INVESTOR ACCOUNT SERVICE IN CCASS The 8 th ACG Cross Training Seminar Hong Kong Securities Clearing Company Limited 27 – 28 June 2006

INVESTOR ACCOUNT SERVICE IN CCASS

The 8th ACG Cross Training SeminarHong Kong Securities Clearing Company Limited

27 – 28 June 2006

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Agenda

1. Background

2. Admission Requirements

3. Scope of Services

4. CCASS Service Fees

5. Benefits

6. Stock Segregated Account with Statement Service

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BackgroundProfile of HKSCC

• 1989 - incorporation of HKSCCHong Kong Securities Clearing Company Ltd

• 1992 - recognised as clearing house and became operator of CCASS

Central Clearing And Settlement System A computerised book-entry clearing and settlement system for transactions in

securities listed on the Stock Exchange of HK

• May 1998 - introduced Investor Account Service

• Mar 2000 - became a wholly owned subsidiary of HKEx

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BackgroundHKSCC Participantship

• Brokers (433)

• Clearing Agency (1)

• Custodians (37)

• Stock Lender (0)

• Stock Pledgee (6)

• Investor Participants ( ~14,700)Figures as of 31 May 2006

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BackgroundInvestor Account Service

• May 1998

- introduce for individual and corporate

investors in HK

• Dec 1999

- accept BVI incorporated companies

• Jun 2006

- open for Macau residents and corporations

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Three common options for shares Three common options for shares custody in HK:custody in HK:

There is another option:There is another option:

Entrust with HKSCCEntrust with HKSCC

Keep physical certificatesKeep physical certificates

Entrust with a BrokerEntrust with a Broker

Entrust with a Custodian Entrust with a Custodian BankBank

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A A SafeSafe alternative….. alternative…..

…….. Legal protection for shares deposited with .. Legal protection for shares deposited with HKSCCHKSCC … ….. No need to worry about loss of physical .. No need to worry about loss of physical certificatescertificates

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Admission Requirements

Individual Investor Accounts• HKID / Macau Resident ID Card Holder aged

18 or above

Joint Individual Investor Accounts• HKID Card Holders aged 18 or above• Up to a maximum of 4 Investors per account

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Corporate Investor Accounts• Corporations incorporated in HK under the HK

Companies Ordinance, or by any legal entity incorporated in HK under HK Law

• Overseas Corporations incorporated in the British Virgin Islands (BVI) under the International Business Companies Act (IBC Act)

• Corporations incorporated in Macau under the Commercial Code of Macau

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• Maintain a correspondence address in Hong Kong / Macau

• Maintain a HKD Designated Bank Account for CCASS money settlement purpose

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Scope of ServicesNature of Investor Account

• NOT mandatory

• A depository account for share custody

• Purchases and sales of stocks made by Investor Participants (“IP”) and the resulting settlements will continue to be handled by CCASS Broker or Custodian Participants

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Scope of ServicesTransaction Flow

CCASS

Broker IP A/C

Designated Bank

IP’s Designated Bank

1 Place Order

2

Input Trade Order

3 Order Matching

4

Order Matching Result

5Transactions transmit to CCASS

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Input ISI

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Affirm ISI

8ISI

settlement

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IPIPBroker

AMS/3

Broker’s Designated Bank

Money Settlement

Money Settlement

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Scope of Services

• Stock transfer and settlement

• Custodial services

• Nominee services

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Scope of ServicesStock Transfer

What is ISI ?

• Investor Settlement Instructions (“ISI”) are

used to initiate stock transfer and money

settlement electronically through CCASS

between IP and Broker, Custodian or Stock

Pledgee Participants

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Scope of ServicesMoney Settlement

Electronic money settlement between CCASS and Participants:

CCASS generates the following instructions for money settlement

Electronic Payment Instruction (EPI)

Direct Debit Instruction (DDI) /Direct Credit Instruction (DCI)

To process the moneysettlement of an ISI

between an IP and a Broker/Custodian Participant

To process the moneysettlement between an IP

and CCASSe.g. dividend payment / fees

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Scope of ServicesMoney Settlement for ISI

Three payment options are available for ISI

transactions:

• Free of Payment (FOP)

• Delivery versus Payment (DVP)

• Realtime Delivery versus Payment (RDP)

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Scope of ServicesMoney Settlement

Free of Payment (FOP)

