Market Infrastructure
Developments Impacting
Equities Markets
Insights for institutional clients
2
Citi Securities and Fund Services
Equities Markets
The rapid economic growth in Asia Pacific and the accumulation of wealth across societies within
the region continue to attract international investors, putting greater demands on stock markets
but also acting as a catalyst for constructive change. Individual countries have responded by
merging exchanges in order to achieve efficiencies and scale, enabling the formation of new
platforms and increasing regional cooperation for cross-border share transactions, including
renminbi (RMB) denominated equities.
Investor protection and market transparency
are the major concerns of regulators throughout
the world, and the authorities in Asia Pacific
are also keen to promote better safeguards and
corporate governance. Clearing and settlement
processes have been enhanced in several
markets, notably through the deployment of the
latest technology, while electronic applications
are increasingly available to make investor
access easier and cheaper.
Asia Pacific is a vast, diverse region and its
stock markets also vary significantly. However,
cooperation is leading to a greater convergence
of trading and administrative practices that are
continuing to make national exchanges more
competitive, as well as secure.
Clearing and settlement processes have been enhanced
in several markets, notably through the deployment of
the latest technology, while electronic applications are
increasingly available to make investor access easier
and cheaper.
Some key examples of recent developments in
the equities markets:
Mergers and Consolidation Improves Efficiency
and Access
•Bursa Malaysia, Singapore Exchange Limited
(SGX) and the Stock Exchange of Thailand (SET)
connect on the Association of Southeast Asia
Nations (ASEAN) Trading Link, where crossborder trades are transacted through local
brokers via the main platforms developed by
the exchanges. In a move that should improve
efficiency and reduce cost, the countries’
securities regulators announce the
implementation of disclosure standards for
multi-jurisdiction offerings of equity and plain
debt securities in ASEAN. The Philippines Stock
Exchange (PSE) confirms its intention to join the
link and the Ho Chi Minh City Stock Exchange
(HOSE) discusses its potential for Vietnam.
•Tokyo Stock Exchange and Osaka Stock
Exchange merge to form the Japan Exchange
at the start of 2013, which is developing new
stock price indices, enhancing its corporate
governance, reducing execution latency and
extending its trading hours.
•PSE and the Philippine Dealing System begin
discussions to merge their stock and bond
exchanges.
•State Securities Commission submits its plans
to merge the Hanoi Stock Exchange and HOSE
to form the Vietnam Stock Exchange.
Cross-Border Cooperation within the Region is a
Recurring Theme
•Qualified Foreign Investors can invest directly
in the Indian equities market.
•The China Securities Depository and Clearing
Corporation allows Hong Kong, Macau and
Taiwan residents living in Mainland China to
open domestic securities accounts to trade
A shares.
•China Banking Regulatory Commission
(CBRC) and the China Insurance Regulatory
Commission (CIRC) join the China Securities
Regulatory Commission (CSRC) in approving
Qualified Domestic Institutional Investors to
invest in the Taiwan securities market, further
opening their capital markets to each other
under the Economic Cooperation framework.
•Hong Kong Monetary Authority (HKMA), Bank
Negara Malaysia (BNM) and Euroclear Bank
launch a pilot platform for the cross-border
investment and settlement of debt securities.
•Hong Kong Exchanges & Clearing (HKEx),
Shanghai Stock Exchange, and Shenzhen Stock
Exchange sign an agreement to establish a
joint venture in Hong Kong to develop financial
products and related services. HKEx Information
Services Limited (HKEx-IS) obtains approval to
set up a Hong Kong and financial information
services business subsidiary in Shanghai.
Market Infrastructure Developments Impacting Equities Markets
•Bank of Thailand (BOT) and the HKMA
announce the creation of a cross-border
Payment versus Payment link.
RMB-Denominated Share-Trading Spreads
Further
•China’s CSRC announces that the renminbi
(RMB) Qualified Foreign Institutional Investor
(RQFII) scheme will be expanded to allow
Hong Kong-based financial institutions to
apply for licenses to offer RMB fund products
to foreign investors. The Central Bank of
the Republic of China (Taiwan) also grants
approvals to Taiwanese banks to launch
onshore RMB accounts.
•The first RMB-denominated shares on the
SGX’s dual currency trading platform started
trading in August 2013.
Introduction of Competing Trading Platforms
•Korea’s Financial Services Commission brings
the Korea Exchange’s monopoly to an end
after approving the creation of alternative
trading systems in a move designed to lower
trading costs, ensure best execution and
expand the activities of its nascent investment
banks.
•India’s Bombay Stock Exchange and National
Stock Exchange launch trading platforms for
small- and medium-sized enterprises, and the
country’s third stock exchange MCX Stock
Exchange Limited opens for cash equities and
equities derivatives trading.
Electronic Trading and Processing Continues
to Evolve
•PSE launches PSETradex, an internet-based
trading platform that aims to increase the
number of online investors in the market,
and Hanoi Stock Exchange implements an
electronic auction system for government and
municipal bonds.
•China’s CSRC launches a Qualified Foreign
Institutional Investor (QFII) and RQFII
online application platform, and Indonesia’s
Bapepam-LK introduces an online system
called the E-Government Bapepam-LK that
enables participants to submit reports and
requests for licenses electronically.
•The Securities and Exchange Board of India
(SEBI) issues guidelines for algorithmic
trading, the Australian Securities &
Investments Commission refines its rules
on dark liquidity and high-frequency trading
and Hong Kong’s Securities and Futures
Commission proposes to improve the
regulatory framework for electronic trading.
3
Security and Risk Management Enhancements
to Raise Investor Confidence
•Singapore Exchange’s post-trade settlement
system migrated from the mainframe to
the open platform Linux system, which
should enhance the security of post-trade
infrastructure and data transmission,
improving safeguards for client confidentiality
and data integrity.
•Australian Securities Exchange Clearing
House insists that its clearing participants
must supply daily call margins on their
unsettled cash market transactions in the
Australian market.
•Bapepam-LK creates an Indonesia Investor
Protection Fund.
