Reform of the Securities Settlement Infrastructure in Japan

Transcription

1 Sibos 2001 Special Interest Session Latest Developments in the Japanese Banking Market Reform of the Securities Settlement Infrastructure in Japan October 17th, 2001 Shuta Okawara, Manager Custody Planning Department Global Securities Services Division

2 Prior Market Developments Apr. 94 DVP for JGB Apr. 97 JGB T+7 to T+3 Nov. 97 Corporate bonds T+10 to T+7 Apr. 98 DVP for corporate bonds Jun. 98 Corporate bonds T+7 to T+5 Dec. 98 New Foreign Exchange Yen Clearing System Oct. 99 Corporate bonds T+5 to T+3 2

3 Preliminary Discussions: Liberal Democratic Party Securities and Markets Issues Sub-Committee proposes Reform of the securities settlement system, Aug. 99 Japan Securities Dealers Association Committee for Reform of the Clearing and Settlement System, Sep. 99 Ministry of Finance Financial Council Working Group, Oct. 99 Bankers Association Market Committee also starts 2 working groups etc. 3

4 Proposals and Reports:2000 Paperless, book entry settlement Reform of CSD Eligible securities types Organization demutualization Realization of DVP settlement Shortening of settlement cycle : T+1 Electronic matching system Electronic documentation Trade reports Accounting Clearing / netting system 4

5 Legislative Changes : 2001 Apr. Jun. Sept. Law for Electronic Documents Ammendment of CSD legislation - move to an industry owned company Law for short term bonds settlement - dematerialization of commercial papers Electronic Proxy voting 5

6 Practical Changes for 2001and January April May September November 2002 RTGS for JGB Law for Electronic Documents DVP for TSE and OSE trades JASDEC PSMS i Phase 1 (equities) JASDEC to handle book-entry settlement and safekeeping of convertible bonds January JASDEC PSMS Phase 2 (convertible bonds and custodians) i PSMS: Pre-Settlement Matching System 6

7 Practical changes planned for 2002 and 2003 Expansion of JASDEC PSMS to other securities types and trades Bonds, futures, securities lending Demutualization of JASDEC Move to an industry owned corporation Preparations to start Q DVP for OTC transactions Working Group examining scheme Implementations anticipated within fiscal 2002 Unified clearing organization 7

8 Platform for T+1: JASDEC PSMS Participants : the whole chain Asset management companies Broker / dealers Trust banks Sub-custodians (agents for foreign investors) Functions Post-trade matching for domestic trades Standing Settlement Instruction data enrichment Pre-settlement matching Real-time processing Message Formats: Global Standards ISO15022, ISIN, BIC PSMS:Pre-Settlement Matching System 8

9 JP Securities Settlement Today Cross border Fund Manager Trade of Securities Broker / Dealer Instruction Global Custodian Instruction Sub Custodian Confirmation Confirmation or Status Report 3. Cash Settlement BOJ Banks Data Data Physical Delivery Instructions and Confirmations Instructions and Confirmations ETC Provider Data or Documents 2. Securities Settlement NTT DATA Matching via Telephone BOJ JASDEC JGB Registration Agent Equities Registered Bonds Physical Securities / Letter of Transfers Instructions and Confirmations 1. Matching of Settlement Instructions Instruction Data or Documents Local Agent Confirmation or Status Report Abroad Japan BOJ: Bank of Japan JASDEC:Japan Securities Depositary Centre JGB:Japanese Government Bond 9

10 JP Securities Settlement in the Near Future - Cross border Global Custodian Instruction MT Fund Manager Sub Custodian 24 hours Confirmation MT or Status Advice MT548 BOJ: Bank of Japan JASDEC:Japan Securities Depositary Centre Asia 6am-9pm Europe 0am-3pm NY 6pm - 9am Cash MT MT548 Release BOJ RTGS Trade of Securities GSTPA TFM Post-Trade Matching Settlement Instruction Matching JGB JASDEC PSMS September 2001 Post-Trade Matching (for domestic trades) January 2002 Pre-Settlement Matching Equities Convertible Bonds March JASDEC 2003? DVP MT MT548 Release Straight Bonds Registration Agent Instruction 7am to 10pm Confirmation or Status Report Abroad Japan Clearing Bank 10 JGB:Japanese Government Bond Cash Broker / Dealer Local Agent

11 STP / Standardization Discussions ISITC Japan Established Dec., 1998 Approx. 80 member firms, 130 individuals 5 Working Groups Liaison with JASDEC Task Forces and Securities Market Practice Group FIX Japan Committee Established Dec., 1998 Approx 12 member firms FIX 4.2J GSTPA Japan Committee Outbound Investment Working Group Investment into Japan Working Group 11

12 The road ahead Platform for T+1 is in place. However; DVP still to be developed. Task force designing the scheme Expand to other eligible securities types Legislative changes in the pipeline More involvement from the initiator of the settlement chain investment managers Vendor solution ETC PT Service Bureau SWIFT, Hitachi, QUICK, NTT Data, Tosho Computer System, Nihon UNISYS What about cross-border? 12

13 13 What this all means to a bank Huge IT investment and extensive business expertise required Only the most committed players with substantial business scale and accumulated expertise can justify the continuation of their business.

14 For further information Shuta Okawara, Manager Custody Planning Department Global Securities Services Division Bank of Tokyo-Mitsubishi, Ltd. Tel: Sibos Booth