Presentation by
Japan Securities Clearing Corporation
June 27th-28th, 2006
The 8th ACG Cross Training Seminar
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Japan Securities Clearing Corporation June 27th-28th, 2006
TOPICS
1. Introduction of JSCC
2. Operations of JSCC
3. Direct and Indirect Structure
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Japan Securities Clearing Corporation June 27th-28th, 2006
1．Introduction of JSCC
1．(1) Establishment of JSCC
 Stock exchanges in Japan had their own clearing functions before commencement of operations of
JSCC.
 This situation led to numerous inefficiencies, therefore it was essential to create a clearing
organization and a CCP function that covered all of the nation’s markets and integrated all the
clearing operations.
 As a result, JSCC was established in July 2002 and has provided cross-market clearing operations
for equity and fixed income products since January 2003.
 The clearing operations for Tokyo Stock Exchange Derivatives has also been conducted by JSCC
since February 2004.
◆About JSCC
Date of Incorporation
July 1st, 2002
Commencement of Operations
January 14th, 2003
Shareholders*1
(Shareholding ratio) *2
Tokyo Stock Exchange, Inc. (86.3%)
Osaka Securities Exchange Co., Ltd. (9.5%)
JASDAQ Securities Exchange,Inc. (3.4%)
Nagoya Stock Exchange, Inc (0.7%)
Fukuoka Stock Exchange (0.05%)
Sapporo Securities Exchange (0.05%)
*1 Shareholders of the JSCC are only market providers based on the idea that clearing functions are transferred from each market.
*2 Shareholding ratio was determined on the basis of trading value of domestic stocks in each market.
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Japan Securities Clearing Corporation June 27th-28th, 2006
1．(2) Structure of Trading, Clearing, Settlement
Market
6 Stock Exchanges
Trading
Clearing
Organization
JSCC
Clearing
DVP settlement
Settlement
Organization
Settlement
Securities
Settlement
Transfer instructions
Funds
Settlement
Tokyo Stock Exchange, Inc
Central Securities
Depository(JASDEC)
Bank of Japan
/Fund Settlement Bank
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Japan Securities Clearing Corporation June 27th-28th, 2006
1．(3) Relationship among Infrastructures for Securities Markets
in Japan －Share Ownership
Clearing Organization
JSCC
13.7%
Other Stock
Exchanges
86.3%
Stock Exchange
TSE*1
100%
Settlement Organization
22.0%
Settlement Organization
JASDEC*2
JSSC*3
①Operations for physical deliveries and
safe keeping (entrusted by JASDEC)
②Other settlement and custody services
*1 TSE: Tokyo Stock Exchange
*2 JASDEC: Japan Securities Depository Center
*3 JSSC: Japan Securities Settlement & Custody
Japan Securities Clearing Corporation June 27th-28th, 2006
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1.（4）Scope of JSCC’s Operation
Trading
Stock
Exchange
Clearing
6 Stock Exchanges
Settlement
JASDEC
Domestic Stock
TSE/OSE
Foreign Stock
TSE
Derivatives
OSE
Derivatives
JSCC
TSE / OSE
JSSC/JASDEC
The unified
cross-market
clearing
organization
TSE
OSE
JGB OTC
JGBCC*1
Bank of Japan
Non-Exchange
Transaction
Transfer
JDCC*2
JASDEC
*1 JGBCC: Japan Government Bond Clearing Corporation
*2 JDCC: JASDEC DVP Clearing Corporation
Japan Securities Clearing Corporation June 27th-28th, 2006
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1.(5) Outline of JSCC’s core business
Eligible transactions
・All exchange-traded cash products
・TSE traded derivative transactions (JSCC has
commenced TSE derivatives clearing since Feb.2004)
Core services
・Assumption of the obligation
・Netting
・Account Transfer Instruction
・Settlement guarantee
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Japan Securities Clearing Corporation June 27th-28th, 2006
1.（6）Outline of JSCC’s complementary business
TSE
JASDAQ Stock Exchange
Management services
concerning surety bond
JSCC
Monitoring of the financial status of
participants
JGBCC
JDCC
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Japan Securities Clearing Corporation June 27th-28th, 2006
2. Operations of JSCC
2.(1) Cross-market Clearing Organization
TSE
Transactions
↓
Matching
OSE
Transactions
↓
Matching
Nagoya SE
Transactions
Fukuoka SE
Transactions
Sapporo SE
Transactions
JASDAQ SE
Transactions
↓
Matching
↓
Matching
↓
Matching
↓
Matching
JSCC
Assumption of the obligation
■ CCP Function
■ Settlement
Guarantee
Scheme
Netting
Agency Clearing
Participants
Non-clearing participants
(Market participants other
than clearing participants)
Principal Clearing
Participants
Account Transfer
Instructions
DVP Settlement
(Link between settlement of securities and funds)
Central Securities Depository (JASDEC)
Clearing
Participant A/C
Clearing
Participant A/C
Clearing
Participant A/C
JSCC’s A/C
Bank of Japan/ Fund Settlement Banks
Clearing
Participant A/C
Clearing
Participant A/C
Clearing
Participant A/C
Clearing
Participant A/C
Clearing
Participant A/C
Clearing
Participant A/C
Clearing
Participant A/C
JSCC’s A/C
Clearing
Participant A/C
Clearing
Participant A/C