•In April 2013, SEBI issued a discussion paper
on the enhancement of risk management
frameworks on stock exchanges recommending
measures such as T+1 settlement in cash
equities and evaluation of methods to mitigate
risk to client collateral.
Citi is active in all the local markets covered
in this regional overview, where our wellestablished presence and reputation
means that the bank has successfully built
partnerships with investors, regulators and
other market participants over many years. In
several countries, Citi has helped the financial
authorities and stock exchanges devise
and implement initiatives that improve the
efficiency, security and transparency of their
markets. We regularly provide advice and always
monitor developments, recognizing that robust
and safe capital markets are beneficial to both
investors and the countries themselves.
Of course, stock markets are dynamic
institutions, constantly adjusting to and
responding to the needs and demands of their
constituents. Any static picture can quickly be
overtaken by events, but it is important for all
participants in Asia Pacific’s rapidly growing
markets to be aware of the latest developments
in order to increase and consolidate their
knowledge and understanding.
We hope you will find this snapshot of key
market infrastructure changes and trends in the
region, and their impact on equities useful and
informative.
4
6
APAC Major Markets
Equities
Australia (GMT+10)DST
Hong Kong (GMT+8)
Japan (GMT+9)
Singapore (GMT+8)
Stock Capitalization1 (USDBn)
1,300
2,803
4,126
723
Market Infrastructure
Trading
ASX*
Chi-X
NSX
SEHK*
ASX Clear
Clearing
Settlement
GEM
TSE*
JSCC
HKSCC
CHESS (Dematerialized)
OTC
SGX*
JDCC
CDP
JASDEC (Dematerialized)
CCASS (Immobilized)
Note: GEM is run by SEHK
*main bourse
Chi-X
CDP (Immobilized)
Note: JSCC clears exchange traded equities, JDCC clears OTC equities
Relationship between Exchange,
CCP, CSD
ASX is a listed company, and owns ASX Clear and CHESS.
The Hong Kong government is the single largest shareholder in HKEx, a listed company. HKEx
owns SEHK, HKSCC and CCASS.
JPX is the holding company of TSE, OSE and JSCC. JASDEC is owned by JPX, JSDA and
participants. JDCC is wholly-owned subsidiary of JASDEC.
SGX is a listed company and owns both SGX-ST and the CDP.
Remote Membership
Offshore brokers from any markets may apply for remote membership with ASX.
This was under consideration, but is now on hold due to poor support from local brokers and
other priorities such as RMB initiatives.
Hong Kong brokers may apply for remote membership with TSE, OSE and TFX.
SGX announced plans, and awaits MAS approval.
Short Selling
• Naked short selling is not permitted unless approved by the ASIC.
• Naked short selling is not permitted.
• Covered short selling is allowed with specific disclosure reporting requirements at both the
transactional and positional level.
• Covered short selling of designated stock is allowed with some restrictions including
‘up-tick rule’.
New permanent regulations on short-selling should be implemented in Nov 2013, which include
the removal of the current ‘up-tick rule’ requirement.
No specific rules prohibit short selling, but fails are subject to automatic buy-in and short sales
are reported to SGX which publishes the statistics.
Settlement Cycle
T+3 (True RVP/DVP)
T+2 (Cash settles at 6:45pm)
T+3 (True RVP/DVP)
T+3
Developments and Outlook
Trading
• Chi-X Australia advised the market maker rules and procedures of consultation paper
CP02/2013 released Jun 26, 2013 have received regulatory approval, and the first day of
trading under the Market Maker Regime is targeted for Nov 1, 2013. This timetable depends on
the finalization of operational features and negotiation with ASIC on the short sale relief to
which market making firms may be entitled.
Trading
• On Jul 25, 2012, the SFC enhanced the regulatory framework for electronic trading, which
includes internet trading, direct market access, and algorithmic trading.
Trading
• JSDA introduced new guidelines for the suspension of off-exchange trades in Apr 2012, to
bring more clarity and flexibility to the off-exchange trading of listed instruments.
Trading
• Effective Mar 11, 2013, the SGX-ST requires its trading members to mark all sell orders as to
whether or not they are part of a short sale.
• On Mar 22, 2013, the SFC published a consultation conclusions paper on proposals to improve
the regulatory framework for electronic trading. Key aspects include management and
supervision, adequacy of system, record keeping and risk management.
• The TSE changed its rules in Jun 2012 to provide more flexible third party clearing solutions
for its local broker/dealer clients who are or will be trading participants of the exchange.
• The first RMB-denominated shares on the SGX’s dual currency trading platform started to
trade on Aug 5, 2013.
• On Dec 27, 2012, the OSE obtained authorization for remote trading from the SFC.
Clearing
• With the introduction of reform measures on Nov 5, 2012, clearing participants are subject to
new funding and settlement arrangements, as well as apportionment of bank guarantees.
• The TSE and OSE merged to form the JPX in Jan 2013, as the exchange integrate trading
systems and clearing functions of both exchanges and revitalize its equities and derivatives
markets. As the next step, OSE has transferred its cash product listing to TSE in Jul 16, 2013,
while TSE will transfer its derivatives product listing to OSE in Mar 2014.
• SGX will enable post-trade open access in Nov 2014, and to launch a new settlement
depository, corporate actions, and SBL systems in Q4 2015.
• In Aug 2013, ASIC refined its proposed rules on dark liquidity and high-frequency trading after
discussions with market participants that began with the release of a consultation paper
in Mar 2013. High frequency traders will not have to leave small orders on the market for a
set time or need to meet a minimum size requirement for dark pool trades. The rules are
scheduled to come into force in stages over nine months.
• Effective Sep 2013, ASX extended its trading day by up to two hours in the event of a systems
failure. This applies to equities and exchanges traded options, but not the futures market.
• On Sep 18, 2013, ASX released a consultation paper on issues and proposed changes to the
methodology for allocating ISINs issued by ASX over listed equity and other products, through
its role as National Numbering Agency. The proposal aims to replace the ASX Code with a
unique number that does not include the ASX Code. Existing ISINs will remain unchanged if the
proposal proceeds.
