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INVESTOR ACCOUNT SERVICE IN CCASS

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

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  1. INVESTOR ACCOUNT SERVICE IN CCASS The 8th ACG Cross Training Seminar Hong Kong Securities Clearing Company Limited 27 – 28 June 2006

  2. Agenda 1. Background 2. Admission Requirements • Scope of Services • CCASS Service Fees • Benefits • Stock Segregated Account with Statement Service

  3. 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

  4. 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

  5. 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

  6. 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

  7. BackgroundInvestor Account Service A Safe alternative….. ….. Legal protection for shares deposited with HKSCC ….. No need to worry about loss of physical certificates

  8. 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

  9. 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

  10. Admission Requirements • Maintain a correspondence address in Hong Kong / Macau • Maintain a HKD Designated Bank Account for CCASS money settlement purpose

  11. 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

  12. 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

  13. Scope of Services • Stock transfer and settlement • Custodial services • Nominee services

  14. 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

  15. 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

  16. 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)

  17. 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

  18. 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

  19. 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

  20. 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

  21. Receive Corporate Documents Voting Entitlement Distribution & Election Subscription Scope of ServicesNominee Services

  22. 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

  23. 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

  24. 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

  25. 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

  26. 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

  27. 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)

  28. 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

  29. 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

  30. 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

  31. 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

  32. 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

  33. Thank You

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