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Korea Securities Depository Hyo-Sang Yoo October 2, 2008.

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Presentation on theme: "Korea Securities Depository Hyo-Sang Yoo October 2, 2008."— Presentation transcript:

1 Korea Securities Depository Hyo-Sang Yoo October 2, 2008

2 Korea Securities Depository 1 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) ※ Participants of KSD

3 Korea Securities Depository 2 Global Custodian ICSD CSD Linkage Local Agent Direct Access Multi CSD Model 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

4 Korea Securities Depository 3 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 Americas Argentina Canada Chile Mexico United States Europe Austria Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Switzerland United Kingdom ICSDs Euroclear Clearstream Asia Australia China(Shanghai) China(Shenzen) Hong Kong Indonesia Japan New Zealand Philippines Singapore Thailand Mid East United Arab Emirates

5 Korea Securities Depository 4 ※ Increasing settlements on 3 Asian markets (Bil., USD) ※ Cross-border settlement volume Global custody for Korean investors Category200520062007 China No. of Settlement 1,3124,04413,468 Increasing rate -208%233% Hong Kong No. of Settlement 1,4178,67657,660 Increasing rate -512%565% Japan No. of Settlement 1,5322,0015,513 Increasing rate -31%176% Total No. of Settlement 4,26114,72176,641 Increasing rate -245%421%

6 Korea Securities Depository 5 Local custody - Disintermediation KSD Local Custodian Foreign Investor Global Custodian Multi-tier structure for foreign investors DISINTERMEDIATION by 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

7 Korea Securities Depository 6 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

8 Korea Securities Depository 7 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

9 Korea Securities Depository 8 CSD Linkage TSE Selling BrokerBuying Broker JASDEC KSD JASDEC A/C Custody agreement Application for listing  Selling  ’ Buying Data of trading Issuer Japan Korea  Stocks issuing & deposit (through brokers)  Notification of deposit (Migration) KSD-JASDEC linkage Selling brokerBuying broker

10 Korea Securities Depository 9 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. KSD Singapore T.A. Singapore T.A. KSD Share holder Share holder M Application for Migration M+1 Migration form notice M+2 Form acceptance M+2~5 Ready to issue M+6 Share issue

11 Korea Securities Depository 10 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 Companies Establish ment Issuing country Foreign listingMigrationListing type Listing schedule 3NOD DigitalCaymanKoreaNon-listingXShareAug. 2007 Huafeng Group Holdings CaymanHong Kong OKDRNov. 2007 Cowell E HoldingsCaymanKoreaNon-listingXShareFeb. 2008 6 more companies Japan Hong Kong Cayman Korea Japan Non-listing OXOX Share or KDR November December ※ Foreign Companies’ Listing to Korean Market

12 Korea Securities Depository 11 Asset Management Industry Information Infrastructure Inadequate Asset Management Industry Infrastructure Securities Companies Securities Companies Trustees Fund Admin Fund Admin IMs InformationInfrastructure Fund Admin Trustees Securities Companies Obstacles to Advancement of the Securities Market Loss of Investor Confidence Due to Decreased Transparency High-Cost, Low-Efficiency Operation Processes Advancement of the Securities Market Through Development of the Asset Management Industry Advancement 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 FundNET Development (Background)

13 Korea Securities Depository 12 Investment Managers Fund Fund Asset E/R System D/S System Fund Administrator Distributors Broker/ Dealers Custodians/ Trustees 1 3 2 4 5 6 5 1 3 2 4 56 78 7 FundNet FundNET – Operating Structure

14 Korea Securities Depository 13 Thank You!

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