Clearing
• On Feb 13, 2013, the Australian Federal Treasurer announced that competition in the clearing
and settlement of cash equities will be deferred for two years following advice from the CoFR.
ASX will therefore maintain its monopoly in clearing and settlement.
• The RBA Payments System Board released new FSS for clearing and settlement facilities, with
most new FSS come into effect on Mar 29, 2013. They apply to licensed clearing and settlement
facilities, including the ASX Clear, ASX Clear (Futures), ASX Settlement and Austraclear.
• ASX Clear introduced a Cash Market Margining (CMM) initiative on Jun 7, 2013. Clearing
participants must supply daily call margins on their unsettled cash market transactions.
Settlement
• Citi implemented CHESS Release 8.0 on Jun 11, 2013, this enhancement resolved CHESS
settlement mismatches as Free of Payment settlements with similar units, stock and
counterparties previously can be incorrectly matched in CHESS and settled to the incorrect
account since CHESS does not recognize reference codes.
• The Australian Federal Treasury aims to prevent dividend washing by inserting a specific
integrity rule in the Income Tax Assessment Act 1997. It targets the four-day period between
an ex-dividend date and the record date of a membership interest, when a company closes
its share register to determine shareholder’s dividend entitlements. The revision applies
retroactively from Jul 1, 2013.
• ASX proposed to reduce the ex-dividend date to and including the record date from 5 to 3
business days. The change will apply to all relevant corporate actions with an “ex” period, and
is expected to be implemented in Q1 2014.
• ASX is advancing a project to automate the process of receiving company announcements,
which will also include the distribution of corporate action announcements to the market in a
format conducive to STP.
Other Highlights
• ASIC implemented its best execution rules on Mar 1, 2013, which compel Australian brokers to
provide clients with the best price achievable on available market platforms.
• ASX proposed to broaden the range of international securities listed on the ASX by quoting
unsponsored depository receipts, which will allow investors in the Australian market to obtain
an equitable interest in international securities through an instrument traded, cleared and
settled on ASX.
• Citi is leading discussions with the HKEx to implement the Participant Dealer Agent model in
Hong Kong, an extension of the third party clearing model to allow non-clearing participants
to become a Participant Dealer of ETF and to appoint Citi as their agent in order to close the
gap that results from the requirement that they must be a CCASS participant. Hence, the third
party clearing model will be promoted in Hong Kong.
Settlement
• HKMA, BNM and Euroclear Bank jointly launched a pilot platform for the cross-border
investment and settlement of debt securities on Mar 30, 2012.
Other Highlights
• On Jun 28, 2012, HKEx, SSE and SZSE signed an agreement to establish a joint venture in
Hong Kong to develop financial products and related services.
• HKEx implemented clearing houses’ risk management reform measures in Q3 2012, to
strengthen investor protection.
• HKEx invested USD380 million in technology to launch “HKEx Orion”, a transformative
program of technology initiatives to boost the market platform’s connectivity and capacity, and
also increase market liquidity.
• In Mar 2013 the CSRC announced the RQFII scheme will be expanded to allow Hong Kongbased banks, insurers and fund houses to apply for licenses to offer RMB-denominated fund
products to foreign investors.
• In May 2013, HKEx said it will launch its MMDH Founding Members Programme in Shanghai
by the end of 2013. It is designed to allow information vendors and other interested parties to
participate in the early set-up of the market data hub HKEx.
• Effective Jul 26, 2013, the HKMA announced two enhancements in the provision of RMB
liquidity to Authorized Institutions participating in RMB business effective Jul 26, 2013. One
day funds will be available on the next day (T+1) and overnight funds will be available on the
same day (T+0).
• Citi is in progress to request the HKSCC to review the existing limitation on the application
for buy-in exemption in accordance to CCASS Operational Procedure Section 10.8.3 and
10.8.4, with the objection to provide flexibility in the application for buy-in exemption by short
clearing brokers and custodians.
• SFC is planning to introduce a Mainland-Hong Kong mutual recognition of funds platform to
expand and to develop the asset management industry, to be complimented with legal and
policy support from both Chinese and Hong Kong regulators.
• Chi-X Japan, a subsidiary of Chi-X Global, plans to launch a new service for cross order
investors in Q4 2013. The service, Chi-Net, will allow Chi-X Japan PTS participants to submit
single stock cross orders.
• The phased introduction of small tick trades at the TSE is scheduled for Jan 14, 2014 for Phase
I, and July 22, 2014 for Phase II. The small tick is expected to enhance the liquidity and trading
process of the TOPIX 100 stocks, a core part of the Japanese equities universe.
• Citi is working closely with the JPX to activate a remote trading system to provide direct
access for broker-dealers abroad.
Clearing
• On Mar 27, 2012, the TSE amended its trading participant criteria for inclusion in the clearing
process in response to a request by Citibank Japan Ltd. to provide more third party clearing
solutions for its local broker/dealer clients who are or will be trading participants of the
exchange.
Clearing
• On Jan 21, 2013, the SGX introduced margining of securities transactions cleared by members
of the CDP, replacing the previous practice of maintaining a clearing fund to cover any losses.
• Effective Apr 22, 2013, SGX enhanced the clearing and DVP rules of the CDP to provide greater
transparency and clarity on its default management and buy-in procedures.
Settlement
• On Oct 21, 2012, SGX’s post-trade settlement system migrated from mainframe to the open
platform Linux system. The new system will enhance security of the post trade infrastructure
and data transmission to better safeguard client confidentiality and data integrity, and is a part
of a wider project to improve security and allow SGX securities trading members a choice of
back office systems.
• SGX announced that the settlement of securities transactions becomes final when the
securities are either credited to or debited from a member’s clearing account at the end-of-day
batch cycle on T+3.
• Effective Oct 1, 2013, JSCC which is engaged in on-exchange equities and OTC derivatives
clearing, merged with JGBCC which is engaged in OTC JGB clearing.
• Currently, trades settled under enhanced DVP which, amongst others, guarantee cash
payments with securities settlement processed via the PSMS, are not done on a real-time
basis. Securities are settled at an end-of-day batch basis. Citi is working to bring forward the
end-of-day batch settlement to intraday, close to the cash settlement timeline.
