We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services. Korea Securities Depository Hae-Il Jang Managing Director Korea Securities Depository KSD’s Global Custody Services
Jan 02, 2016
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Hae-Il Jang Managing Director
Korea Securities Depository
KSD’s Global Custody Services
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
KSD Overview
Central Securities Depository of Korea
Founded in 1974 under the Commercial Code and transformed in 1994 under the Securities & Exchange Act
59 shareholders including KRX, securities companies, banks, etc and 1,067 participants including securities companies, banks, insurance companies, etc. (Dec. 31, 2010)
Supervised by Ministry of Strategy & Finance, Financial Services Commission (FSC), and Financial Supervisory Service (FSS)
※ Participants of KSD
43%48%
55%61%
69%
57%
52%
45%
39%
31%
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010
No. & ratio of Domestic Participants
No. & ratio of Foreign Participants
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
KSD Overview
Core Infrastructure of the Capital MarketCore Infrastructure of the Capital Market
Deposit & Settlement Services Primary
Market Services
Primary Market
ServicesAsset
Management Support
Derivatives Market
Services
International Deposit & Settlement
International Deposit & Settlement
Low Cost ㆍ High Efficiency Global Standard
• Securities Deposit
• Securities Settlement
• Entitlements
Processing
• Transfer Agent
Services
• Bond Registration
Service
• FundNet Service
(deposit, establishment,
redemption, settlement)
• Fund Servicing
(calculate, disclose NAV)
• SLB Intermediary
• Repo Services
• Secured Call
Management
• Collateral Management
for OTC transaction
• Global Custody
Service
• Local Custody
Service
• KDR Depositary
• Custody for ADR
underlying shares
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
KDR DepositaryKDR DepositaryKDR DepositaryKDR Depositary
Custodian for ADR(GDR)Custodian for ADR(GDR)Underlying SharesUnderlying Shares
Custodian for ADR(GDR)Custodian for ADR(GDR)Underlying SharesUnderlying Shares
PrimaryPrimaryMarketMarketPrimaryPrimaryMarketMarket
Korean Korean CompaniesCompanies
Korean Korean CompaniesCompanies
국내증권시장국내증권시장국내증권시장국내증권시장KoreanKoreanMarketMarketKoreanKoreanMarketMarket
ForeignForeignCompaniesCompanies
ForeignForeignCompaniesCompanies
OverseasOverseasMarketMarket
OverseasOverseasMarketMarket
Local Custody ServiceLocal Custody ServiceLocal Custody ServiceLocal Custody Service
Global Custody ServiceGlobal Custody ServiceGlobal Custody ServiceGlobal Custody Service
SecondarySecondaryMarketMarket
SecondarySecondaryMarketMarket
KoreanKoreanInvestorsInvestorsKoreanKorean
InvestorsInvestors
ForeignForeignInvestorsInvestorsForeignForeign
InvestorsInvestors국내증권시장국내증권시장국내증권시장국내증권시장KoreanKoreanMarketMarketKoreanKoreanMarketMarket
국내증권시장국내증권시장국내증권시장국내증권시장OverseasOverseasMarketMarket
OverseasOverseasMarketMarket
One Single Gateway for Global Investment
KSD’s global services
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
GlobalCustodian
ICSD
CSD Linkage
Local Agent
DirectAccess
Multi CSDModel
Cross-border Securities Settlement Channel
6 Models for Cross-border
Securities Settlement
These models vary by “legislation structure”, “market practices for investment” and “openness for foreign financial organization”
6 Models for Cross-border Securities Settlement by BIS
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Global custody service for domestic investors
Unique model that CSD provides global custody service by expanding the scope of its eligible securities from domestic securities to global securities
- cross-border custody, settlement and corporate action services over the 36 markets of
34 countries with 4 custodians for overseas investment by domestic investors
※KSD’s Custodian Euroclear Clearstream Citibank SSB Americas
ArgentinaCanadaChileMexicoUnited States
EuropeAustriaDenmarkFinlandFranceGermanyGreeceIrelandItalyNetherlandsNorwayPortugalSpainSwitzerlandUnited KingdomBelgiumIsraelSweden
ICSDsEuroclearClearstream
AsiaAustraliaChina(Shanghai)China(Shenzen)Hong KongIndonesiaJapanNew ZealandPhilippinesSingaporeThailandTaiwanVietnam
Africa &Mid EastUnited Arab EmiratesSouth Africa
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
5.9
12
6
8.5
4.9
9.7
12.5
12,69918,800
32,341
97,28389,722
144,797
118,674
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2004 2005 2006 2007 2008 2009 2010
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Settlement Amount (Bil, USD) Number of Settlements
(Bil., USD)
※ Cross-border settlement volume
Global custody service for domestic investors
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
STP in KSD's global custody service
Before STP
Clients KSD Custodian
SAFE Terminal
Manual operation for data transformation
Low efficiency, High risk
After STP
Clients
SAFE SWIFT
STP : Automatic transformation from original message into SWIFT message ⇒ No manual operations
High efficiency, Low risk
KSD Custodian
STP launched to reduce operational risks and inefficiency by automatic transformation (March 2006)
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Disintermediation - Local custody service
KSD
Local CustodianLocal Custodian
Foreign InvestorForeign Investor
Global CustodianGlobal Custodian
Multi-tier structure
for foreign investors
DISINTERMEDIATIONby 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
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
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
Disintermediation - Local custody service
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
Citi 23.1%SCB 25.4%
HSBC 36.0%Others 7.9%KSD 1.9%Samsung Se
2.7%
DB 3.0%
<Market share of local custody service>
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
CSD Linkage
Base of CSD linkage – Local custody service
Co-listing of Korean securities on Tokyo Stock Exchange
- Kodex200 ETF co-listed on KRX and TSE in November, 2007 - arbitrage trading between Korea and Japan - STP through SWIFT for migration (1 BUSINESS DAY)
KSD-JASDEC linkage Model
TSESelling Broker Buying Broker
JASDECJASDEC
KSD
JASDEC A/C
Custody agreementCustody
agreement
Application for listing
Selling ’ Buying
Data of trading
IssuerIssuer
JapanJapan
KoreaKorea Stocks issuing & deposit
(through brokers)
Notification of deposit (Migration)
Selling broker Buying broker
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
KSD’s Custody Service for Domestic Companies issuing ADR∙GDR(1994)
- For domestic companies that issue ADR or GDR
- Custody agreement
Bank of New York
Citibank N.A.
