maintaining and transferring the records of ownership of G-Secs in dematerialised form to individuals and others like banks, non-resident Indians, provident fund trusts, corporates etc. Investors such as banks holding G-Secs in book entry form through their Subsidiary General Ledger (SGL) accounts with the Reserve Bank of India (RBI), can now hold them in their depository accounts with CDSL.
Convenient ‘Single’ Slip for Delivery and Receipt Instructions
Along with the introduction of settlement number, CDSL has also revised the format of the instruction slip to be used for issuing delivery and receipt instructions. In CDSL system, BOs do not have to use different types of instruction slips for on-market, off-market and inter-depository instructions. While revising the format, it has been ensured that the settlement number is conveniently split into “exchange”, “settlement type” and “settlement number”, so that it becomes easy for investors to fill it. Investors delivering securities from their accounts with the other depository must obtain from their Depository Participants, the inter-depository transaction slip separately prescribed by the other depository.
A Status Update
As of 12th March, 2003 Central Depository Services (India) Limited (CDSL) has 4,619 issuers whose securities are admitted for demat. The spread of live depository services through Depository Participants of CDSL and their branches has increased to 107 towns and cities. An update of CDSL’s status under various parameters is mentioned hereunder: Issuers whose securities are admitted to CDSL (equity) 4,619 Number of Depository Participants registered 188 Number of live Depository Participant connections to CDSL 411 Number of cities/towns having live Depository Participants 107
ACG News
“Pra Sung-kra-chay”
11Hongkong Securities Clearing Corporation
CCASS/3 Stage 2 Rollout
The second stage of CCASS/3, the next generation Central Clearing and Settlement System was successfully launched on 9 December last year.
With the introduction of CCASS/3 Stage 2, CCASS Participants are now able to manage their collateral through the Common Collateral Management System (CCMS) and maintain the security profiles of their staff through the Security Management functions. CCMS provides a common platform for CCASS Participants to maintain a pool of collateral to meet their obligations in both the securities and derivatives markets, and thus increase their efficiency and liquidity.
The introduction of CCASS/3 Stage 2 also included functional architecture upgrades that enable the system to accommodate an extended range of stock codes, International Securities Identifica-tion Numbers, or ISIN, and Bank Identifier Codes, or BIC, to meet future marker development needs. In addition, the upgrades provide the capacity to process trades from multiple markets with different settlement cycles.
HKEx is now working on the third and final stage of CCASS/3 – the introduction of Participant Gateways (PGs). PGs facilitate direct linkage between Participants Supplied Systems (PSSs), which are participants’ back office systems, and CCASS/3. Using the PG access mode, CCASS/3 func-tions can be performed by the transmission of standard messages to achieve straight-through-processing between PSSs and CCASS/3. Transactions entered into the PSSs can be routed to CCASS/3 directly, without the need to re-enter them into the system via CCASS/3 Terminals. CCASS Participants can subscribe to the PG service according to their operational needs. HKEx is currently assisting Participants who have signed up for the PG service to perform and end-to-end test between their PSSs and CCASS/3. The first batch of PGs is expected to be rolled out by mid-year.
Extension of Tick Rule Exemption
The tick rule exemption for market making transactions of Exchange Traded Funds (ETF) Market Makers and for hedging transactions of Stock Options Market Makers and Stock Futures Regis-tered Traders was extended on 29 November last year to other registered market makers/liquidity providers and Derivative Warrant Hedging Participants respectively.
Registered market makers and liquidity providers eligible for tick rule exemption now include Derivative Warrant Liquidity Providers, Equity Linked Instrument (ELI) Liquidity Providers, ETF Market Makers and Pilot Programme Market Makers. The exemption allows them to sell short
ACG News12the respective securities at a price below the best current ask price in performing their market making or liquidity providing transactions. As stated in the Securities Ordinance, market makers and liquidity providers are required to acquire the right to vest the securities sold short in the purchaser before the end of the following trading day.
The tick rule exemption granted to Stock Options Market Makers and Stock Futures Registered Traders on corresponding hedging transactions remains unchanged. In addition, the exemption now allows Derivative Warrant Hedging Participants appointed by the issuers of single stock derivative warrants to act as their agents to sell short the underlying stocks at a price below the best current ask price for hedging the corresponding single stock derivative warrant positions held by the issuers.
Market makers, liquidity providers, Derivative Warrant Hedging Participants and Designated Stock Futures Hedging Short Selling Participants are required to enter prescribed short sale indicators when placing orders for tick-rule-exempted short selling.
The extension of tick rule exemption is aimed at increasing market liquidity for the benefit of all market participants. Further extension of tick rule exemption may be considered, depending on market demand.
ACG News
Wooden crafts
13Japan Securities Depository Center,Inc.
Recent Development
Paperless Commercial Paper System Operational at the end of March: In line with the Law Concerning Book-Entry Transfer of Corporate Bonds, which became effective on January 6, 2003, JASDEC will start to handle paperless CP on March 31, 2003. Under the system, the right of CP holders is recorded and transferred between accounts opened at JASDEC or at the participants, such as securities companies and banks without physical papers, and the funds will be settled by the book-entry transfer between the accounts maintained by such participants at the Bank of Japan to realize the DVP settlement.
