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STP Initiative in Securities Market- Improving Efficiency and Reducing Risk and Cost -

June 2, 2008. Jimbaran Bay, Bali, Indonesia

Japan Securities Depository Center, Inc.

ACG Cross-Training SeminarOrganized by Exchange of Information Task Force

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Why STP ? Increase Efficiency

Reduce Risk and Cost

How STP ? We developed PSMS (Pre-Settlement Matching System)

Trade

Post-Trade

Pre-Settlement

Clearing

Settlement

What STP ? All Processes, from order to settlement, should be handled Automatically (Electronically, without human intervention) and

Seamlessly (Connecting each process, data standardization)

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Two-way approach to realize STP by PSMS.

Trade

Post-Trade

Pre-Settlement

Clearing &Settlement

Trade processes were relatively automated by several provided solutions (e.g. FIX).

But post-trade processes were not so.

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.

2. From Settlement Side

1. From Trade Side

PSMS covers both

Settlement Matching

Trade Matching

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InvestorBroker

/DealerExchange

Broker

/DealerInvestor

JASDEC

JSCC(Japan Securities

Clearing Corporation)

Relationship Diagram of Equity TradingRelationship Diagram of Equity Trading

Bank ofJapan

Pre-Settlement

Matching System

Pre-Settlement

Matching System

JDCC(JASDEC DVP Clearing

Corporation)

JDCC(JASDEC DVP Clearing

Corporation)

: Customer-side’s flow

: Street-side’s flow

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Basic policies for the system-1Basic 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

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Adopting central matching for both Post-Trade and Pre-Settlement arenas

Providing variety of connectivity to users

Basic policies for the system-2Basic policies for the system-2

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

Realization of matching on T+0

Unification of related rules such as Market Rules, Market Practices, etc.

Flexibility of connecting ETC vendors with PSMS

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)

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InvestmentManager

Trust Bank

PSMS

Broker / Dealer

Trade Matching

2. Trade Report1. Investment Instruction

4. Trade Report／ Investment Instruction

OrderNOE

3. Notice of Matching Status3. Notice of Matching Status

Allocation

SSI

Settlement Matching

Approval5. Notice of TR Affirming Status

6. Notice of Matching Status6. Notice of Matching Status

7. DVP Order

5. Notice of TR Affirming Status

Book-Entry Transfer System (Stocks, CB, Corporate Bonds, CP)

(Except Stock (Lending & Borrowing ) and JGB)

"Tripartite Center Matching" Type ( without using investment instruction distribution service )

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Broker / Dealer

Settlement Matching for Non-Resident Trade

Sub Custodian

Exchange

Overseas

Japan

3. Order

4. NOE

Investment Manager

Broker / Dealer

Global Custodian

Customer (Pension Fund etc.)

1. Order

6. NOE

7. Trade Matching

9. Settlement Instruction

8. Settlement Instruction

2. Order

10. Settlement Instruction

10. Settlement Instruction

11. Notice of Matching Status

5. NOE8. Settlement Instruction

PSMS

Book-Entry Transfer System

(Stocks, CB, Corporate Bonds, CP) (Except JGB)

12. DVP Order

11. Notice of Matching Status

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Introducing ISO20022 standard to PSMS

Introducing the SWIFT(*) Network Connectivity to PSMS

Future PlanFuture Plan

* S.W.I.F.T （ Society for Worldwide Interbank Financial Telecommunication ）

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Standardization

Globalization Harmonization

THANK YOUTHANK YOU

http://www.jasdec.com/