• Money settlement is to take place outside

CCASS and HKSCC is not involved

• IP should arrange with their counterparties if

money settlement is required outside CCASS

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Scope of ServicesMoney Settlement (DVP)

Delivery versus Payment (DVP)

• Shares settled in advance to money

settlement

• An EPI will be generated and funds settled

through the overnight interbank clearing

• Receipt of payment must be monitored by

both delivering and receiving parties

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Scope of ServicesMoney Settlement (RDP)

Realtime Delivery versus Payment (RDP)

• Shares will be put on-hold in the delivering

Participant’s stock account

• CHATS payment instruction will be generated

• If payment is confirmed, the shares will be delivered

to the receiving party immediately; Otherwise, the

shares will be released back to the delivering party

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Scope of ServicesCustodial Services

• IP can deposit or withdraw physical share certificates into or from CCASS

• Shares deposited in CCASS are re-registered under the name of HKSCC Nominees Limited

• Shares withdrawn from CCASS are required to be re-registered to the name of IP

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Scope of ServicesNominee Services

Entitlement Distribution & Election

Entitlement Distribution & Election

ReceiveCorporate Documents

ReceiveCorporate Documents

VotingVotingSubscriptionSubscription

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• Receive corporate information directly

from listed issuers, e.g. annual reports

and notices

• HKSCC will collect benefit entitlements

for IPs and distribute to their stock /

designated bank accounts electronically

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• HKSCC will credit the entitlement in relation to corporate actions (such as rights subscription, open offer / takeover, etc) directly to stock / designated bank accounts of IPs

• Choose to attend corporate meetings in person, appoint representatives to attend meetings or appoint HKSCC to vote for them

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Scope of ServicesOthers

• HKSCC will send statements and provide enquiry

function to IP about the corporate actions and

deadlines, such as subscription, voting & dividend

election requiring their action

• Apply for initial public offering (IPO) and tender

electronically via CCASS and have HKSCC credited

allotted shares into their stock accounts and refunds to

their designated bank accounts directly

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Scope of Services - optionalShort Message Services (SMS)

Short Message Services (SMS) include:

• Investor Settlement Instructions (ISIs)

• Announcement summary and deadline for dividend

election and voting instructions

• EIPO and tender announcements

• Rejected transactions such as Direct Debit Instruction

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Scope of Services Communicating with CCASS

CCASSCCASS Internet System

CCASS Phone System Counter Service

IP a/c - 1Stock a,b,c….



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CCASS Service Fees

Stock Custody Fee

• $0.012 per board lot or odd lot

• minimum fee of $20 and maximum fee of $3,000

• per month

HKSCC charges IP the same fees as it charges other CCASS Participants (subject to adjustments in minimum and maximum fees, where appropriate)

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CCASS Service Fees

Dividend/Interest Collection Fee• 0.12% of the cash amount of dividend/interest• minimum fee of $10 and maximum fee of $500• per stock/debt in one currency on the same day

ISI Stock Settlement Fee• 0.002% of the gross value for each ISI transaction• minimum fee of $2 and a maximum fee of $100• each transaction

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Benefits

Stock

Custody

Nominee

Service

s

Other

Service

s

• Stock Deposit

• Stock Withdrawal

• Electronic Share Transfer

• Electronic Money Settlement

• Receive Corporate Documents

• Entitlement Distribution & Election

• Subscription

• Voting

• eIPO

• SMS Alert Message

Stock

Custody

Nominee

Service

s

Other

Service

s

• Stock Deposit

• Stock Withdrawal

• Electronic Share Transfer

• Electronic Money Settlement

• Receive Corporate Documents

• Entitlement Distribution & Election

• Subscription

• Voting

• eIPO

• SMS Alert Message

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Benefits

• Control over the movement of shares

deposited in CCASS

• Receive records of shareholdings in CCASS

• Enjoy better legal protection of shareholdings

in CCASS

• Enjoy a variety of communication channels

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Stock Segregated Account with Statement Service (SSA)

• Investors has to open SSA via brokers / custodians

• SSA is owned by brokers / custodians

• No legal relationship between HKSCC and SSA holders

• Stock in custody of and movement is controlled by brokers / custodians

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Stock Segregated Account with Statement Service (SSA)

• A service enabling investors to reconcile their stockholdings and trading records kept by their brokers or custodians with statements issued by HKSCC

• Receive corporate communications direct from share registrars

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Thank You