Introduction of Securities Registration and Depository Model in China
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Introduction of Securities Registration and Depository Model in China June 2009 Contents Current Registration and Depository Models in China Registration Model Depository Model Structure of Accounts Summary Historical Background

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Contents l.jpg
Contents in China

  • Current Registration and Depository Models in China

    Registration Model

    Depository Model

  • Structure of Accounts

    Summary

    Historical Background

    Advantages and Disadvantages

    Improvement of the Account Structure


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Current Registration and Depository Models in China——Registration Model

Issuer

By entrustment

SD&C

The holder book

Investor A

Investor B

Investor C

Investor ……


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Some explanatory notes about registration model China——Registration Model

  • The legal relationship between Issuer and SD&C: Principle-agent relationship

  • General dematerialization

  • Centralized registration: SD&C provides direct services related to registration to investors.

  • Holding system:

    Direct holding (major)

    Indirect holding (minor)


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Current Registration and Depository Models in China——Depository Model

SD&C (depository)

存管模式

Broker’s self-supporting account

1000 shares

Brokerage account

2400 shares

Customer B

200 shares

Customer C

1200 shares

Customer A

1000 shares

400 shares

600 shares

Broker (custody)

Customer A

1000 shares

Customer C

1200 shares

400 shares

600 shares

Customer B

200 shares


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Some explanatory notes about depository model China——Depository Model

  • Centralized management of accounts: SD&C opens accounts for investors directly.

  • Electronic book-entry

  • Two-tiered depository system:

    Ⅰ Investors’ accounts are in custody with brokers .

    Ⅱ Brokers’ self-supporting accounts and brokerage accounts are deposited with SD&C .


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Structure of Accounts——Summary China——Depository Model

Types of accounts

  • Classified by markets:

    Ⅰ Shanghai accounts

    Ⅱ Shenzhen accounts

  • Classified by the use of accounts:

    Ⅰ Renminbi ordinary accounts (A share accounts)

    Ⅱ Renminbi special accounts (B share accounts)

    Ⅲ Security investment fund accounts (fund accounts)

    Ⅳ Other accounts: broker bond accounts etc.


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—— China——Depository ModelClassified by holders:

ⅰ A share accounts:

Individual accounts

Ordinary institutional accounts

Special institutional accounts

ⅱ B share accounts:

Domestic investor accounts

Foreign investors accounts

  • Classified by the character of holders:

    Ⅰ Direct-holding accounts

    Ⅱ Indirect-holding accounts: such as foreign investors’ B share accounts, QFII accounts.


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Open an account China——Depository Model

  • Candidates of opening an account:

    Qualification of Chinese citizen or Chinese legal person

    Some other exclusions by law .( QFII etc.)

  • Principles of opening an account:

    (1) By real name

    Personal valid identification papers

    (2) One account for one person

    Ordinary investors: just can open only one account for one purpose at one market

    Special legal-person institutions: can open some accounts, such as securities firms, trust company, insurance company, fund company, QFII and so on.


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(3) Real-time principle China——Depository Model

Distribute account number and print account card by real-time account-opening system

(4) Agent to open an account

Ordinary investors: at account-opening agents.

Only special legal-person institutions: directly at SD&C


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Use an account China——Depository Model

  • Shanghai market:

    Designated-trading system

    Can be only used at the designated broker.

  • Shenzhen market:

    Custody securities at where you buy them

    Can be used at many brokers at the same time.


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Historical Background China——Depository Model

  • Support of communication technology

    Boosting the capability of communication and data-processing

    Improving the efficiency of depository and clearing system

  • Subsequent predominance of China securities market

    General dematerialization

    Electronic book-entry

  • Requirement of supervision


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Structure of Accounts China——Depository Model——Advantages and Disadvantages

Advantages

  • Typical Direct-holding system:

    Clear legal relationship

    Safe, transparent, efficient

  • SD&C carries on the unified administration to accounts.

    Scale benefits

    Reducing cost and improving efficiency

  • SD&C takes charge of holding-details for investors directly which avails to supervision.


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Dis China——Depository Modeladvantages

  • Many types of accounts, different markets have different accounts, different securities have different accounts.

    This leads to some disadvantages: inconvenience in use, occupies more system resources, lowers market efficiency and can’t meet to the needs of innovation businesses in the future.


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Structure of Accounts—— Users’ or Regulators’ needs to Improve the Structure

  • Needs of indirect-holding: such as cross-border transaction, security lending and borrowing and some innovation businesses in the future.

  • Needs of account unification: reducing the types of accounts that one account can be used at different markets to buy different securities.


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Thanks! to Improve the Structure


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