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Japan Securities Clearing Corporation June 27th-28th, 2006
2. （2） Core Processing of Clearing
Assumption of the obligation
 Assuming the obligation simultaneously when transaction are executed on
stock exchanges
 Receipt of transaction data from stock exchanges
 Notice of assumption of the obligation data to each participant
Netting
 Calculation of net position of securities and funds
 Netting with respect to each participant, and each security
 Without distinction between house and client
Account Transfer Instruction
 DVP Settlement (Settlement link between securities and funds)
 Instruction of transfer to JASDEC and Bank of Japan or Fund Settlement Banks
 Notice of settlement data to each participant
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Japan Securities Clearing Corporation June 27th-28th, 2006
2. （3） Data processing (Trading-Clearing-Settlement)
Date
Settlement Procedures
Receipt of transaction data
Stock Exchange
T
Assumption of the obligation
Participant’s
transaction data
Assumption of the
obligation data
Notification
Correction
Participant
T+1
Notification
Netting
T+2
Notification
Settlement data
Settlement Instruction
Settlement Instruction
T+3
Notification
<Securities Settlement>
Book-entry transfer at
the JASDEC
Participant
<Funds Settlement>
Account transfer at BOJ
or Fund Settlement banks
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Japan Securities Clearing Corporation June 27th-28th, 2006
3. Direct and Indirect Structure
3.（1） Securities Accounts
Central Securities Depository (JASDEC)
Securities Co. A
(JSCC participant)
client
JSCC
house
Securities Co. B
(JSCC participant)
house
client
Account transfer
Instruction
Securities Co. A
client
Securities Co. B
JSCC
Toyota:3,000
house
house
Customer A-1
Sony
-2,000
Customer A-2
client
Customer B-1
SONY +3,000
Sony: 1,000
Toyota +3,000
Toyota -3,000
Sony -4,000
Customer B-2
Sony +3,000
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Japan Securities Clearing Corporation June 27th-28th, 2006
3.（2）Agency Clearing Participant
Participant category
 Principal Clearing Participants/ Agency Clearing Participants
Participant requirement
 Sound internal system for management
 Appropriate internal system for business operation
 Stable financial criteria for participation (Please refer to the below table.)
・Securities company
Paid-in Capital
Net Assets
Net Capital Requirement Ratio
Principal
Agency
\ 300 million
\ 300 million
\ 2 billion
\ 20 billion
200 %
200 %
Principal
Agency
\ 300 million
\ 300 million
\ 2 billion
\ 20 billion
8%
8%
400 %
400 %
・Registered financial institution
Paid-in Capital
Shareholders’ Equity
Capital Adequacy Ratio*
Solvency Margin Ratio
* In case of a participant without overseas branches, 4% is applied.
Japan Securities Clearing Corporation June 27th-28th, 2006
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Image of Principal and Agency Clearing Participants
JSCC
Principal Clearing
Participants
client
Client
Clearing and
Settlement
Agency Clearing
Participants
house
house
Client
Clearing Process by Agency Clearing
Participants
Client
Non-Clearing
participants
Securities Co.
A
client
Client
house
Client
 Transactions conducted by Non-Clearing
Participants on stock exchanges shall be
cleared through Agency Clearing Participants.
client
 Agency Clearing Participants receive a
notification for assumption of the obligation
with each Non-Clearing Participant.
Securities Co.
B
house
client
Client
 Agency Clearing Participants have to make
a contract with Non-Clearing Participants, and
submit a copy of the contract to JSCC.
Client
 The position of Non-Clearing Participants
are netted together with that of Agency
Clearing Participants, and settled at
JASDEC in accordance with the transfer
instruction by JSCC.
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Japan Securities Clearing Corporation June 27th-28th, 2006
3.（3）Account for Margin of Derivatives Trading
JSCC Account for Margin
Principal Clearing
Participant
house
client
Principal Clearing
Participant
house
Agency Clearing
Participant
house
client
Agency Clearing
Participant
house
client
Non-Clearing
participants
house
client
Deposit of Margin for derivatives
 Participants have to deposit margin for
derivative trading to JSCC Account for
Margin.
 Participants have to deposit margin for
their own position and margin for their
customer’s position separately.
 Margin of Non-Clearing Participants is
deposited through their Agency Clearing
Participants.
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Japan Securities Clearing Corporation June 27th-28th, 2006
Thank you
Japan Securities Clearing Corporation
2-1,Nihombashi-Kabuto-cho,Chuo-ku,
Tokyo 103-0026 Japan
Phone: +81-3-3665-1234
Fax : +81-3-3665-1235
URL :http://www.jscc.co.jp/english/index.html
E-mail: t-oomori@jscc.co.jp
y-sakamaki@jscc.co.jp
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Japan Securities Clearing Corporation June 27th-28th, 2006