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Hong Kong Securities Clearing Company Limited June 2008 - Bali

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  1. Hong Kong Securities Clearing Company Limited June 2008 - Bali 10th ACG Cross-Training Seminar STP - CCASS Participant Gateway

  2. Agenda • Introduction • Clearing House : HKSCC CCASS • Key features, Operations, Access channels CCASS Participant Gateway (PG) • Benefits • Overview • System components, Key features Straight Through Processing • C3T and PG • Q & A

  3. HKSCC was incorporated on 5 May 1989 and was recognized as clearing house on 28 May 1992 Merged with SEHK and HKFE, HKSCC became a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx) on 6 Mar 2000 What is CCASS ? Central Clearing And Settlement System It is a system providing book entry settlement for securities in cash market Ordinary shares, preference shares, registered warrants, PAL, unit trusts, funds, debt securities, structured products (e.g. derivative warrants, callable bull/bear contracts and listed equity linked instruments) listed on the Stock Exchange are eligible for admission into CCASS Introduction of Clearing House : HKSCC 3

  4. CCASS: Key features • Centralised • A centralised system for all market intermediaries to transact business • Electronic linkage • All Participants must be electronically linked with CCASS • Electronic Book Entry System • Settlement is done on a book-entry basis where no physical movement of certificates and cash is involved • Securities and cash are exchanged on a Delivery Versus Payment basis • CCASS Participant Seven categories of Participants: Custodian Participants, Direct Clearing Participants, General Clearing Participants, Investor Participants, Clearing Agency Participants, Stock Lender Participants and Stock Pledgee Participants.

  5. CCASS Operations 5

  6. CCASS CCASS Terminals CCASS Internet System CCASS Phone System Participant Gateway Service Counter Access to CCASS Five channels for Participants to access CCASS:

  7. Access to CCASS - C3T & PG • In the CCASS Architecture Upgrade Project, two Communication • Channels were developed as part of technology upgrade: • CCASS/3 Terminal (C3T) • Access to CCASS through a browser-based terminal • C3T Functions: Enquire portfolios, movements and transactions; • input data, upload files and download reports • Participant Gateway(PG) • A technical device installed at the Participants’ premises to provide an access • point through which Participants’ back office systems can communicate with • CCASS on a message basis • Adoption of PG is optional to CCASS participants Both C3T Functions and PG Messages were processed by the mainframe in a similar fashion 7

  8. Network Connectivity- C3T & PG • C3T and PG are connected to the CCASS Host system via SDNet • It uses the TCP/IP protocols with high security protection by means of • firewall and intrusion detection systems

  9. C3T (Browser based interface) 9

  10. PG(Message based system) Example: Input Settlement Instruction (SI) Input Message Output Message Wed Dec 19 17:00:55 CST 2007 Send 0 :{1:CMT1n009bsgxv00000446}{2:I540B01323X}{4: :16R:GENL :20C::SEME//123455004A00002 :23G:NEWM :98A::PREP//20071111 :16S:GENL :16R:TRADDET :98A::SETT//20071111 :35B:/HK/1 :16S:TRADDET :16R:FIAC :36B::SETT//UNIT/2000, :97A::SAFE//01 :16S:FIAC :16R:SETDET :22F::STCO/CCAS/DINR :22F::SETR/CCAS/RTRL :16R:SETPRTY :95R::DEAG/CCAS/H00001 :16S:SETPRTY :16R:SETPRTY :95Q::BUYR//abc company :97A::SAFE//1234567890 :16S:SETPRTY :16R:AMT :19A::SETT//HKD0, :16S:AMT :16S:SETDET -}{5:{CHK:0000000062CA5359}} Wed Dec 19 17:01:00 CST2007Received: {1:CMT1n009bsgxv00000165}{2:O598B01323X}{4: :20:PG87860000502805 :12:001 :77E: :20C::PREV//123455004A00002 :20C::SIIN//I16181312 :25D::PROC//SUCC :70E::ERRE//EMSG/RECORD ADDED SUCCESSFULLY /ENUM/-2003 -}{5:{CHK:00000000D3611177}} 10

  11. Benefits of using PG 1. Straight-through-processing (STP) • Using the PG access mode, CCASS/3 functions are performed by the • transmission of standard messages. Transactions input to the PSS • can be routed to CCASS/3 directly, without the need to re-input to • CCASS via C3T • 2. Real-time data feed to CCASS • 3. No time constraint for instruction processing 4. Tightening up the internal control without manual intervention 5. Cost effectiveness • Most suitable for high volume data exchange without the need to go • through the input processing via CCASS/3 11

  12. Overview of PG • An alternative access channel to CCASS • PG is a Windows 2000-based device installed at the participant’s premises • It is designed to support participant back office system (Participant Supplied System or PSS) • It facilitates a direct electronic interface between PSS and CCASS with the aim to achieve data straight through processing eventually • PG is a message-based gateway. All communications between PSS and PG are done through messages • Messages follow the SWIFT ISO15022 as possible. • In general, each message sent from and received at PSS can represent a business transaction in CCASS

