INVESTOR SERVICES Quarterly Snapshot Q3 2018

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1 INVESTOR SERVICES Q3 2018

2 Global Market Highlights FX liquidity: Turkey: Effective August 13, 2018, the Central Bank of the Republic of Turkey and the Banking Regulation and Supervision Agency introduced measures on the Turkish Lira (TRY) and the foreign exchange market liquidity management to ease concerns over the fluctuation of the TRY. Effective August 29, 2018, the local banks borrowing limits for overnight transactions at the Interbank Money Market are twice the limits applicable prior to August 13, Zimbabwe: Liquidity challenges continue to exist, impacting the ability to move United States Dollar (USD) offshore. Country unrest / Strikes: Market disruption: Zimbabwe: On August 2, 2018, J.P. Morgan s subcustodian, Stanbic Bank Zimbabwe Limited, moved to their alternate site outside of Harare for the day due to ongoing unrest. There was no impact to trading or settlement. Australia: On August 30, 2018, the Reserve Bank of Australia (RBA) experienced technical issues with its payment infrastructure due to a power outage at its head office. Settlement delays were experienced but all scheduled settlements were completed. Normal business resumed on August 31, The RBA issued an incident report for the outage. Canada: On September 26, 2018, CSD Clearing and Depository Services Inc. experienced technical difficulties. Normal operations resumed and all scheduled trades settled on the same day. Indonesia: On September 3, 2018, the Indonesia Central Securities Depository experienced slow performance due to technical issues with its settlement system, C- BEST. Normal operations resumed and all scheduled trades settled on the same day. Philippines: On September 27, 2018, the Philippines Depository and Trust Corporation s centralized system, eclearsettle, experienced technical difficulties and was temporarily disabled. Normal operations resumed and all scheduled trades settled on the same day. South Africa: On September 10, 2018, J.P. Morgan s subcustodian experienced a technical fault which impacted cash reporting. The fault was resolved on September 11, 2018 and there was no impact to trading or settlement. Turkey: On September 26, 2018, Borsa Istanbul (BIST) experienced technical issues resulting in the suspension of BIST transactions. The issue was resolved and trading resumed on the same day. Significant tax changes impacting Foreign Investors across several markets: South Korea: The Ministry of Economy and Finance announced the government s tax reform proposals which, if enacted as proposed, may impact an Overseas Investment Vehicle s eligibility to claim tax treaty relief. The proposals, if passed as proposed, would become effective January 1, Thailand: The cabinet of Thailand approved an extension of the reduced 7% value added tax (VAT) rate for another year from October 1, 2018 to September 30, Continued global shortened settlement cycle movement announcements in Q3: Brazil: The Brazilian Stock, Commodities and Futures exchange, B3 S.A., announced its timeline to implement the trade date (T)+2 settlement cycle for equities which they plan to execute in a phased approach during Indonesia: The settlement cycle for onexchange equity trades will change from T+3 to T+2 on November 26, Japan: The equity settlement cycle is scheduled to change from T+3 to T+2 on July 16, Malaysia: Bursa Malaysia announced a delay to the implementation of a T+2 settlement cycle which was tentatively scheduled for third quarter A new implementation date will be announced in due course. Singapore: Effective December 10, 2018, the settlement cycle will reduce from T+3 to T+2 and the Central Depository (Pte) Limited will implement its new settlement system. 1

