View
221
Download
3
Category
Tags:
Preview:
Citation preview
Korea Securities Depository
Hyo-Sang Yoo
October 2, 2008
Korea Securities Depository2
KSD Overview
Central Securities Depository of Korea
Founded in 1974 under the Commercial Code and transformed in 1994 under the Securities & Exchange Act
69 shareholders including KRX, securities companies, banks, etc and 1,000 participants including securities companies, banks, insurance companies, etc. (Dec. 31, 2007)
Supervised by Ministry of Strategy & Finance, Financial Services Commission (FSC), and Financial Supervisory Service (FSS)
43%48%
55%61%
69%
57%
52%
45%
39%
31%
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007
No. & ratio of Domestic Participants
No. & ratio of Foreign Participants
※ Participants of KSD
Korea Securities Depository3
GlobalCustodian
ICSD
CSD Linkage
Local Agent
DirectAccess
Multi CSDModel
Models for Cross-border Settlement
6 Models
These models vary by “legislation structure”, “market practices for investment” and “openness for foreign financial organization”
Cross-border Securities Settlements
Korea Securities Depository4
Global custody for Korean investors
Cross-border custody, settlement and corporate action services over the 34 markets of 32 countries with 6 custodians for overseas investment by domestic investors
* Custody Network Euroclear, Clearstream, Citibank, BNY Mellon, SSB, Pershing
AmericasArgentinaCanadaChileMexicoUnited States
EuropeAustriaDenmarkFinlandFranceGermanyGreeceIrelandItalyNetherlandsNorwayPortugalSpainSwitzerlandUnited Kingdom
ICSDsEuroclearClearstream
AsiaAustraliaChina(Shanghai)China(Shenzen)Hong KongIndonesiaJapanNew ZealandPhilippinesSingaporeThailand
Mid EastUnited Arab Emirates
Korea Securities Depository5
※ Increasing settlements on 3 Asian markets
(Bil., USD)
※ Cross-border settlement volume
Global custody for Korean investors
Category 2005 2006 2007
China
No. of Settlement
1,312 4,044 13,468
Increasing rate
- 208% 233%
HongKong
No. of Settlement
1,417 8,676 57,660
Increasing rate
- 512% 565%
Japan
No. of Settlement
1,532 2,001 5,513
Increasing rate
- 31% 176%
Total
No. of Settlement
4,261 14,721 76,641
Increasing rate
- 245% 421%
Korea Securities Depository6
Local custody - Disintermediation
KSD
Local CustodianLocal Custodian
Foreign InvestorForeign Investor
Global CustodianGlobal Custodian
Multi-tier structure
for foreign investors
DISINTERMEDIATIONby KSD’s
local custody service
KSD’s custody service (1998)
- custodian services: securities and cash account opening and management, settlement and balance report, etc.
- standing proxy services: exercise of voting right and dividend distribution, reports to the regulator, investment registration to FSS, etc.
Unique model that CSD functions as a local custodian by DISINTERMEDIATION to cross-border investment
- Direct access to CSD- Custody a/c as a participant’s a/c and legal ledger
Korea Securities Depository7
Prerequisite conditions for custody service by CSD
- stipulation by laws or decrees for cross-border securities deposit and settlement business by account opening with foreign CSDs or foreign institutional organizations
Local custody - Disintermediation
Advantages of KSD’s custody service
- direct access to CSD, custody a/c as a participant’s a/c and legal ledger
- precise corporate actions by CSD
- stable and firm legal basis as CSD
- reasonable fee
Weakness of KSD’s custody service
- non-commercial banking institution (cash management or FX not available directly)
- no global network
Overcoming the weakness:
- alliance with commercial bank for cash management and FX
Korea Securities Depository8
CSD Linkage
Base of CSD linkage – Local custody service
Co-listing of Korean securities on Tokyo Stock Exchange
- Kodex200 co-listed on KRX and TSE in November, 2007
- arbitrage trading between Korea and Japan
- STP through SWIFT for migration (1 BUSINESS DAY)
CSD linkage between KSD-HKMA for bond settlement
- no transaction since linkage setup (1999)
- CSD linkage SHOULD BE BASED on the MARKET DEMAND
Korea Securities Depository9
CSD Linkage
TSESelling Broker Buying Broker
JASDECJASDEC
KSD
JASDEC A/C
Custody agreement
Custody agreement
Application for listing
Selling ’ Buying
Data of trading
IssuerIssuer
JapanJapan
KoreaKorea
Stocks issuing & deposit (through brokers)
Notification of deposit (Migration)
KSD-JASDEC linkage
Selling broker Buying broker
Korea Securities Depository10
Transfer Agent Linkage - Share Migration
Share migration service by transfer agent linkage for co-listed company
- STX Pan Ocean, a Korean entity listed on SGX (July 2005) and KRX (Sep. 2007)
- Share migration demand from Singaporean shareholder and setup of transfer agent linkage
※ Transfer agent linkage model
Inefficiency for migration and risks of arbitrage trading comparing to CSD linkage
- 6 BUSINESS DAYS to migrate for arbitrage trading
Singapore T.A.
KSDSingapore
T.A.Singapore
T.A.
KSD KSDShareholder
Shareholder
MApplication for
Migration
M+1Migration
form notice
M+2Form
acceptance
M+2~5Ready to
issue
M+6Share issue
Korea Securities Depository11
Issuance of KDR and shares for foreign companies' listing in Korea
Current foreign candidates for KRX listing
- Mostly Chinese and Japanese companies
- Cayman holding companies which have subsidiaries in mainland China
- U.S, Germany, Canadian companies also considering listing to Korean market
CompaniesEstablish
mentIssuing country
Foreign listing Migration Listing typeListing
schedule
3NOD Digital Cayman Korea Non-listing X Share Aug. 2007
Huafeng Group Holdings
Cayman Hong Kong Hong Kong O KDR Nov. 2007
Cowell E Holdings Cayman Korea Non-listing X Share Feb. 2008
6 more companiesJapan
Hong KongCayman
KoreaJapan
Non-listingOX
Share or KDRNovemberDecember
※ Foreign Companies’ Listing to Korean Market
Korea Securities Depository12
Asset Management Industry Information Infrastructure
Asset Management Industry Information Infrastructure
Inadequate Asset Management Industry Infrastructure
Inadequate Asset Management Industry Infrastructure
Securities Companies
Securities CompaniesT
rustees
Tru
stees
FundAdmin
FundAdmin
IMs
IMs
InformationInformationInfrastructureInfrastructure
IMsFund Admin
Trustees Securities Companies
Obstacles to Advancement of the Securities Market
Loss of Investor Confidence Due toDecreased Transparency
High-Cost, Low-Efficiency Operation Processes
Advancement of the Securities Market Through Development of the Asset Management IndustryAdvancement of the Securities Market Through Development of the Asset Management Industry
Regained Investor Confidence With Transparent Fund Management
Regained Investor Confidence With Transparent Fund Management
Low-Cost, High-Efficiency Back-office Infrastructure
Low-Cost, High-Efficiency Back-office Infrastructure
FundNET Development (Background)
Korea Securities Depository13
InvestmentManagers
Fund Fund AssetE/R System D/S System
FundAdministrator
Distributors Broker/Dealers
Custodians/Trustees
1
32
4
5
6 5
1
3
2
4
56 7 8
7FundNet
FundNET – Operating Structure
Korea Securities Depository14
Thank You!
Recommended