Activities of the Exchange of Information Task Force
In accordance with the agreement at the Annual Meeting held in Bangkok in November last year, the Task Force conducted a survey in the middle of December to investigate the topics to be discussed in the Cross-Training Seminar 2003 and the possible venue of the seminar. Based on the survey results, the Task Force decided to hold the Seminar 2003 in May in Korea, hosted by the Korean Securities Depository (KSD) with the main topic Services provided by CSDs, featuring New Service Areas. Accordingly, an invitation letter to the seminar will be sent from the host, KSD, to all members in due course, and the Task Force hopes all members participate in the seminar.
ACG News14
Naka
National Securities Depository Limited
STEADY – An STP initiative by NSDL - India
NSDL has introduced the facility of enabling brokers to deliver contract notes to custodian / fund managers electronically through its “STEADY (Securities Trading-information Easy Access and Delivery)” service. STEADY is a facility which enables the brokers to deliver/submit contract notes to custodians/ fund managers electronically by transmitting digitally signed and encrypted trade information. It further enables fund managers to enrich the contract note and convert it into instructions for the custodian.
In June 2002, SEBI, the capital market regulator in India set up a committee on Straight-Through Processing (STP) which studied the life cycle of a trade with the objective to identify the areas that require manual intervention. It was observed that FIIs trade in India through brokers and settle the trades through their local custodians (LCs). The trade instructions are received electronically by LCs from FIIs as SWIFT messages. However, they receive actual trade execution information from brokers in the form of physical contract notes or as electronic files prepared by brokers in different formats.
The LCs have to match the information received from brokers and FIIs and confirm the trade to the stock exchange before the stipulated deadline. In case of domestic Mutual Funds / Institutions, the brokers communicate the trade execution information to the fund managers and custodians, in physical contract notes and also send the same in electronic file. As the format of such data was not standardised and hence would follow different formats, this would lead to manual intervention with potential possibility of errors in processing. SEBI, therefore, decided to standardise this communication as the first step towards implementing STP in the country. It was decided that transfer of information from brokers to fund managers / custodians should be standardised and automated providing necessary infrastructure for hands free operations and STP. Reviewing this proposal and the requirements, NSDL decided to introduce STEADY for electronic delivery of digitally signed contract notes by brokers to custodians / fund managers in pre-defined, uniform formats. STEADY provides the contract notes using ISO 15022 format as standard all across, thus facilitating the matching process in their respective systems.Through this system, custodians / fund managers can also confirm or reject the contract notes to the brokers electronically.
This facility enables fund managers to send digitally signed settlement instructions to respective custodians in ISO 15022 format. India has an Information Technology Act which gives legal validity to digital signatures. The transmission security is provided by 128 bit SSL encryption. The SSL certificate also provides subscribers to ensure authenticity of the website facility prior to any upload / download of contract notes.
Thus with the introduction of electronic contract notes, the Indian market has taken a significant stride towards achieving STP.
ACG News
Kwae-noi river
15Thailand Securities Depository Co., Ltd.
Media Clearing Services
Thailand Securities Depository Co., Ltd. (TSD) has been successful in promoting Media Clearing Services where dividends and interests are paid directly into the investors’ bank account on the payment date instead of paying by checks. A large number of investors have shown interest in the service, particularly at the second quarter of the year when most companies are paying dividends. The service is popular because shareholders can save time, and it is very convenient. Shareholders will no longer have to deal with dividend payments in the form of checks, which can be delayed, damaged, destroyed, or lost in the mail, nor would they have to waste time depositing checks, which can take up to 5-7 days to clear. In addition, provincial shareholders do not need to pay high transaction fees when cashing cross-province dividend checks. Shareholders will receive a letter informing them that their dividends have been transferred to their bank accounts, and they will also receive a withholding tax certicate.
Currently, there are 134 companies that have already joined the Media Clearing service. During the dividend payment season, 86 companies used the service, while 85,000 shareholders registered to have their dividends transferred directly into their bank accounts.
Back Ofce Service Bureau for Fund Management Business
At present, the fund management business in Thailand has a high growth rate. Not surprisingly, people are increasingly paying more attention to this channel of investment as it provides a higher rate of return as well as tax benets. Having already provided clearing, settlement, and depository services to over 500 listed and non-listed companies, the TSD has offered one-stop-service to Asset Management Companies (AMCs) for integrating their back ofce and fund registrar functions. These services were rst offered to Retirement Mutual Funds (RMF) in 2002 and then Provident Funds at the beginning of 2003. This one-stop-service has been well received by unit holders as it provides them with more convenience. Other benets AMCs are enjoying are reduced costs, increased operation efciency and help in coping with the ever-changing demands of this highly competitive age. Due to the success of those services, TSD is expanding its service to cover other mutual funds in order to cope with the increasing service demand after fund trading. These new services are likely to kick off in June 2003.