  13. PSS CCASS/3 Input Message Send an input message for delivery / receipt of securities either FOP or DVP Return a reply message specifying the SI input no. as a unique reference to the instruction Output Message Overview of PG • PG acts as a router to route requests and responses between PSS and CCASS • Example: Input Settlement Instruction (SI)

  14. To meet international standards in providing open access and connectivity for CCASS Participants to access CCASS It will bring Hong Kong into line with prevailing as well as emerging industry standards and will prepare the Hong Kong market to meet the challenges of increasing globalization of financial markets Aim of developing PG • ISO 15022 Securities Messaging Standard (“ISO Standard”) is adopted as the messaging standard which pave the road for Straight Through Processing 14

  15. There are mainly 3 components in a PG system: PG Administrator Main Window - It is a front-end GUI interface - A participant can perform login/logout from C/3, check the communication status between PSS and C/3 etc. PG Engine - It serves as a common architecture component in PG that provides the technical services - It allows an integration of different electronic exchange platforms, information providers PG Application Programming Interface (API) - It provides an open systemthat participants can attach their own applications. PG: System components 15

  16. Message Routing - route requests and responses between PSS and CCASS Support for concurrent transactions - support multiple transactions sent from PSS concurrently by using PG-API Message encryption and authentication - ensure secured transmission between PSS and C/3 - smart card for its authentication to C/3 - PSS’s authentication to PG via PG-API : PSS ID and Password Asynchronous message processing - distribute CCASS broadcast message and notification to PSS PG: Key features 16

  17. Straight through processing - C3T Terminal input Participants input instructions via C3T and print out CCASS reports in text format STP - Batch File Upload • Instead of inputting instruction one at a time by on-line data entry, Participant may use batch file containing a number of instructions and upload to the HKSCC host computer to save effort • The batch file is a DOS file created according to a certain format stipulated by HKSCC. • After uploading, CCASS will validate and processed the uploaded batch files upon receipt or at scheduled times CCASS/3Terminal 17

  18. Straight through processing - C3T • Input control report will be generated to indicate which records are rejected and give a summary of result for each validated batch file • Batch upload function is suitable for participant with a high volume of instructions. Subscription to this service is not required. STP - Report Data Download • Participant can download the CCASS reports in data file format and process the downloaded report files according to their own internal processing requirements • Data file format are available for most of CCASS reports Participants may develop back office system to capture and process the data files to streamline their internal processing and avoid duplicating efforts in manually rekeying instructions into CCASS 18

  19. Straight through processing - PG • Participants can connect their own back-office systems (Participant Supplied System, PSS) to CCASS through PG • By integrating PSS to PG (via PG-API), participants can design their clearing • and settlement back-end process and front-end user interface to meet their • business and operational requirement • PG is responsible for communicating with PSS but not further down to • the other backend system 19

  20. PG C/3 PSS (1) PG User Sign-On (2) PSS Sign-on (3) B/c and Notification subscription (4) Data Download (4) Data Download (5) Online Activities, (5) Online Activities, Reports and Data Files Download Reports and Data Files Download (6) Broadcast and Notifications (6) Broadcast and Notifications (7) Overnight Report Download (7) Overnight Report Download (8) PSS Sign-out (8) PG User Sign-Out Straight through processing - PG • Daily operation flow in PSS 20

  21. PG C/3 PSS (1)Txn Request (2)Txn Request w Validate Txn w Initiate ad hoc txn w Route Txn w Perform update or w Receive Request/ query synchronous Response to w Generate Ref Key response corresponding w Format result parties (4)Txn Response (3)Txn Response w Notify result Straight through processing - PG • PSS is the main initiator for both online and batch transactions. PSS can initiate • business transaction, file upload, report / file download and receive broadcast message • & notification • All transactions are based on the Request-Response processing, PSS will have to wait • for the response from C/3 for every transaction sent. An end-to-end transaction is • considered complete once the Txn-Response is received. • Transactions input to the PSS can be routed to CCASS/3 directly, without the need to • re-input to CCASS via C3T • This facilitates straight through processing for improved operational efficiency and • reduced risk 21

  22. PSS C/3 Business Transaction Initiate business w Response to w txn business txn File Upload Initiate file- Response to file- w w upload upload Initiate request w File Download Distribute file- w and receive file download download Receive AM w Asynchronous Message(AM) Distribute AM w CCASS Functions supported by PG All functions supported by CCASS/3 via PG can be categorised into 3 groups

  23. Clearing and Settlement function • Maintain DI, DI, ISI, ATI and STI • File Transfer • SI, ISI, ATI and STI File Transfer • Enquiry • Enquire Settlement Account/Status • Report Download • Data File Download (Start of Day), Overnight Report Distribution (Download), Report Download (Online) and Report Profile Maintenance • Asynchronous Message • Broadcast/Notification Messages CCASS Functions supported by PG

  24. Q & A