Singapore Exchange 27 - 28 June 2006 The 8 th ACG Cross Training Seminar Merits and Demerits of Direct and Indirect Accounts.

Singapore Exchange

27 - 28 June 2006

The 8th ACG Cross Training SeminarMerits and Demerits of Direct and Indirect Accounts

OVERVIEW

CDP Overview

Services at CDP

Merits/Demerits of Direct Accounts

Merits/Demerits of Indirect Accounts

Q&A

1. Clearing House for Securities Market• Clears & settles securities transactions and

effects book-entry transfer of these securities

2. Central Depository• Acts as central depository for securities listed &

quoted on the SGX-ST and unlisted debt

securities• Entitlements distribution and corporate actions

CDP OVERVIEW

- ROLES AND FUNCTIONS

CDP OVERVIEW

- ACCOUNT STRUCTURE

CDPCDP

Direct Securities Accounts

Direct Securities Accounts

DA Sub-AccountsDA Sub-Accounts

IndividualAccountsIndividualAccounts

CorporateAccountsCorporateAccounts

Sub-A/c 1Sub-A/c 2Sub-A/c 3

CDP OVERVIEW

- ACCOUNTS OPENED AS AT 31 MAY 2006

1.28 million securities accounts

DA Sub-Accounts 5%

Individual Accounts(Individual, Joint, Corporate) 95%

1. What is a Direct Securities Account?• It is an account that investors maintain

with CDP directly to hold securities bought

from the Singapore Securities market. • Each account holder can only open 1

Direct Securities Account, which will track

the entire shareholdings portfolio.

CDP OVERVIEW

- ACCOUNT STRUCTURE

2. What is a DA Sub-Account?• It is an account that an investor maintains

directly with the Depository Agent (DA). • DA are approved participants who own,

manage or control a portfolio of securities in the course of their business, both for their own account and the account of clients.

• To facilitate the conduct of such business, they have requested CDP to allow them to maintain sub-accounts.

• DA can be custodian banks, securities brokerage houses, finance company nominee companies.

CDP OVERVIEW

- ACCOUNT STRUCTURE

CDP Direct Account

TM1 Trading A/C TM2 Trading A/C TM3 Trading A/C

1. Many TM Trading Accounts linked to 1 CDP

Direct Securities Account

2. Linkage authorisation = standing

instruction from account holder to CDP

CDP OVERVIEW

- RETAIL CLIENT SECURITIES SETTLEMENT

Investor Trading Member Clearing Member

CDP

Trade instruction

Trade detail & settlement instruction

Settlement instructionTrading Member

Participants who choose to offer specialist equities execution-only services. Each Trading Member must be qualified by a member of CDP at all times.Clearing MemberParticipants who have clearing rights and their role is to clear trades as third party clearers for Trading Members and for themselves if they also have trading rights. Currently, all Trading member are also Clearing Member, except for one.

CDP OVERVIEW

- TRADE FLOW

1. ‘Free’ balance• Securities that are fully paid

2. ‘Available’ balance• Securities not paid for• Cannot be traded• Earmarked for transfer or settlement

CDP OVERVIEW

- SECURITIES ACCOUNT BALANCES

3. Account Statements

1. Opening of Securities Accounts

2. Transfer of securities

3. Deposit of securities

4. Withdrawal of securities

5. Value Added Services:

Direct Crediting Services

Internet Services

CDP Automated Phone Services

SBL Services

SERVICES AT CDP

1. SGD dividends are credited on payment date,

directly into depositors’ bank accounts

2. No need to queue at bank

3. No worry about lost cheques

4. Major local and foreign participating banks

DIRECT CREDITING SERVICES (DCS)

1. On-line access to securities holdings, with current

portfolio value

2. Available 24 hours a day, 7 days a week

3. Access to transaction records for current and

previous months

4. Access to cash distributions for current and

previous months

CDP INTERNET SERVICES

1. Guided by automated voice instructions

2. Access to securities holdings and information on

corporate actions

3. Available 24 hours a day, 7 days a week

4. No traveling, no queuing & no hassle

CDP AUTOMATED PHONE SERVICES

SBL SERVICES

1. Earn a fee

2. No participation cost

3. Sell at anytime

4. Confidentiality will be maintained

To Account Holders

• Retain legal title over securities assets

• Financial security and confidentiality in safe haven

• Protection against unauthorised access to the account through the linkage

• Payment of dividends either by the issue of a cheque or through DCS with automated reporting to the tax authorities

• Automatic credit of security benefits directly to securities accounts

MERITS OF DIRECT ACCOUNTS

To CDP

• Huge database for promoting other value-added

services

• Direct relationship with customers

MERITS OF DIRECT ACCOUNTS

To brokers

• Brokers unable to view and earmark clients’

securities prior to sale.

To account holders

• Manage authorization to brokers

DEMERITS OF DIRECT ACCOUNTS

To Indirect account holders

• Provides them an alternative

• High level of security and confidentiality

• Access to a broad range of global investing

MERITS OF INDIRECT ACCOUNTS

To Indirect account holders

• Longer turnaround for cash distribution

• Shorter cutoff time for other corporate actions

• Higher cost

To CDP

• Unable to identify customers

DEMERITS OF INDIRECT ACCOUNTS