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INVESTOR ACCOUNT SERVICE IN CCASS. The 8 th ACG Cross Training Seminar Hong Kong Securities Clearing Company Limited 27 – 28 June 2006. Agenda. 1. Background 2. Admission Requirements Scope of Services CCASS Service Fees Benefits Stock Segregated Account with Statement Service.

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INVESTOR ACCOUNT SERVICE IN CCASS

The 8th ACG Cross Training Seminar

Hong Kong Securities Clearing Company Limited

27 – 28 June 2006

agenda
Agenda

1. Background

2. Admission Requirements

  • Scope of Services
  • CCASS Service Fees
  • Benefits
  • Stock Segregated Account with Statement Service
background profile of hkscc
BackgroundProfile of HKSCC
  • 1989 - incorporation of HKSCC

Hong 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
background hkscc participantship
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
background investor account service
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

background investor account service6

Three common options for shares custody in HK:

Keep physical certificates

Entrust with a Broker

Entrust with a Custodian Bank

There is another option:

Entrust with HKSCC

BackgroundInvestor Account Service
background investor account service7
BackgroundInvestor Account Service

A Safe alternative…..

….. Legal protection for shares deposited with HKSCC

….. No need to worry about loss of physical certificates

admission requirements
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
admission requirements9
Admission Requirements

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
admission requirements10
Admission Requirements
  • Maintain a correspondence address in Hong Kong / Macau
  • Maintain a HKD Designated Bank Account for CCASS money settlement purpose
scope of services nature of investor account
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
scope of services transaction flow

3

Order Matching

AMS/3

ISI settlement

8

2

Input Trade Order

10

Money Settlement

6

Input ISI

IP

Scope of ServicesTransaction Flow

5

CCASS

Transactions transmit to CCASS

9

Designated Bank

Money Settlement

Broker

IP A/C

IP’s Designated Bank

4

7

Order Matching Result

Affirm ISI

Broker’s Designated Bank

1

Place Order

Broker

scope of services
Scope of Services
  • Stock transfer and settlement
  • Custodial services
  • Nominee services
scope of services stock transfer
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
scope of services money settlement
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 money

settlement of an ISI

between an IP and a Broker/

Custodian Participant

To process the money

settlement between an IP

and CCASS

e.g. dividend payment / fees

scope of services money settlement for isi
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)
scope of services money settlement17
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

scope of services money settlement dvp
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
scope of services money settlement rdp
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
scope of services custodial services
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
scope of services nominee services

Receive

Corporate Documents

Voting

Entitlement Distribution

& Election

Subscription

Scope of ServicesNominee Services
scope of services nominee services22
Scope of ServicesNominee Services
  • 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
scope of services nominee services23
Scope of ServicesNominee Services
  • 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
scope of services others
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
scope of services optional short message services sms
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
scope of services communicating with ccass
Scope of Services Communicating with CCASS

CCASS

CCASS Internet System

IP a/c - 1

IP a/c - 3

Stock a,b,c….

Stock a,b,c….

IP a/c - 2

Stock a,b,c….

Counter Service

CCASS Phone System

ccass service fees
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)

ccass service fees28
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
benefits

Stock Custody

Stock Custody

Nominee Services

Nominee Services

  • Stock Deposit
  • Stock Withdrawal
  • Electronic Share Transfer
  • Electronic Money Settlement
  • Stock Deposit
  • Stock Withdrawal
  • Electronic Share Transfer
  • Electronic Money Settlement
  • Receive Corporate Documents
  • Entitlement Distribution & Election
  • Subscription
  • Voting
  • Receive Corporate Documents
  • Entitlement Distribution & Election
  • Subscription
  • Voting

Other Services

Other Services

  • eIPO
  • SMS Alert Message
  • eIPO
  • SMS Alert Message
Benefits
benefits30
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
stock segregated account with statement service ssa
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
stock segregated account with statement service ssa32
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