Settlement
• On Jun 21, 2013, the FSA gave an update on its settlement risk reduction initiatives, in a joint
statement with the JSDA. One of the two initiatives relates to the JGB market, and includes a
further reduction in the settlement cycle, from the current domestic T+2 to T+1.
Other Highlights
• On Apr 1, 2013, the securities regulators in Malaysia, Singapore and Thailand announced the
implementation of the ASEAN Disclosure Standards Scheme for multi-jurisdiction offerings of
equity and plain debt securities in ASEAN.
• The JASDEC will introduce ISO20022 compliant messages in its PSMS scheduled for Jan 2014.
• From Jul 1, 2013, SGX revised its main board listing fees. The revision reflects the extensive
resources spent by the SGX to improve the fund-raising, trading and risk management systems
and processes for the benefit of listed companies and investors.
Other Highlights
• Effective from Jul 16, 2013, the cash equities markets operated by TSE and OSE were
integrated within TSE. OSE-listed stocks will be newly listed on TSE, and cross-listed stocks will
be assigned to a market section, either automatically or elected by the issuer.
• SGX has introduced long dated orders for securities in Aug 2013, allowing investors to specify
the number of days they want their buy or sell orders to stay active up to a maximum 30 days.
• On Sep 24, 2013, JPX announced that one of its subsidiaries, the OSE, reached a decision to
change its corporate name to Osaka Exchange, Inc. effective Mar 2014, when the derivatives
market at the TSE is integrated into OSE.
• In Aug 2013, SGX introduced new listing rules on poll voting and general meetings. The rules
aim to strengthen corporate governance practice in Singapore for all SGX-listed companies and
trusts, by increasing transparency and encouraging shareholder participation.
• JPX and Nikkei are together developing a new equity market index scheduled for introduction
at the end of 2013. The new index should help promote the Japanese market and its listed
companies to both local and international investors.
• Effective Sep 2013, SGX and Clearstream to jointly offer collateral management services to
customers. SGX customers will be able to use Clearstream’s Liquidity Hub Global Outsourcing
service, which will allow them to use assets held at SGX’s securities depository, CDP, for their
collateral needs on a fully automated and real-time basis.
7
9
ASEAN Markets
Equities
Vietnam (GMT+7)
Indonesia (GMT+7)
Malaysia (GMT+8)
Philippines (GMT+8)
Thailand (GMT+7)
Stock Capitalization1 (USDBn)
67
463
463
209
355
Market Infrastructure
HOSE*
Trading
Clearing
Settlement
HNX*
IDX*
MYX*
LFX
PSE*
SET*
MAI
—
KPEI
Bursa Securities Clearing
SCCP
TCH
VSD (Immobilized)
KSEI (Dematerialized)
Bursa Malaysia Depository (Immobilized)
PDTC (Immobilized)
TSD (Immobilized)
*main bourse
Relationship between Exchange,
CCP, CSD
Vietnam government owns the HOSE, HNX and VSD.
• IDX is privately held and owns the Indonesia Clearing and the KPEI.
• KSEI is owned by IDX, KPEI, custodian banks, brokers and securities
registrars. Citi is a 5% shareholder of KSEI.
Bursa Malaysia is a listed company and owns the Bursa Securities Clearing
and Bursa Malaysia Depository Sdn Bhd.
PSE is a listed company and owns SCCP and partly owns PDTC.
SET is privately held and owns TSD and TCH.
Remote Membership
Not permitted.
Not permitted.
Not permitted.
Not permitted.
Announced plan to offer.
Short Selling
Naked short selling and covered short selling are not allowed.
• Naked short selling is not allowed.
• Naked short selling is not allowed.
• Naked short selling is not allowed.
• Naked short selling is not allowed.
• Covered short selling is allowed, but limited to the list of securities
published monthly by IDX.
• Regulated short selling is allowed provided the cover trade has been
made through the SBL Central Lending Agency or SBL Negotiated
Transaction frameworks.
• Covered short-selling will be allowed but be limited to a list of
qualified securities.
• Covered short selling is allowed, but limited to SET approved
securities (that is, equities in the SET100 index, ETFs, ETF-linked
funds and debt securities).
Settlement Cycle
T+3 for equities and fund certificates; T+1 for fixed income.
T+3 (True RVP/DVP)
T+3 (True RVP/DVP for ISS mode)
T+3
T+3
Developments and Outlook
Trading
• On Mar 19, 2013, SSC inaugurated the MSS for HNX and HOSE in order to improve market
transparency and management.
Trading
• On Sep 28, 2012, the Bapepam-LK launched a new online system called
the E-Government Bapepam-LK. It allows market participants to submit
reports and requests for licenses electronically.
Trading
• Bursa Malaysia enhanced its trading system in Jul 2012 through the
introduction of new order and validity types, allowing market participants
to execute a greater variety of trading and risk management strategies.
The changes form part of wider initiatives to improve the market’s
framework and efficiency.
Trading
• Effective Jan 2013, PSE started the OSB to enable local investors
to place and monitor their trade orders electronically with their
brokers.
Trading
• The TSD launched a new service in May 2013 to offer securities
lending to investors in the market as an alternative service provider.
• Effective from Jul 22, 2013 for HOSE and Jul 29, 2013 for HNX, the trading hours of both
exchanges were extended by 45 minutes to close at 15:00.
• On Jul 24, 2013, HNX issued Decision 345/QD-SGDHN revising the regulations on the
trading of listed securities and Decision 343/QD0SGDHN revising regulations on the
UPCoM in order to enhance its trading systems.
• On Jul 29, 2013, HNX launched an upgraded trading system with the capacity to handle 20
times the previous trading order volume. The enhancement will also help to facilitate the
periodic order matching session and new types of trading orders, and to allow investors to
amend prices and volumes.
• Effective Aug 15, 2013, the Ministry of Finance issued new rules to improve the efficiency,
transparency and security of electronic transactions in the stock market.
