ACG Cross-Training Seminar Organized by Exchange of Information Task Force STP Initiative in Securities Market - Improving Efficiency and Reducing Risk and Cost - June 2, 2008. Jimbaran Bay, Bali, Indonesia Japan Securities Depository Center, Inc. 1
What STP ? All Processes, from order to settlement, should be handled Automatically (Electronically, without human intervention) and Seamlessly (Connecting each process, data standardization) Why STP ? Increase Efficiency Reduce Risk and Cost Trade Post-Trade Pre-Settlement Clearing Settlement How STP ? We developed PSMS (Pre-Settlement Matching System) 2
Two-way approach to realize STP by PSMS. Trade processes were relatively automated by several provided solutions (e. g. FIX). But post-trade processes were not so. 1. From Trade Side Post-Trade Pre. Settlement Trade Matching PSMS covers both Settlement Matching 2. From Settlement Side Clearing & Settlement PSMS added Settlement Matching function to enable settlement to be more efficient and exact. Settlement matching was also a major premise of DVP for customer-side transactions. 3
Relationship Diagram of Equity Trading Investor Broker /Dealer Exchange Broker Investor /Dealer Pre-Settlement JSCC Pre-Settlement Matching System (Japan Securities Clearing Corporation) Matching System JDCC (JASDEC DVP Clearing Corporation) : Customer-side’s flow : Street-side’s flow JASDEC Bank of Japan 4
Basic policies for the system-1 Realization of STP in compliance with settlement practices specific to Japanese Market Setting up of Japanese Standard based upon Global Standard Adoption of ISO 15022 syntax, ISIN code, BIC code Standardization and co-utilization of fund identification code 5
Basic policies for the system-2 Adopting central matching for both Post-Trade and Pre-Settlement arenas Realization of matching on T+0 Unification of related rules such as Market Rules, Market Practices, etc. Realization of Single Access Point by supporting various asset classes and trade types Stocks, CB, JGB, Corporate Bonds, CP, Futures/Options, etc. Trade, Repurchase, Lending & Borrowing, New Issuing Record Providing variety of connectivity to users Various type of connectivity : CPU Direct Connection (Online real-time Processing, File Transmission Processing) and Web Terminal Connection (using web form and transferring CSV file) Flexibility of connecting ETC vendors with PSMS 6
"Tripartite Center Matching" Type ( without using investment instruction distribution service ) Order NOE Investment Manager Allocation PSMS 1. Investment Instruction 3. Notice of Matching Status 2. Trade Report Trade Matching 3. Notice of Matching Status 4. Trade Report／Investment Instruction 5. Notice of TR Affirming Status Approval Trust Bank Broker / Dealer 5. Notice of TR Affirming Status SSI 6. Notice of Matching Status Settlement Matching 7. DVP Order Book-Entry Transfer System (Stocks, CB, Corporate Bonds, CP) (Except Stock (Lending & Borrowing ) and JGB) 7
Settlement Matching for Non-Resident Trade Overseas 1. Order Customer (Pension Fund etc. ) Investment Manager 6. NOE Broker / Dealer 7. Trade Matching 8. Settlement Instruction 2. Order Japan 8. Settlement Instruction 5. NOE 3. Order Global Custodian Broker 10. Settlement Instruction / Dealer 4. NOE Exchange PSMS 9. Settlement Instruction Sub Custodian 11. Notice of Matching Status 10. Settlement Instruction 12. DVP Order Book-Entry Transfer System (Stocks, CB, Corporate Bonds, CP) (Except JGB) 8
Future Plan ØIntroducing ISO 20022 standard to PSMS ØIntroducing the SWIFT(*) Network Connectivity to PSMS * S. W. I. F. T（Society for Worldwide Interbank Financial Telecommunication） 9
THANK YOU Standardization Globalization Harmonization http: //www. jasdec. com/ 10
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