Transcript KSD Overview

Current Status and Future Outlook
of Korean SLB Market
- for New Service Initiative Task Force session
June 28th, 2006
Korea Securities Depository
Outline





Growth of SLB Market
Characteristics of SLB Market
CSD as SLB intermediary
Development since ACG9
Future Outlook of SLB Market
1
Growth of SLB Market (1)

History

KSD is authorized as SLB intermediary (Aug.
1996)

Foreign Investors are allowed in SLB (July 1998)

KSFC (July 2000) and Securities companies (Sept.
2000) are allowed to act as SLB intermediary

Foreigner’s borrowing limit expanded to KRW 10
billion (July 2005)

Approval system to ‘Foreigner’s securities
borrowing over KRW 10 billion’ was changed to
‘Prior-reporting System’ (Jan. 2006)
2
Growth of SLB Market (2)

Size of SLB Transactions
(Unit: 100 million shs)
year
96
97
98
99
00
01
02
03
04
05
061)
trading amount
2
100
213
146
54
52
157
276
592
863
582
1)From Jan. through May for 2006

Foreigner’s SLB Transactions1)
(Unit: million shs, KRW billion)
foreigners
total
foreigner's ratio
volume
value
volume
value
volume
value
2003
123,322
4,044
219,179
6,203
56%
65%
2004
242,310
8,281
425,305
12,872
57%
64%
2005
483,743
14,213
589,129
17,136
82%
83%
20062)
384,109
10,990
431,548
12,712
89%
86%
1)KSD’s SLB statistics only 2)From Jan. through May for 2006
3
Characteristics of SLB Market (1)
 SLB
through Intermediaries
 Blind Transaction
 Active Participation of Foreigners
 Tight Regulation
4
Characteristics of SLB Market (2)

SLB through Intermediaries

KSD, Securities Companies &KSFC act as
intermediaries


Foreigners should use intermediaries to SLB in Korea
Blind Transaction

Bid-Offer Transaction taking roots

Cost efficient
 Easy to find the lender

Recall from lenders

Not vis-à-vis contract
 Not reluctant to recall
5
Characteristics of SLB Market (3)

Active Participation of Foreigners


Borrower oriented market
High ratio of foreigners SLB trade

Foreign investment ratio in Korean Stock Market: 37.17%
 SLB ratio of foreigner : over 80%

Tight regulation

FOL


Foreigner’s SLB of FOL names are limited
Prior-report to BOK

When borrow from onshore over 10billion
 Complicate reporting procedure

IRC etc.
6
CSD as SLB Intermediary
 Strength


Corporate action service for lent shares
Weakness


Tight internal regulation
Limited risk taking


Collateral ratio vs. Credit line
etc.
7
Development since ACG9 (1)
 F/X
deregulation
 Borrowing of funds and banks are
allowed
 Completion of SLB consulting to
TSD
8
Development since ACG9 (2)
 F/X

Deregulation
Prior-reporting system

Foreigners who want to borrow more than KRW10 billion
from onshore lender should submit prior report to BOK
 Changed from ‘approval system’ to ‘report system’

Way to market opening

F/X liberalization plan (2009)
 Borrowing
of funds and bank are
allowed

Financial institutions are allowed Securities
Borrowing

Limited purpose

Risk hedge, fail-cover, arbitrage
9
Development since ACG9 (3)
 Completion

of SLB consulting to TSD
Dispatch ‘System Consulting Team’ to TSD

From July 2005 to March 2006, 6 members
 SLB & Repo system consulting
 System architecture design, system technical design, source
coding, test & training

Scope of system consulting
Repo
SLB
Common
Total
No. of screen
46
43
10
99
No. of printout
45
72
-
117
Batch Program
7
12
-
19
External Interface
-
-
5
5
10
Future Outlook of SLB Market

SLB liberalization

F/X liberalization is under way

Prior-reporting system will be abolished in 2009
 Foreign currency as collateral for SLB

High Potential for Growth

Funds & Banks SLB

From July 2006, funds & banks will join SLB as borrower
 Aggregate value of funds : KRW 137 trillion

SLB amount: 1% of Securities Trading Amount
11
Thank You