• SSC confirmed its plans to merge HNX and HOSE to form the Vietnam Stock Exchange.
The proposal will be submitted to the Prime Minister in Q4 2013.
Settlement
• Effective from Sep 4, 2012, VSD shortened equity settlement and clearing timelines, with
cash funding to be available by 16:00 on T+2 and securities to be settled by 8:45 on T+3.
• On Nov 22, 2012, VSD held a roundtable to discuss the idea of a CCP for the Vietnam
market. The CCP is expected mainly to serve the derivatives market which will be
launched in 2015.
• VSD is scheduled to have the STP solutions for operational processes covering
registration, depository, settlement and clearing, corporate action, account opening
and closing, and reconciliation for the securities market to go live on Jan 1, 2014.
Other Highlights
• SSC announced revised regulations governing the activities of foreign investors in the
stock market, which reduce administrative burdens on STC applications, shorten the
timeframe for STC approval from 10 days to 5 days. Effective from Feb 15, 2013, the
regulation also requires foreign investors to appoint a representative for reporting and
information disclosure.
• SSC issued a regulation on the establishment and management of ETF which is effective
from Sep 1, 2013. VSD is developing the infrastructure and a SBL system to support the
trading of ETF certificates.
• As part of the MOF and SSC action plan for 2013, HOSE plans to introduce new investment
products and indices to be launched in 2014, such as mid cap and small cap indices, ETFs,
covered warrants and non-voting depository receipts.
• HOSE is expecting to become an official member of the WFE by the end of 2013.
• IDX issued a revised regulation on Nov 14, 2012 on equity-type securities
trading. It consisted of several changes such as the extension of IDX
trading hours, the implementation of pre-closing and post-closing
sessions for trading in the regular market, as well as other improvements.
• Effective Jan 2, 2013, IDX started trading 30 minutes earlier at 09.00
(GMT+7).
Clearing
• Bapepam-LK improved the STP mechanism between brokers and KPEI.
Other Highlights
• On Dec 28, 2012, Bapepam-LK issued two regulations for the
establishment of the Indonesia Investor Protection Fund. The
regulations are expected to improve protection for investors in the
event of the insolvency of their broker custodian.
• In Jan 2013, the Indonesia Financial Services Authority began to
consider allowing shelf registration for stocks during public offerings
in the IDX. Issuers would able to use the same prospectus published
during the initial public offering for future corporate events, such as the
additional offering of securities.
• The SC announced a conceptual framework for an unlisted market
at the end of May 2013 called MyULM, it would be Malaysia’s first
online platform to trade unlisted securities and alternative investment
products.
Settlement
• Bursa Malaysia implemented the CMF on Jul 9, 2012, an infrastructure
which facilitates the automation and electronic matching of trade
and settlement details for institutional trades between brokers and
custodian banks. Currently the CMF is applicable for transfers and
turnaround trades settled via ISS.
Other Highlights
• On Sep 18, 2012, Bursa Malaysia and SGX connected on the ASEAN
Trading Link, offering investors new access to both markets. Crossborder transactions are through local brokers via the main platforms
developed by the exchanges.
• Malaysia amended its capital market laws and issued new guidelines in
Jan 2013 to enable investors to access a new asset class, and to allow
public-listed companies and banks to sell bonds to retail investors.
• On Mar 28, 2013, Bursa Malaysia implemented NRS, an e-service made
available to Bursa Depository Members to have an option to subscribe
rights issue electronically and pay the subscription amount directly
to the issuer’s rights issue account. It improves current paper-based
process, and to improve on time needed to apply for rights issue.
• Citi is working closely with Bursa Securities Malaysia to explore
CMF recommendations: 1) Introduce additional matching cycle and
flexibility of file uploads to facilitate auto-matching in CMF for late hour
processing; and 2) Introduce enhancement of transfer mode.
• On Jan 1, 2013, PSE introduced trading suspensions for listed
companies that are non-compliant with the minimum public
ownership requirements (10% public float). Market liquidity is
not affected.
• In 2013, SET developed a 2012 – 2016 Operational Master Plan for
post-trade service enhancements. The measures are expected
to reduce costs, increase market efficiency and straight-through
processing, as well as to support front office initiatives such as the
ASEAN Trading Link and cross-listings.
• On Apr 2, 2013, PSE launched PSETradex, an internet-based trading
platform that aims to increase the number of online investors in
the market.
• SET announced that effective Mar 1, 2013, listed securities with
highly speculative trading patterns must be backed by 100%
cash funding.
• On Aug 19, 2013, PSE announced that Philippines is not yet ready
to join ASEAN bourses’ cross-border trading. It intends to launch
more products ahead of its planned participation to join ASEAN
Trading Link whose founding members Singapore and Malaysia
followed by Thailand.
• SET collaborated with the SEC Thailand and announced 3 latest
developments in derivatives warrant trading: shorten the listing
process of the derivatives warrant from 15 days to 3 days, change
the derivatives warrant ticker symbol by adding the last trading
date into the symbol, and add more underlying securities for the
derivatives warrant by expanding from existing underlying SET50
to SET100 as well as others from SET index series e.g. SETHD.
Clearing
• On Sep 28, 2012, SCCP revised the list of PSEi securities eligible
for collateral. In order to reduce settlement risk, the clearing house
stipulates that only securities of good standing may be used.
Settlement
• In Feb 2013, SCCP received a provisional license to operate as a
securities depository by the Securities and Exchange Commission
based on its application in Oct 2012. Only equities listed in the PSE,
which raised capital to support the SCCP, will be accepted by the
SCCP depository.
Other Highlights
• BOT is considering to allow foreign investors to participate in
onshore securities borrowing and lending activities. Foreign
investors may be required to open a special “Blocked Account” for
management of the SBL cash collateral.
• Effective Jul 6, 2012, non-resident investors domiciled in ASEAN
market trading Thai stock through the ASEAN linkage are exempt
from the CGT.
• Citi expects to be able to offer true DVP settlement of equities
transaction for clients and potential brokers’ clients in applying as a
settlement bank with the SCCP.
