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Introduction of Securities Registration and Depository Model in China June 2009

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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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Presentation Transcript
contents
Contents
  • 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

current registration and depository models in china registration model
Current Registration and Depository Models in China——Registration Model

Issuer

By entrustment

SD&C

The holder book

Investor A

Investor B

Investor C

Investor ……

slide4
Some explanatory notes about 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)

current registration and depository models in china depository model
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

slide6
Some explanatory notes about 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 .

structure of accounts summary
Structure of Accounts——Summary

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.

slide8
——Classified 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.

slide9
Open an account
  • 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.

slide10
(3) Real-time principle

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

slide11
Use an account
  • 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.

historical background
Historical Background
  • 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
structure of accounts a dvantages and d isadvantages
Structure of Accounts——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.
slide14
Disadvantages
  • 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.

structure of accounts users or regulators needs to improve the structure
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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