5 NIT Financial Systems Clearing & Settlement Systems Settlement System – CSDClearing System – Clearing BanksCentral Depository SystemsDeposits System – Custodian BanksCentral Depository System – CSDPledge System - BanksCustody System – Custodian BanksTrading System - BrokersAuto Blocking System – BrokersSettlement Guarantee System - BrokersBack Office System – Brokers & Custodian Banks
7 Financial Systems Ex. Custody System Overview Securities BlockingBrokerage FirmsIssuing Buy & Sell OrdersPortfolio Transfer to another custodianAuto matching executed trades with clients’ instructions/ordersRecording DepositsClients’ balances/positions queryYes or No BalanceClients OrdersClientsIssuance of Clients Statement of securities accountsSending matched transactions and transfers for settlementCSDCustodian BanksReceipt of matched transfers
8 Financial Systems Custody System Features Connected to the Exchange, CSD and brokers.Easy management of shareholders’ accounts.Several security levels and segregation of tasks.An extra backup to the CSD database.Fully automated with Journal & printouts for all operations.
9 Financial Systems Custody System Basics The system depends on three main axis;Using client unified code applied by the ExchangeThe Auto Link between the CSD systems and the custodian systemsApplying the auto match concept (matching trades executed at the Exchange with investors’ instructions)
10 Broker-Dealers 56 Brokers SWIFT Service BureauBroker-Dealers 56 BrokersNITCurrent Situation
11 SWIFT Service Bureau Cont. NITCorporateInsurance companiesBanksBroker-DealersInvestment ManagersStock ExchangesDepositoriesTrusteesClearing systemsPayment SystemsSettlement SystemsGovernment InstitutionsSWIFT Service BureauSWIFT Service Bureau Cont.Future Vision
12 Certificate Authority - CA Current SituationBrokerage FirmsIssuersPaper WorkSignature RequiredCustodiansClearing BanksCash Dividend BanksCapital Market AuthorityInvestorsQueryPrimary DealersConnectedWithout legal EvidencePaper work needs from signature and stampsCash dividend needs many checks.MCSD employee only sign on the username responsibility.Stock-Exchange Broker / PD / and Custodians will be for Automation only .Inability to allow the investor to make online Stock Transactions.Stock ExchangesMCDRMCDR Employee12
13 Certificate Authority - CA Cont. Brokerage FirmsFuture VisionIssuersDigital SigningCustodiansXClearing BanksCash Dividend BanksCapital Market AuthorityInvestorsQueryPrimary DealersConnectedWith Legal EvidenceAll transaction is digitally signed and supported by Law.Stock ExchangesMCDRMCDR Employee13