• Effective Sep 9, 2013, SET will reduce the period of releasing news
of newly registered securities to one day prior to first trading by
09:00 from the current period of 2 days.
Other Highlights
• On May 22, 2013, PSE signed separate agreements with the BAP
and the SGX that lead to BAP and SGX to sell their shares PDS
Group to the PSE. The agreements also provide the framework for
a plan to consolidate the operations of PSE and PDS. The merger is
expected to close by the end of 2013, and may be further delayed.
• The depository and clearing house has expanded its post-traded
services to FCY denominated securities with Phase 1 TSD completed
in Sep 2012 for FCY debentures registered in Thailand, and other
types of securities will be rolled out in the upcoming phase.
• PSE partnered with the Korea Exchange to use its technology for
PSE EDGE, the local bourse’s new disclosure system. Investors can
easily access disclosure information real-time through the PSE
website, trading terminals and the systems of other data vendors
and analysts. PSE EDGE is also available via mobile platform.
• In Sep 2013, the BAP has placed on hold the planned merger of the
PSE and the PDEx, the equities and fixed income exchanges
respectively, due to the filing of the antimonopoly lawsuit against PDEx.
• BOT and the HKMA jointly announced the establishment of a crossborder PvP linkage between the BAHTNET and the USD CHATS.
The link will be launched in July 2014.
10
12
Major Registration Markets
Equities
China (GMT+8)
India (GMT+5½)
South Korea (GMT+9)
Taiwan (GMT+8)
Stock Capitalization1 (USDBn)
3,762
953
1,124
819
Market Infrastructure
SSE*
Trading
SZSE*
CSDCC
Clearing
Settlement
BSE*
NSE*
MCX-SX
KRX*
TWSE*
GTSM
ICCL
NSCCL
MCX-SX CCL
KRX
TWSE
GTSM
NSDL and CDSL (Dematerialized)
CSDCC (Dematerialized)
KSD (Dematerialized)
Note: TWSE and GTSM clear their own trades
*main bourse
Relationship between Exchange,
CCP, CSD
TDCC (Dematerialized)
SSE and SZSE are privately held and they jointly own the CSDCC.
• BSE and NSE are privately held.
KRX is privately held and owns KSD with 39 others financial institutions.
• ICCL is a wholly owned subsidiary of BSE.
• TWSE is privately held and owns 50.43% of TDCC.
• GTSM is a private non-profit organization.
• NSCCL is a wholly owned subsidiary of NSE.
• MCX-SX CCL is jointly promoted by MCX-SX, MCX and FTIL.
Remote Membership
Not permitted
Not permitted.
Not permitted.
Not permitted.
Short Selling
• Naked short selling is not allowed
• Naked short selling is not allowed.
• Naked short selling is not allowed.
• Naked short selling is not allowed.
• Covered short selling is allowed on a limited number of stocks through the margin trading and
securities lending program, but QFIIs are currently not eligible to participate in the program.
• Covered short selling is allowed on a limited basis provided the cover trade has been made
using the securities lending and borrowing platform offered by the local CCP.
• Covered short selling, except on listed financial stocks, is allowed but is subject to validation
check and compliance with FISCMA7.
• Covered short selling is allowed and all loanable stocks are now exempt from the up-tick rule.
Note that an exception is when the stock price drops and hits the daily fluctuation limit (7%),
the short selling of the particular stock shall still follow the up-tick rule on the next trading day.
Settlement Cycle
A share – T+0 shares, T+1 cash; B share – T+3; ETF/Warrants – T+1
T+2
T+2 (True RVP/DVP for InSet mode)
T+2
Developments and Outlook
Trading
• The CSDCC released revised Rules on Securities Accounts and Business Guidelines on Apr 1,
2013, which allows residents from Hong Kong, Macau and Taiwan who are living in Mainland
China to open domestic securities accounts to trade A shares.
Trading
• India’s third stock exchange, MCX-SX, began to trade cash equities and equities derivatives on
Feb 11, 2013.
Trading
• On Jul 1, 2013, KONEX was introduced for the trading of SMEs to help tap into fresh funding
sources.
• In Feb 2013, SEBI permitted stock exchanges to introduce LES to the cash equity market.
• On Jul 28, 2013, the SZSE revised its trading rules. Three major amendments were made,
including the lowering of thresholds for block trading, adding new pricing methods for block
trading and allowing same day turn around trade for bond ETFs.
• Effective Apr 2013, trading in illiquid stocks in the equity market is conducted only through a
periodic call auction mechanism.
• From Aug 2013, the ATS can compete with the KRX to lower trading costs instill best execution
and expand the business scope of investment banks.
Trading
• Starting from Jul 1, 2013, TWSE and GTSM imposed the altered trading method when the
number of a company’s TWSE or GTSM listed common shares is: 1) less than 25% of its total
issued common shares; and 2) less than 60 million shares (TWSE), less than 5 million shares
(GTSM). The intention is ensure a company’s listed common shares don’t become illiquid due to
a private placement or capital reduction.
Settlement
• The CSDCC released revised detailed implementation rules on QFIIs securities registration and
settlement on Feb 21, 2013, to enable QFIIs to open multiple securities accounts in each stock
exchange.
Other Highlights
• In Jan 2013, the CSRC and the FSC discussed measures for further open their capital markets
to each other under the framework of the cross-strait ECFA.
• Effective Jul 2013, a wider range of scrips are available for trading on the securities lending
and borrowing segments of the exchanges.
Clearing
• From Mar 2013, FIIs are permitted to use corporate bonds as collateral in the cash equity
segment and Indian Government securities and corporate bonds as collateral in the equity
futures and options segment in addition to already allowed collateral forms.
• On Feb 18, 2013, the CSRC published new rules to authorize qualified securities companies,
insurance assets management companies and securities investment private equity firms to
directly engage in mutual fund management businesses. The rules took effect on Jun 1, 2013.
Settlement
• In Apr 2013, SEBI issued a discussion paper on the enhancement of risk management
frameworks on stock exchanges. Key measures proposed include T+1 settlement in cash
equities, evaluation of methods to mitigate risk to client collateral and incentivizing internet
based trading models.