3 J.P. Morgan Network / Central Securities Depository (CSD) Updates Belgium, France, Netherlands: J.P. Morgan s phased implementation of a direct settlement model continued in July 2018 for clients contracted with JPMorgan Chase Bank, N.A. (JPMCB NA) or a J.P. Morgan entity that uses JPMCB NA to access these markets, which all use TARGET2-Securities (T2S) for trade settlement. Kenya: Effective July 18, 2018, the Central Bank of Kenya CSD suspended account openings for government bonds and treasury bills due to enhanced focus on anti-money laundering and know your client requirements. Romania: Effective September 3, 2018, the CSD s Rule Book was changed to permit over-the-counter (OTC) trading for equities. Key Market Developments Argentina: The Central Bank of the Republic of Argentina announced measures to gradually reduce and eventually eliminate Letras de Banco Central (LEBAC) Bank Notes by December Botswana: Effective August 2, 2018, Botswana Stock Exchange completed its demutualization process by becoming incorporated as a limited liability company and obtaining registration as Botswana Stock Exchange Limited on the register of companies. China: Effective August 31, 2018, the Shanghai Clearing House announced that International Securities Identification Numbers (ISINs) had been assigned to all of its products. J.P. Morgan understands that the other fixed income depository, China Central Depository & Clearing Co., Ltd., also has ISINs for all its bonds. China A-Share: The FTSE Russell announced that China A Shares will be assigned Secondary Emerging market status commencing with the FTSE Global Equity Index Series (GEIS) semi annual review in June China Bond Connect: Effective August 24, 2018, the Hong Kong Monetary Authority announced the implementation of delivery versus payment (DVP) settlement of Bond Connect trades settling with China Central Depository and Clearing Co. Ltd. Effective August 31, 2018, Bond Connect Company Limited announced that it has launched a block trading service for China Bond Connect. Croatia: The Zagreb Stock Exchange announced that, effective October 1, 2018, trading on the multilateral trading facility (MTF), CE Enter Market, was terminated with the intention to manage a MTF with higher corporate governance standards and transparency under the name Progress. Egypt: India: Effective July 29, 2018, the Egyptian Exchange approved changes in regulations allowing issuers to split their listed shares more than once per year. The Financial Regulatory Authority announced it is preparing to permit the issuance of short term bonds from Quarter Effective July 16, 2018, the Securities and Exchange Board of India (SEBI) advised Registrar and Transfer Agents to monitor and ensure compliance of Foreign Portfolio Investor limits in primary market issuance. Effective August 30, 2018, the National Securities Clearing Corporation Limited was renamed as National Stock Exchange Clearing Limited as part of a strategic rebranding initiative. SEBI issued revised guidelines for FPIs to provide additional information to comply with revised Know Your Client (KYC) requirements and extended the market deadline to March 20, FPIs who do not provide the required information by the market deadline will be prohibited from making further securities purchases in India. The government amended the Companies Rules 2014, mandating unlisted public companies to issue securities in dematerialized form only, effective October 2, SEBI mandated that, effective December 5, 2018, the transfer of securities of listed companies in dematerialized form only, except in cases of transmission or transportation of services. Indonesia: Effective August 20, 2018, the Indonesia Financial Services Authority issued a regulation which allows the issuance of debt securities in the capital market, offered to and traded by professional investors only. 2

4 Kazakhstan: Effective September 17, 2018, the Kazakhstan Stock Exchange JSC launched the settlement of Eurobonds in United States Dollar (USD). Kuwait: The FTSE Russell announced the classification of Kuwait as a Secondary Emerging market within the FTSE GEIS. The classification will be implemented in two 50% tranches, the first effective September 20, 2018 and the second effective December 24, Malaysia: Effective August 21, 2018, the central bank of Malaysia, Bank Negara Malaysia, announced changes to the Foreign Exchange Administration policies, including flexible hedging of foreign currency obligations and wider access for non-residents to the onshore financial market. Mexico: Effective July 25, 2018, a new stock exchange, Bolsa Institucional de Valores, was launched, trading equities, warrants and certain fixed income instruments. Philippines: Effective August 28, 2018, the Bureau of the Treasury implemented its new settlement system for government securities, the National Registry of Scripless Securities. South Korea: Effective August 1, 2018, the Ministry of Strategy and Finance changed its official English name to the Ministry of Economy and Finance. Sri Lanka: Effective August 3, 2018, the Colombo Stock Exchange revised its listing rules to add a third board, the Empower Board, for small to medium firms. Taiwan: The Financial Supervisory Commission (FSC) announced the launch of the continuous trading mechanism to align with international market practice. The implementation date is scheduled for March 23, FSC announced that there will be no trading and settlement in Taiwan securities and futures markets on working Saturdays, effective from January 1, Thailand: The Thailand Securities Depository plans to implement e-proxy Voting in December 2018 as a green initiative to reduce paper documents. Turkey: Borsa Istanbul will launch the Swap Market on October 1, The swap market will initially be operated for foreign exchange transactions with Takasbank acting as the central counterparty. Ukraine: The President of Ukraine signed the law which introduces the foreign nominee concept to the Ukrainian market. The law becomes effective on November 24, United States: Government Sponsored Entities, The Federal National Mortgage Association (Fannie Mae) and The Federal Home Loan Mortgage Corporation (Freddie Mac), will create a new asset type, the Uniform Mortgage-Backed Security, with a target implementation date of June 3,

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