Transcript Securities Settlement

June, 2008
Korea Securities Depository
Contents
Ⅰ
Cross-border Securities Transactions
and KSD Services
Ⅱ
KSD Custody Services
Ⅲ
Custody Services Using CSD linkage
I . Cross-border Securities Transactions
and KSD Services
1. What are International Services?
2. International Services of KSD
I. Cross-border Securities Transactions and KSD Services
1. What are International Services?
Capital Market Structure and Cross-border Securities
Transactions
Domestic
Overseas
Issuer
Issuer
Exchange
Exchange
Securities
Securities
Investor
Investor
Investor
Investor
Ⅰ. Cross-border Securities Transactions and KSD Services
1. What are International Services?
① Out-bound : from Domestic to Overseas
Issuer
Investor
Stock
ADR
Bond (CB·BW·EB)
Stock
DR
Bond
Local Custodian
for Original Shares
CB·BW·EB Agent
Paying Agent
ICSD
Global Custodian
Ⅰ. Cross-border Securities Transactions and KSD Services
1. What are International Services?
② In-bound : from Overseas to Domestic
Issuer
Stock
KDR
Bond · ETF
Transfer Agent
DR Custodian
Disclosure Agent
Investor
Stock
KDR
Bond · ETF
Standing Proxy
Local Custodian
Ⅰ. Cross-border Securities Transactions and KSD Services
1. What are International Services?
Responsive to Rapid Changes in International Financial
Environment
Change
Network
Risk
+
Opportunity
R&D
Ⅰ. Cross-border Securities Transactions and KSD Services
1. What are International Services?
International Cooperation and New Service Introduction
Network
R&D
Organizing
int’l conference
Consulting
Exporting infrastructure
RSI
CSD Linkage
Cross-listing
CSD
ISSA·ICMA
ECSDA
Lead manager
Law firm
CSD
ADB
Ⅰ. Cross-border Securities Transactions
and KSD Services
1. What are International Services?
2. International Services of KSD
Ⅰ. Cross-border Securities Transactions and KSD Services
2. International Services of KSD
Major International Services
RSI
CSD linkage
Co-listing
Conference
Consulting
Infra Export
Int’l settlement
Transfer agent
Depositary
Custodian
Bond agents
Local Custody
Disclosure agent
Ⅰ. Cross-border Securities Transactions and KSD Services
2. International Services of KSD
Foreign Securities Deposit & Settlement Service
 In case where a Korean purchases foreign securities in a foreign
country, KSD designates a foreign custodian, and deposits and
settles them.
KSD has designated global custodians and ICSDs as the custodians.
Foreign
Securities
Deposit
&
Settlement
Service
 Institutional investors may select a foreign custodian directly. Retail
investors, however, are required to deposit their securities, which
they purchased through domestic securities firms, with KSD
 Currently, KSD provides international deposit & settlement services
to 30-some countries including the U.S., Japan and China.
 As of December, 2007, the number of participants for the foreign
securities deposit & settlement services stands at 122 organizations
including brokers, banks, and insurers, holding 178 accounts.
Ⅰ. Cross-border Securities Transactions and KSD Services
2. International Services of KSD
DR Underlying Share Custody & Overseas Bond Agent
DR
underlying
share
custody
Overseas
Bond
Agent
 In case where a domestic company issues DR overseas, KSD signs a
custody agreement with a foreign DR custodian and acts as a
custodian of DR underlying shares.
KSD has signed a custody agreement with four overseas custodians.
 46 issues of 39 companies issued DR overseas of which KSD acts a
underlying share custodian for 44 issues of 38 companies (99%).
 On behalf of the companies that issued overseas bonds including
CB·BW·EB, KSD receives and takes care of rights exercising of
bondholders as a conversion · warrant exercise · exchange · paying
agent.
 KSD competes with domestic and foreign financial institutions. What
is impressive is the market share of KSD stands at about 90%.
Ⅰ. Cross-border Securities Transactions and KSD Services
2. International Service of KSD
Listing of Foreign Corporations and Local Custody (1)
 In case where a foreign company issues and lists stocks on the
domestic market, KSD acts as a transfer agent.
Transfer
Agent
Depositary
 In July, 2007, KSD signed a transfer agent agreement with 3NOD
Digital Group, a Cayman Islands offshore holding company.
 In August, 2007, 3NOD listed itself on Kosdaq, the first case as a
foreign company
 In case where a foreign company lists itself on Korea Exchange in the
form of DR, KSD takes care of DR issuance and rights exercising.
 In March, 2007, KSD signed a depositary agreement with Hua feng
Textile Int’l Group Ltd..
 In November, 2007, Hua feng Textile was listed on Stock Market.
Local
Custody
 In case where a foreign investor invests in the domestic market, KSD
carries out securities deposit & settlement services as a standing
proxy and custodian.