• The CSRC released provisional rules on the securities investment fund custody business by
non-bank financial institutions in Mar 2013. Non-bank financial institutions such as securities
companies, can now apply for a license to provide custody services for securities investment
funds.
Other Highlights
• In Apr 2013, the new MCX-SX exchange began working to raise low volumes in cash equities
and derivatives, including a move to strengthen its LES in order to incentivize market making
and help challenge the duopoly of the NSE and the smaller BSE.
• The PBOC revised RQFII rules in May 2013 to give clear guidance on RQFII account
management and custodian bank appointments, and enable RQFIIs to implement more flexible
investment strategies by removing the “20% in equity and 80% in fixed income” investment
allocation restriction.
• On Jul 15, 2013, the Insurance IRDA allowed domestic insurance companies to participate as
lenders on the SBL segment of exchanges and earn additional returns on their portfolios.
• The CSRC launched a QFII and RQFII online application platform on May 20, 2013. QFII and
RQFII applicants now need to submit their license applications via the online platform as well
as submitting hard copy applications.
• China has agreed to allow Taiwan-based financial institutions to invest in the China securities
markets through the RQFII scheme as part of the cross-strait service trade agreement signed
between the two countries. The investment quota and effective timeline has not been disclosed yet.
• On Jul 12, 2013, the CSRC raised the investment quota of QFII from USD80 billion to USD150 billion.
• On Sep 29, 2013, CSRC announced several measures to promote capital market openness and
reforms within the Shanghai FTZ. The measures will relax controls on both inward and outward
investments, explore introduction of new investment instruments, and provide easy access for
financial institutions to set up branches within the Shanghai FTZ.
• Citi has worked actively with intermediaries including depositories and regulatory bodies to
enable e-voting for businesses transacted through postal ballot. Shareholders/proxy will be
able to cast votes on the e-voting platform hosted by the NSDL and CDSL, and will thus benefit
through reduced cut off timings and significant cost savings on logistics.
• NSE introduced trading in ETFs from Sep 3, 2013 for the SLB segment of investors.
• Citi is working closely with regulators and exchanges to enable non-cash collateral for FII
trades in cash equities, equity derivatives and SLB segments.
• In Sep 2013, the RBI permitted non-resident investors to acquire shares of a listed Indian
company on the stock exchange under the Foreign Direct Investment scheme subject to
fulfilment of certain conditions.
• SEBI approved regulations on the FPI framework in its Board meeting in Oct 2013. FII and QFI
foreign investment routes will be merged into a new investor class termed as FPI with a more
streamlined application process. Instead of registering as FII and subaccounts with SEBI, FPIs
will register with a Designated Depository Participant subject to compliance with risk based
KYC norms.
• Based on the announcement of FSC on Aug 19, 2013, the National Assembly passed the
proposed amendments to the Enforcement Decree of the FSCMA, including the introduction
of ATS. It has been effective since Aug 29, 2013.
Other Highlights
• In Dec 2012, the FSS published an English handbook to help foreign investors better
understand the Korean stock trading system and make investment registration quick and easy.
It includes laws and regulations governing foreign investment, covering items from registration
procedures, investment limits to trading of listed stocks, among other things. For more
information, visit http://english.fss.or.kr/fss/en/main.jsp (Publications/Special Issues/Guide to
investing in Korea).
• Effective Mar 8, 2013, KSD has amended the SBL regulations to change the application period
of roll over requests for arranged SBL transactions.
• On Aug 21, 2013, the KSD launched an English version of the SBL web-based system showing
detailed SBL related information.
• The TWSE plans to replace the auction method with a continuous method for the trading of all
securities, by shortening auction matching intervals from 20 seconds to 5 seconds through a
three-stage implementation. The first stage took effect from Jul 2013, which reduced auction
trading intervals from 20 seconds to 15 seconds. The continuous trading method is more in line
with international practice.
• GTSM introduced a circuit breaker mechanism for securities traded on its automated trade
matching system, which is intended to stabilize the Taiwan securities market in periods of
extreme volatility.
• Citi and other market participants are working with the TDCC to launch the information
exchange platform, which allows brokers, custodian banks and securities investment trust
enterprises to exchange settlement details for trade matching purposes.
Settlement
• The CBC is working with TDCC to simplify the current procedure of pledging securities to make
it easier for foreign investors to borrow Taiwan dollars by using securities as collateral.
Other Highlights
• On Feb 6, 2013, the CBC granted approvals to Taiwanese banks, including Citi, to launch
onshore RMB accounts.
• The FSC plans to allow companies registered in Mainland China to list in Taiwan stock
exchanges as T shares and to issue Formosa Bonds in Taiwan.
• Effective Sep 23, 2013, all loanable stocks are exempt from the up-tick rule in a short sell.
• TWSE plans to adopt a stock price stabilization measure for stocks whose price fluctuation
reaches 3.5% in the second half of 2014. The FSC proposed to rule amendments to attract
foreign investments in the Taiwan market.
13
Acronym Glossary
ASIC
Australian Securities and Investments Commission
KSEI
Kustodian Sentral Efek Indonesia
ASX
Australia Securities Exchange
KYC
Know Your Client
Alternative Trading Systems
LES
Liquidity Enhancement Schemes
BAHTNET Thai Baht Real Time Gross Settlement System
LFX
Labuan International Financial Exchange
BAP
MAI
Market for Alternative Investment
Bapepam-LKIndonesia Capital Market and Financial Institution
Supervisory Agency
MAS
Monetary Authority of Singapore
MCX
Multi Commodity Exchange
BNM
Bank Negara Malaysia
MCX-SX
MCX Stock Exchange Limited
BOISL
Bank of India Shareholding Ltd
MMDH
Mainland Market Data Hub
BOT
Bank of Thailand
MYX
Bursa Malaysia Bhd
BSE
Bombay Stock Exchange
NSCCL
National Securities Clearing Corporation Ltd
CBC Central Bank of the Republic of China (Taiwan)
NSDL
National Securities Depository Limited
CCASS
Central Clearing And Settlement System
NSE
National Stock Exchange
CCP
Central Counterparty Clearing House
NSX
National Stock Exchange of Australia
CDP
The Central Depository (Pte) Ltd
OSE
Osaka Securities Exchange
CDSL
Central Depository Services (India) Limited
PBOC
The People’s Bank of China
CGT
Capital Gain Tax
PDEx
Philippine Dealing and Exchange Corporation
CHESS
Clearing House Electronic Sub-Register System
PDS
Philippine Dealing System Holdings Corporation
CMF
Central Matching Facility
PDTC
Philippine Depository & Trust Corp.
