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KSD Overview

KSD Overview. December 14, 2001 Tashkent, Uzbekistan H.S. Yoo. Outline. Overview of Korean Securities Market KSD Profile Scope of Business. Overview of Korean Securities Market. Securities Market Infrastructure Overview of Trade & Settlement in Korea Market Statistics. Overview.

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KSD Overview

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  1. KSD Overview December 14, 2001 Tashkent, Uzbekistan H.S. Yoo

  2. Outline Overview of Korean Securities Market KSD Profile Scope of Business

  3. Overview of Korean Securities Market Securities Market Infrastructure Overview of Trade & Settlement in Korea Market Statistics

  4. Overview Ministry of Finance & Economy Financial Supervisory Commission Financial Supervisory Service K S E KOSDAQ OTC K O F E X Securities Market Structure : Decision-Making : Planning & Admission : Audit & Inspection Equity Bond Futures Options Equity,Bond KOSPI 200 Equity K S D KOSCOM Deposit Settlement Computer System

  5. Overview K S E KOSDAQ I N A S OTC(Bond) KOFEX Members Securities Companies Securities Companies Institutional Investors Institutional Investors Futures Companies Trade volume (year 2000) USD 506.2 bln USD 449.5 bln USD 58 bln USD 1,416 bln USD 179.6 bln Clearing K S E K S D K S D K S D K O F E X Settlement K S D K S D K S D K S D K O F E X Delivery Book-entry Transfer Book-entry Transfer Book-entry Transfer Book-entry Transfer - Payment Designated Bank Designated Bank Designated Bank B O K Designated Bank Netting Multilateral Multilateral Bilateral R T G S Multilateral Settlement Cycle T+2 T+2 T+2 T T+1 Overview of Trade & Settlement in Korea

  6. Overview Market Statistics (as of June, 2001)

  7. KSD Profile Foundation Participants Financial Highlights

  8. KSD Profile Foundation KSSC KSD • December 1974 • Commercial Code • Wholly-owned Subsidiary of KSE • April 1994 • Securities & Exchange Act (SEA) • Over 100 shareholders • Non-Profit Seeking • Special Public Organization • Sole CSD under the SEA

  9. KSD Profile Participants • 964 accounts for 456 participants (Oct. 2001)

  10. KSD Profile Financial highlights (Dec. 31, 2000) • Total assets of 753 billion KRW (579 million USD) • Shareholder’s equity of 241 billion KRW (185 million USD) • Net income of 69 billion KRW (53 million USD)

  11. Scope of Business Centralized Deposit and Settlement Eligible Securities Account Book KSE Settlement KOSDAQ Settlement Debt Settlement (OTC) Institutional Settlement(INAS) Corporate Actions Cross-border Securities Settlement Derivative Settlement Services

  12. Scope of business Deposit & Settlement Eligible Securities Account Book KSE Settlement KOSDAQ Settlement Debt Settlement (OTC) Institutional Settlement(INAS)

  13. Scope of business Deposit & Settlement Eligible Securities • Securities listed on the KSE; • Securities registered on the KOSDAQ; • Short-term monetary instruments including CDs and CPs; and • Securities deemed appropriate by KSD

  14. Scope of business Deposit & Settlement Account Book Participant A/C Book Proprietary Client Redeposit Client A/C Book Participant Deposit Client

  15. Scope of business Deposit & Settlement KSE Market Settlement 1. Trade (T) / Confirmation (T) 1. Trade (T) / Confirmation (T) KSE KOSCOM 2. Clearing Data (T+1) 3. Settlement Statement (T+2 Morning) 3. Settlement Statement (T+2 Morning) Broker/Dealer Broker/Dealer 4. Settlement (T+2, 4 p.m.) 4. Settlement (T+2, 4 p.m.)