Ⅱ. KSD Custody Services
1. Custody Service Overview
2. Major Custody Services
Ⅱ. KSD Custody Services
1. Custody Service Overview
Custody Service & Custody Market
1
Concept of Custody Service
Foreign investors should appoint standing proxy and a custodian
for safekeeping their securities holdings in Korea
2
Market ratio of Custody Service
A 2.7%
KSD 1.9%
Others 7.9%
(December, 2007)
B 36.0%
D 3.0%
C 23.1%
E 25.4%
Ⅱ. KSD Custody Services
1. Custody Service Overview
2. Major Custody Services
2. Major Custody Services
Ⅱ. KSD Custody Services
Related Laws & Regulations and Services
1
Related Laws & Regulations
Securities
Law
Regulation
2
Cash
Securities and Exchange Act
Foreign Exchange Transactions Act
Regulation on Supervision of
Securities Business
Foreign Exchange Transactions
Regulation
Scope of service
• Investment registration
• Opening accounts at banks and securities companies
- Foreign currency and KRW account
- Securities account
• Securities custody
• Entitlement processing
• Information provision (Corporate actions)
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
2. CSD Linkage Structure & Procedure
3. Migration Procedures
4. Corporate Action
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
Scope of CSD Linkage
 CSD Linkage for International Settlement
- Foreign Securities Transaction & Settlement
- Overseas Custodian in issuing country
 CSD Linkage for Co- Listing
- DR Depositary & CSD in Listing country
- Underlying share Custody
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
Roles of KSD depending on Different Co-listing Methods
Division
Foreign Company
in KRX
Domestic Company
in Overseas Market
DR
KDR Depositary
Custodian of
Underlying Shares
Stock
Transfer Agent &
CSD
-
CSD Linkage
(Stock)
CSD
Custodian of
Foreign CSD
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
Requirements for Co-Listing through CSD Linkage
Applicable Laws and Regulations
Listing
Country
Issuing
Country
- Listing regulation of Exchange
- CSD regulation on paperless deposit
CSD acting as a Custodian
- Corporate Action, Standing proxy
1. CSD Linkage Overview
Ⅲ. Custody Services using CSD Linkage
Service Overview and Progress
Overview
 In case a domestic company is listed on a foreign exchange,
KSD provides custody services through CSD linkage.
 In December, 2001, KSD signed a custody agreement and an
MOS with JSCC.
 In November 1, 2007 KSD signed a custody agreement and
an MOS with JASDEC.
Progress
 In November, 2007, Kodex200
Stock Exchange (TSE)
ETF was listed on Tokyo
 Samsung Investment Trust Management Co., Ltd. co-listed
Kodex200, which was listed on KRX, on TSE in November, 2007
 Some Korean Investment trust companies plan to list ETF in
overseas market
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
2. CSD Linkage Structure & Procedure
3. Migration Procedures
4. Corporate Action
Ⅲ. Custody Services using CSD Linkage
2. CSD Linkage Structure & Procedure
CSD Linkage Structure
Selling
Broker
Selling
Foreign
Exchange
’Buying
Buying
Broker
Data of trading
Application for listing
Overseas
Foreign CSD
Selling broker
A/C
Buying broker
A/C
Issuer
Notification of deposit
(Migration)
Korea
KSD
Stocks issuing & deposit
(through brokers)
F-CSD A/C
Custody
agreement
Ⅲ. Custody Services using CSD Linkage
2. CSD Linkage Procedure & Structure
Listing Structure under CSD Linkage
KRX(300)
KSD
Participant A
150 shares
Participant B
50 shares
Overseas(300)
Foreign CSD
Participant 1
20 shares
Participant 2
JASDEC A/C
100 shares
70 shares
Participant 3
10 shares
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
2. CSD Linkage Structure & Procedure
3. Migration Procedures
4. Corporate Action
Ⅲ. Custody Services using CSD Linkage
3. Migration Procedures
Migration Between Exchanges
KSD
Foreign CSD
A/C
Overseas
Trading
Participant A
KRX
Trading
Ⅲ. Custody Services using CSD Linkage
3. Migration Procedures
Migration from KRX to Foreign Exchange
(3-1)
KSD
Foreign CSD
(3)
(4)
(2-1)
Broker
/Custodian
F- CSD
A/C
Custodian
(2)
(5)
(1)
(1-1)
(5)
Ⅲ. Custody Services using CSD Linkage
3. Migration Procedures
Migration from Foreign Exchange to KRX
(3)
KSD
Foreign CSD
(5)
(2-1)
(6)
(2)
Broker
/Custodian
F-CSD
A/C
Custodian
(4)
(5-1)
(1-1)
(1)
(7)
Ⅲ. Custody Services using CSD Linkage
1. CSD Linkage Overview
2. CSD Linkage Structure & Procedure
3. Migration Procedures
4. Corporate Action
Ⅲ. Custody Services using CSD Linkage
4. Corporate Action
Dividend
Investor
Issuing
company
KSD
Foreign
CSD
Investor
Investor
Ⅲ. Custody Services using CSD Linkage
4. Corporate Action
Voting Right Exercising
Investor
Investor
Investor
Foreign
CSD
KSD
Issuing
company
Ⅳ. Vision
1. Current Status & Challenges
2. CSD linkage in Asia
Ⅳ. Vision
1. Current Status & Challenges
Current Status
• Co-listing between Korean Stock market and Foreign
Markets
- Korean ETF to be listed in Asian Markets
- Foreign Securities to be listed in Korean Market
through CSD
Linkage
Ⅳ. Vision
1. Current Status & Challenges
Challenges
• Different Laws & Regulation
- Physical Certificate Deposit
- Qualification for Opening account in CSD
• Tax
- Beneficial shareholder statement, etc.
Ⅳ. Vision
1. Current Status & Challenges
2. CSD linkage in Asia
Ⅳ. Vision
2. CSD linkage in Asia
CSD linkage in Asia
CSD Linkage
• makes CSD act as a Major Player
• improves efficiency
• provide participants with varied
choices
in Cross- border Transaction & CoListing in Asia
Thank you
Minhee Lee
International Services Planning Team Korea
Securities Depository
Tel : 82-2-3774-3442
E-mail : [email protected]