CoFR
Council of Financial Regulators
PSE
Philippine Stock Exchange
CSDCC
China Securities Depository and Clearing Corporation
PSMS Pre-Settlement Matching System
CSRC
China Securities and Regulatory Commission
PvP
Payment versus Payment
ECFA
Economic Cooperation Framework Agreement
QFI
Qualified Foreign Investor
ETF Exchange-Traded Funds
RBA
Reserve Bank of Australia
FIIs
Foreign Institutional Investors
RBI
Reserve Bank of India
FPI
Foreign Portfolio Investor
RMB
Renminbi
FSC
Financial Supervisory Commission
RQFII
RMB Qualified Foreign Insititutional Investor
FSCMA
Financial Investment Services and Capital Market Act
SBL
Securities Borrowing and Lending
FSS
Financial Stability Standards
SCCP
The Securities Clearing Corporation of the Philippines
FTIL
Financial Technologies India Limited
SEBI
Securities and Exchange Board of India
FTZ
Free Trade Zone
SEC
Securities and Exchange Commission
GTSM
Gre Tai Securities Market
SEHK
Hong Kong Stock Exchange
HKEx
The Hong Kong Exchanges & Clearing
SET
Stock Exchange of Thailand
HKEx-IS
HKEx Information Services Limited
SFC
Securities and Futures Commission
HKMA
Hong Kong Monetary Authority
SGX
Singapore Exchange Limited
HKSCC
Hong Kong Securities Clearing Company
SGX-ST
Singapore Exchange – Securities Trading Limited
HNX
Hanoi Stock Exchange
SMEs
Small and Medium Enterprises
HOSE
Ho Chi Minh City Stock Exchange
SSC
State Securities Commission
ICCL
Indian Clearing Corporation Ltd
SSE
Shanghai Stock Exchange
IDX
Indonesia Stock Exchange
STC
Securities Trading Code
IRDA
Insurance Regulatory and Development Authority
STP
Straight Through Processing
ISINs
International Securities Identification Numbers
SZSE
Shenzhen Stock Exchange
ISS
Institutional Settlement Service
TCH
Thailand Clearing House Co. Ltd
JASDEC
Japan Securities Depository Center
TDCC
Taiwan Depository Clearing Corporation
JGB
Japanese Government Bond
TFX
Tokyo Financial Exchange
JGBCC
Japan Government Bond Clearing Corporation
TMI
Tokyo Market Information
JPX
Japan Exchange Group, Inc.
TSD
Thailand Securities Depository
JSCC
Japan Securities Clearing Corporation
TSE
Tokyo Stock Exchange
JSDA
Japan Securities Dealers Association
TWSE
Taiwan Stock Exchange
KONEX
Korea New Exchange
USD CHATS US Dollar Clearing House Automated Transfer System
KPEI
The Indonesian Clearing and Guarantee Corporation
VSD
Vietnam Securities Depository
KRX
Korea Exchange
WFE
Word Federation of Exchanges
KSD
Korea Securities Depository
ATS
Banker’s Association of the Philippines
Contact Us
Asia Pacific
Jeffrey Williams
Regional Head, Direct Custody & Clearing
Asia Pacific
+852 3419-8826
jeffrey.williams@citi.com
Rudy Ingkiriwang
Regional Head, Asia Network Management
+65 6657-5938
rudy.ingkiriwang@citi.com
Judy Yip To
Market Advocacy, Asia Pacific
+852 3419-8830
judy.yipto@citi.com
AUSTRALIA
CHINA
HONG KONG
Martin Carpenter
Securities Country Manager
+61 (2) 8225-2411
martin.carpenter@citi.com
Kevin Sc Wong
Securities Country Manager
+86 (21) 2896-6705
kevin.sc.wong@citi.com
Cindy T Chen
Securities Country Manager
+852 3419-8820
cindy.t.chen@citi.com
INDIA
INDONESIA
JAPAN
Aashish Mishra
Securities Country Manager
+91 (22) 6175-7100
aashish.k.mishra@citi.com
Daniel Wijono
Securities Country Manager
+62 (21) 5290-8956
daniel.wijono@citi.com
Yasuhiro Yanakawa
Securities Country Manager
+81 (3) 6270-9534
yasuhiro.yanakawa@citi.com
KOREA
MALAYSIA
PHILIPPINES
Hee-Jin Kim
Securities Country Manager
+82 (2) 2077-4391
heejin.kim@citi.com
Benedict Ler
Securities Country Manager
+60 (3) 2383-2638
benedict.ler@citi.com
Theresa Reyes
Securities Country Manager
+63 (2) 894-7235
theresa.reyes@citi.com
SINGAPORE
TAIWAN
THAILAND
Alvin Goh
Securities Country Manager
+65 6657-5008
alvin.nc.goh@citi.com
Hsiao-Chi Wang
Securities Country Manager
+886 (2) 8726-9222
hsiaochi.wang@citi.com
Dol Watanasri
Securities Country Manager
+66 (2) 788-2679
dol.watanasri@citi.com
VIETNAM
Ha Thu Nguyen
Securities Country Manager
+84 (43) 936-7889
hathu.nguyen@citi.com
15
Footnote
1
August 2013 domestic market stock capitalization sourced from World Federation of Exchange. For India, only BSE market capitalization is included since all the companies listed on the NSE are already included in the BSE market capitalization figure.
Disclosure
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(“Transaction”). Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor.
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Prior to entering into any Transaction, you should determine, without reliance upon us or our affiliates, the economic risks
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