ACG Cross-Training SeminarOrganized by Exchange of Information Task Force STP Initiative in Securities Market - Improving Efficiency and Reducing Risk and Cost - June 2, 2008. Jimbaran Bay, Bali, Indonesia Japan Securities Depository Center, Inc.
What STP ? All Processes, from order to settlement, should be handled Automatically (Electronically, without human intervention) and Seamlessly (Connecting each process, data standardization) Trade Post-Trade Pre-Settlement Why STP ? Increase Efficiency Reduce Risk and Cost Clearing Settlement How STP ? We developedPSMS(Pre-Settlement Matching System)
Two-way approach to realize STP by PSMS. Trade processes were relatively automated by several provided solutions (e.g. FIX). But post-trade processes were not so. Trade 1. From Trade Side Post-Trade PSMS covers both Trade Matching Pre-Settlement Settlement Matching 2. From Settlement Side Clearing & Settlement 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.
: Customer-side’s flow : Street-side’s flow Relationship Diagram of Equity Trading Exchange Investor Investor Broker /Dealer Broker /Dealer Pre-Settlement Matching System JSCC (Japan Securities Clearing Corporation) Pre-Settlement Matching System JDCC (JASDEC DVP Clearing Corporation) JDCC (JASDEC DVP Clearing Corporation) JASDEC Bank of Japan
Basic 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
Basic policies for the system-2 Adopting central matching for both Post-Trade and Pre-Settlement arenas Realization of matching on T+0 Unification of related rules such as Market Rules, Market Practices, etc. 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 Providing variety of connectivity to users 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) Flexibility of connecting ETC vendors with PSMS
"Tripartite Center Matching" Type ( without using investment instruction distribution service ) Broker / Dealer Investment Manager Order NOE Allocation PSMS 2. Trade Report 1. Investment Instruction 3. Notice of Matching Status Trade Matching 3. Notice of Matching Status Trust Bank 4. Trade Report／Investment Instruction 5. Notice of TR Affirming Status 5. Notice of TR Affirming Status Approval SSI 6. Notice of Matching Status 6. Notice of Matching Status Settlement Matching 7. DVP Order Book-Entry Transfer System (Stocks, CB, Corporate Bonds, CP) (Except Stock (Lending & Borrowing ) and JGB)
1. Order 6. NOE 2. Order 7. Trade Matching 8. Settlement Instruction 3. Order 4. NOE Settlement Matching for Non-Resident Trade Overseas Customer (Pension Fund etc.) Investment Manager Broker / Dealer Japan 5. NOE 8. Settlement Instruction Broker / Dealer Exchange Global Custodian 10. Settlement Instruction PSMS 9. Settlement Instruction 11. Notice of Matching Status 10. Settlement Instruction Sub Custodian 12. DVP Order Book-Entry Transfer System (Stocks, CB, Corporate Bonds, CP) (Except JGB) 11. Notice of Matching Status
Future Plan • Introducing ISO20022 standard to PSMS • Introducing the SWIFT(*) Network Connectivity to PSMS * S.W.I.F.T（Society for Worldwide Interbank Financial Telecommunication）
THANK YOU Standardization Globalization Harmonization http://www.jasdec.com/