Deutsche Bank Trust Company
JP Morgan Chase
- Korean companies’ ADR & GDR: 45 issues for 39 companies
- Market share of KSD in Korea: 100%
Citibank,81.1%
JPMC,14.8%
DBTC,0.01%
BNY, 4%
※ Total custody share
Custody service for ADR∙GDR underlying shares
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Advantages using KSD custody services for ADR∙GDR underlying shares
- book-entry issuance of DR underlying
shares
- direct participation in central deposit
system
- STP through SWIFT for DR conversion
and release(1~2 business days)
- corporate actions such as rights
exercising, tax withholding, etc. through
SWIFT
※ ADR∙GDR conversion and release
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2004 2005 2006 2007 2008 2009 2010
0
50
100
150
200
250
Conversion, case Release, case
Conversion, No. of Shares(Mil. Shares) Release, No. of Shares(Mil. Shares)
(Mil. Shares)(Mil. Shares)
1~2 business days for DR conversion and release
Custody service for ADR∙GDR underlying shares
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
KDR Depositary for foreign companies
Centralized securities depository and settlement system of Korea
☞ authorized to issue KDR pursuant to the Financial Investment Service and Capital
Market Act of Korea and its Enforcement Decree
CSD: securities deposit and settlement
Transfer Agent for issuance of foreign shares
Depositary for KDR issuance
CSD
KDRDeposi-
tary
TransferAgent
KSD
※ KSD’s functions at primary market
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
KDR Depositary for foreign companies
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
CompaniesEstablish
mentIssuing country
Foreign listing Migration Listing typeListing
schedule
3NOD Digital Cayman Korea Non-listing X Share Aug. 2007
Huafeng Group Holdings
Cayman Hong Kong Hong Kong O KDR Nov. 2007
Cowell E Holdings Cayman Korea Non-listing X Share Feb. 2008
16 more companies
JapanHong Kong
Cayman
KoreaJapan
Non-listingOX
Share or KDR -
※ Foreign Companies’ Listing to Korean Market(2010)
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
KDR Depositary for foreign companies
※ KDR Issuance Structure
KDR Distribution
KDR Distribution
KoreaOverseas
Issuance of Underlying Shares
Issuance of Underlying Shares
FSSFSS
Lead ManagerLead Manager SubscriptionHandling Co.SubscriptionHandling Co.
InvestorsInvestors
Issuing Co.Issuing Co.
CustodianCustodianKRXKRX
Securities ReportSecurities Report
Custody
Agreement
Custody
Agreement
Deposit Agreement
Deposit Agreement
Listing Application
Listing Application
Underwriting AgreementUnderwriting Agreement
Notification ofListing
Notification ofListing
Issuance of KDR
Issuance of KDR
KSDKDRDepositary(Primary Market)
KDRDepositary(Primary Market)
CSD (Secondary Market)
CSD (Secondary Market)
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Expandability of CSD's role in global market
Unique global custody model by expanding its role from domestic securities to
global securities, overcoming the limits of a traditional CSD
Possibility and expandability of local custody service by CSD, implementing
Disintermediation
Fast and efficient CSD linkage model for the migration between the markets in
the case of co-listed companies in the form of shares
Depositary role of CSD in issuing DRs in domestic market as well as 4 major
Depositary banks
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Annex 1. KSD SLB System
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Annex 2. KSD Tri-Party Repo Service
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Globalization of Fund Services
Annex 3. KSD FundNet Service
The first case in the world a CSD established STP for the entire back-office operations of the asset management market
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Annex 4. Global ETF Market Trend
Global ETF market has grown steadily since its introduction as an alternative investment instrument in 1990, and Korean ETF market has also grown accordingly
Global ETFs Market Korean ETFs Market
0
400
800
1200
1600
2000
`98 `99 `00 `01 `02 `03 `04 `05 `06 `07 `08 `09 `10 `11.6
0
1000
2000
3000
4000
5000
(Million USD) (#)
0
20000
40000
60000
80000
100000
`02 `03 `04 `05 `06 `07 `08 `09 `10 `11.7
0
20
40
60
80
100
120
(Billion Won) (#)
We bridge Asia and the rest of the world as Global Partner with internationally compatible investment services.
Korea Securities Depository
Thank You