10th ACG Cross-Training Seminar

Central Securities Depository of KazakhstanJune 1th-5th, 2008, Jimbaran Bay, Bali, Indonesia

Automated Settlement System of Kazakhstan

Agenda1. Settlement system2. Participants of the settlement system 3. Used software 3.1. Transportation of messages 3.2. Settlement system participants’ software4. Process of Settlement

1. Settlement systemThe process of settlement in Kazakhstan is almost automated on the principle as Straight Through

Processing.

The settlement system of the Central Securities Depository (CSD) is real time gross settlement system. The most of deals are settled in the period of T+0.

The deals are settled during about 10 minutes, including securities and cash movements.

Human elements are decreased from settlement process to the minimum.

2. Participants of settlement system

CSDCSD

CustomerCustomer NN

KISCKISC

ISMT

BMES

CustomerCustomer 1 1InternetInternet

KASEKASE

DialUp

Frame-relay

Ethernet

1

4

2

2 3

2. Participants of the settlement system1. Central Securities Depository of Kazakhstan (CSD).2. Customers of CSD.3. Kazakhstan Stock Exchange (KASE).4. Republican state enterprise Kazakhstan Interbank Settlement Centre of the National Bank of

Kazakhstan (KISC).

KISC is a payment system operator that consists of Interbank System of Money Transfers (ISMT) and Banking Messages Exchange System (BMES).

BMES receives and processes both financial information for the payment system and private participants’ information.

ISMT is the real time gross payment system for banks.

3. Used software3.1. Transportation of messages.

The messages between CSD and CSD’s customers are passed through BMES. CSD can use three communications channels to connect with KISC. The primary ones is Frame-relay. If this channel is problem, CSD can use DailUp or Internet.

The messages between CSD and KASE are passed directly. CSD uses Ethernet to connect with KASE. If this channel is problem, CSD connects with KASE through BMES.

3.2. Settlement system participants’ software.

KASE is working on a paperless basis and processes electronic messages based on SWIFT-similar formats, developing, modernizing and ratifying by KASE.

ISMT is working on a paperless basis and processes electronic messages based on SWIFT-similar formats, developing, modernizing and ratifying by KISC.

CSD’s customers have possibility to link to CSD’s software that is working on a paperless basis and processes electronic messages based on SWIFT-similar formats, developing, modernizing and ratifying by CSD. The networked customers have a remote-data terminal that allows to send messages from customer’s working place. The both networked and non networked customers have possibility to send paper settlement instructions. In this case CSD’s employee creates the SWIFT-similar format in CSD’s software and sends it to automated settlement system. The productivity of CSD software is 2 processed instructions per 3 seconds, including both securities and cash movements.

4. Process of settlement

Terminal of KASE

KASE

File-router of CSD

Terminal of KISC

KISC

1) KASE message

2) Payment order

2) Payment order

CSD

3) Payment confirmation

3) Payment confirmation

4) Settlement confirmation

4) Settlement confirmation

1) KASE message

4. Process of settlement1. KASE sends a message to CSD.2. CSD’s software: - identifies participant, - checks-up the message structure, - blocks securities on the seller’s account, - sends payment order to ISMT.3. ISMT transfers money from buyer’s account to seller’s account and sends payment confirmation to

CSD.4. CSD’s software: - identifies participant, - checks-up the message structure, - transfers securities from seller’s account to buyer’s account - sends settlement confirmation to KASE and both seller and buyer.

All messages are transported through CSD’s file-router that identifies receiver of the message.

If deals are arranged not on KASE, customers of CSD send messages to CSD directly. In this case the settlement process is the same.

Thank You