  16. Scope of business Deposit & Settlement KOSDAQ Settlement 1. Trade (T) / Confirmation(T) 1. Trade (T) / Confirmation(T) KOSDAQ KOSCOM 2. Trade Data (T) 3. Settlement Statement (T+2 Morning) 3. Settlement Statement (T+2 Morning) Broker/Dealer Broker/Dealer 4. Settlement (T+2, 4 p.m.) 4. Settlement (T+2, 4 p.m.)

  17. Scope of business Deposit & Settlement Debt Settlement (OTC) Participants 1. IDB and participants enter the trade details into the SAFE 21. 2. KSD matches the trade details from each trade counterpart and sends matching report to them. 3-1 KSD checks if the seller’s account has enough securities to settle the trade. If yes, KSD restricts the securities from disposal. 3-2 KSD transmits the fund transfer instruction to BOK.(KSD a/c→Seller a/c) 4. The buyer transfers the settlement fund into KSD’s a/c 5. Simultaneously BOK-wire transfers the settlement fund into the seller’s a/c 6. BOK-wire transmits the message that the settlement fund is credited into seller’s a/c. Simultaneously, KSD transfers the securities into the buyer’s a/c. Trade details ②Matching report Matching System Buyer`s a/c Queue system ④ Fund ransfer <Seller’s a/c> enough securities ? no KSD’s a/c yes ③Transmission Fund Transfer Instruction (KSD→Seller) Restriction of Bonds ⑤ Fund Transfer Bonds Transfer Transfer Results (Simultaneously) Seller`s a/c ⑥Transmission [BOK] [KSD] [Interface]

  18. Scope of business Deposit & Settlement 2. Confirmation & Affirmation(T+1) 1. Trade Data (T) 3. Preliminary Settlement Data (T+1) 3. Preliminary Settlement Data (T+1) 4. Settlement(Book-Entry:T+2) Institutional Investor Securities Company Order Order Execution KSE INAS System

  19. Scope of business Corporate Actions : Beneficial Owner System • Beneficial Owner : The persons whose stocks are deposited with KSD and registered in KSD’s name • Streamlined procedure for rights exercising by beneficial owners • Efficient way of securities management for issuers & participants Right Exercising(Direct) Beneficial Owner Issuer(Transfer Agent) Notification Beneficial Owner’s Book Request for Right Exercising Right Exercising(Indirect) Deposit Beneficial Owners’ Statement Request for rights exercising KSD Beneficial Owners’ Statement Participants Redeposit Client a/c Book Participant a/c Book Client Proprietary

  20. Scope of business Cross-border Securities Settlement Outbound Settlement System Settlement system for Korean investors who invest in foreign securities market Inbound Settlement System Settlement system for foreign investors who invest in Korean securities market

  21. Scope of business Cross-border Securities Settlement KSD Outbound Settlement System • Global Custody - General Investors : Mandatory - Institutional Investors : Optional • Cross-border Clearing Network(CCN) - 42 Countries covered - Sub-Custodian : Euroclear, Clearstream, State Street Bank, BNY - Communication : SAFE21, SWIFT, Sub-Custodian’s proprietary S/W <Overseas> <Korea> CSD A(Or Global Custodian) KSD Participant 3 Participant 1 Participant 2 Participant 4 Participant 5

  22. Scope of business Cross-border Securities Settlement Inbound Settlement System(Local Custody Services) • Agent Services (Investment Registration) • Custody & Settlement of Securities • Cash Management / Corporate Actions Services • Linkage with Foreign CSDs : HKMA, JSCC • Total Assets under Custody (Oct. 30, 2000) Equity : 3.5 trillion KRW (2.7 billion USD)  Debt Securities :28.5 billion KRW (22.5 million USD) <Overseas> <Korea> CSD A(or Global Custodian) KSD CSD A(or LC) Participant 1 Participant 2 Participant3 Participant 4 Participant 5

  23. Scope of business Securities Lending / Repo • Securities Lending & Settlement Services • Lender : Fee • Borrower • Arbitrage trading • Settlement Coverage • Triparty Repo Services • Lending and Borrowing of funds by collateralizing securities • Settlement and collateral management on behalf of participants

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