-Dematerialized New System- Book-Entry Transfer System for Stocks, etc.

Kohshi NagaokaJapan Securities Depository Center, Inc.

July 3, 2009. Dhaka, Bangladesh

ACG Cross-Training SeminarOrganized by Exchange of Information Task Force

Stock Dematerialization Overview

January 5, 2009

Japanese listed Stocks were dematerialized.

JASDEC provides several new services

under Dematerialized New System.

1949

1954

1959

1964

1969

1974

1979

1984

1989

1994

1999

2003

2008

TANSU

– Benefits of Dematerialization- Elimination of costs (printing, stamp duty,

registration)- Removal of risk (loss, robbery, forgeries)

– Implementation- 2003 : CP- 2006 : Corporate Bond- 2007 : Investment Trust- 2008 : ETF- 2009 : Stocks, etc

Dematerialization of Securities Certificates

These financial instruments were dematerialized at Jan 5, 2009

• Stocks

• Bonds with Share Option (CB)

• Investment Units (REIT)

• Preferred Equity Investment

Statistics of Depository and Book-Entry Transfer System“Pre-Dematerialization”

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0

10

20

30

40

50

60

70

80

90

100Custody Balances(Left)

Custody Ratio(Right)

(million shares) (%)

FY

Dematerialized New System, Book-Entry Transfer System for Stocks, etc., implemented.

January 5, 2009

What is Depository and Book-Entry Transfer System?“Pre-Dematerialization”

Issuer

Shareholder Registry

Shareholders(Owner of stock certificate)

Beneficial Shareholder

Registry

JASDEC

ParticipantParticipant

CustomerCustomerCustomer

Request forRegistration

Accounttransfer

Number of Shares

Notice ofBeneficialshareholders

NameAddress

What is Book-Entry Transfer System for Stocks, etc.?-Dematerialized New System-

Issuer

Shareholder Registry

JASDEC

Direct AMI Direct AMI

Indirect AMI Indirect AMI

Indirect AMI

Customer CustomerCustomer Customer Customer

Uniform Management Multi-Layer Holding Structure

Accounttransfer

AMI : Account Management Institution

Custodian Bank

Financial Institution

Financial Institution Financial Institution

How does Multi-Layer Holding Structure work?Transfer Account Book

B SecuritiesA Stock Exchange

HoldingAccount

Self Account

HoldingAccount

PledgeAccount

PledgeAccount Customer Account

50 0 40 0 100

JASDEC

Transfer Account Book

Participant A

HoldingAccount

PledgeAccount

20 0

C Securities

CustomerAccount

35

Self Account

HoldingAccount

PledgeAccount

45 0

Direct AMIB Securities(Self Account 40)

Transfer Account Book

Participant B

HoldingAccount

PledgeAccount

35 0

Indirect AMIC Securities(Self Account 45)

A Stock Exchange

Participant A

Participant B

AMI : Account Management Institution

Number of Account Management Institution

Direct AMI(JASDEC Participant)

(257)

Indirect AMI(Domestic)

(36)

Indirect AMI(Foreign)

(23)

AMI: Account Management Institution

Direct AMI(JASDEC Participant) 257Indirect AMI (Domestic) 36Indirect AMI (Foreign) 23TOTAL 316

What is Uniform Management?

Issuer A Issuer B Issuer C

Shareholder / Beneficial Shareholder H

Administrator of Shareholder Registry D

Administrator of Shareholder Registry

E

ShareholderRegistry A B C

Beneficial Shareholder Registry A

B C

Participant F Participant G

Request forRegistration

Beneficial Shareholder

Notice

Integration Participant Account Information

complicated & inefficientIssuer A Issuer B Issuer C

Administrator of Shareholder Registry D

Administrator of Shareholder Registry

E

ShareholderRegistry A

ShareholderRegistry B

ShareholderRegistry C

JASDEC

Shareholder H

Data for reporting Shareholder Information

Integration Participant Account Information

Participant Information

Old System New System

AMI IAMI F AMI G

Protection from AMI’s Miss Record

JASDEC

AMI

Participant Protection

Trusts

Trustee

OperatingCommittee

TrusteeSupervisor

AMI

AMI

bankrupt

Miss Record

bankrupt

OBLIGATED

“NOT perform of duties”

“NOT perform of duties”

“Perform of duties”

claim

claimcompensation

compensationParticipant

Trust Contract

Assessment

Participant

Participant

Order to Pay Supervise

Joint and Several Guarantee

Joint and Several Guarantee

JASDEC’s Role in Japanese Securities Market

Broker

Stock ExchangeStock Exchange

JSCC(DVP Clearing)

Net-Net

JSCC(DVP Clearing)

Net-Net

【 Market 】【 Market 】

【 Clearing 】【 Clearing 】

BrokerCustodian BankCustodian Bank

【 Settlement 】【 Settlement 】

Bank of JAPANJASDEC

【 Matching 】【 Matching 】

Exchange TradeExchange Trade

Broker

TradeData

TradeData

TradeData

TradeData

Non-Exchange TradeNon-Exchange Trade

Securities SettlementSecurities Settlement Cash SettlementCash Settlement

JDCC(DVP Clearing)

Gross-Net

JDCC(DVP Clearing)

Gross-Net

JASDEC(PSMS)JASDEC(PSMS)

G=gross N= net RTGS: Real Time Gross Settlement

BOJ: Bank of Japan JGBCC : Japanese Government Bond Clearing Corporation

JSCC: Japan Securities Clearing Corporation JDCC: JASDEC DVP Clearing Corporation

PSMS: Pre-Settlement Matching System

Securities Market Infrastructure in Japan

Stock / CB

CPNon-Gov.

BondInvestment

TrustJGB

(Japanese Government Bond)Street Side

Customer Side

OrderExecution

Exchanges

OTC

Matching JASDEC (PSMS, etc)

Clearing JSCC JDCC - - - - JGBCC

Securities Settlement

JASDEC BOJ

Type of DVP N-N G-N G-GG-G

(RTGS)N-N

CashSettlement

BOJ / Settlement Bank

Question & Answer

Thank you