cooperative works between uzscsd and ksd december 14, 2001 tashkent, uzbekistan james j.w. kim

Cooperative Works between UzSCSD and KSD

December 14, 2001

Tashkent, Uzbekistan

James J.W. KIM

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Market Trends

CompetitionIntegration & Convergence

Shift to…..

Building a stable, efficient, and reliable Securities Infrastructure

Building a stable, efficient, and reliable Securities Infrastructure

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Front-Office Vs Back-Office

Front-OfficeMonopoly Global competitionUnder pressure to be more specialized, competitive

Back-OfficeIncrease in settlement costs & risks resulting from

large-volume transactionsGlobal StandardizationIn the process of integration

Economy of Scale & More Efficiency

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Outline

Overview of Uzbekistan securities market &

deposit and settlement system

Issues to be dealt with further

What we can expect from this project?

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Uzbekistan securities market

RSE Toshkent & Elsis-SavdoNot as active as other off-exchange markets

Listed companies : approximately 1,200Daily average of transactions : 8.2

Daily average of trade volume : 28,000 shs.

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Deposit & Settlement system Settlement Cycle

Toshkent : T+5 / Elsis-Savdo : T+2 Preliminary requirements Blocking of the securities from disposal

Many institutions related to the settlement process UzSCSD – Securities Delivery Elsis-Kliring – Clearing Commercial Banks – Cash Transfer 2nd Level Depositories - Custody Brokers - Intermediation

Entitlement Processing

Issues to be dealt with further

Settlement Cycle

Complicated Settlement Process

Implementation of Entitlement

Processing

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Settlement Cycle

Higher Settlement Risk due to Longer Settlement Period

G-30 RecommendationsT+5 by 1990T+3 by 1992

ISSA RecommendationsT+1 in a form that does not increase operational risk

Essential for foreign investment

T+5 ???

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Complicated Settlement Process

Simultaneous Settlement BIS, G-30, ISSA

Cash Settlement Final, Irrevocable,

Immediately available to Investors

Settlement Fund through

Central Bank ISSA Recommendations

2000

Toshkent Toshkent

Elsis-SavdoElsis-Savdo

UzSCSDUzSCSD

Elsis-KliringElsis-Kliring

Settlement Bank(Commercial

Bank)

Settlement Bank(Commercial

Bank)

BrokerBroker

Clearing Data /Settlement Instruction

2nd level Depository2nd level Depository

Trade Order

Blocking &Delivery Instruction

SecuritiesBlocking & Delivery

Cash Transfer

Transaction Data

Transfer Instruction

Transaction Data

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Economy of Scale & Scope

Economy of Scale & Scope

Ongoing move for Integration & Linkage

Intensive CompetitionIntensive Competition

Independent & Specialized from trading part

Independent & Specialized from trading part

Integration of back-office sectorIntegration of back-office sector

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Current Status of back-office integrationState Content

U.S. -Integration of settlement related organizations dealing with stocks, corporate bond, ABS, and MBS into DTC-DTC-initiated integration of DTC and NSCC into DTCC(1999) System integration of two organizations is to be completed by the first quarter of 2003-Ongoing integration of settlement-related organizations dealing with Government Bond(GSCC), MBSCC and Emerging Market Bond(EMCC) into DTCC

Canada - Integration of WCCC(Clearing House) and WCDTC(Deposit and Settlement Entity) into CDS(1996)

German - Integration of various Deposit and Settlement Entities into DBC(1989)- Integration of DBC(CSD) and Cedel International(ICSD) into Clearstream(2000)

France -Transfer of Government Bond settlement system(Saturne) of Central Bank to Euroclear France (CSD)(1995)

British - Transfer of the Deposit and Settlement system covering Government Bond and short-term financial instrument to CRESTco(June, 2000)

Switzerland

- Integration of SEGA(CSD) and Intersettle(Cross-Border Settlement Entity) into SIS SegaIntersettle

Japan - Integration of the Deposit and Settlement Entities divided by types of securities into JASDEC(CSD) (2005)

HK - Transfer of Custody operation by the Central Bank to HKSCC(CSD)

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Comparison of Settlement Costsbetween European and U.S Markets

0

200

400

600

800

1000

1200

TradingVolume(mil.shs)

Settlement Cost(Mil.$)

European Countries

the U.S

Source : Merrill Lynch(1999),

Murray(2000)

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Implementation of Entitlement Processing

Distribution of Bonus Issues

Distribution of Bonus Issues

Beneficial Owners

Information

Beneficial Owners

Information

Dividends Payment

Dividends Payment

Subscription to Rights Issues

Subscription to Rights Issues

Stable Entitlement Processing System

Essential forForeign Investment

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What we can expect from this project?

Strong & Efficient Infrastructure for Deposit & Settlement System

Vitalization of Stock Market

Vitalization of Stock Market

Foreign Investments

Foreign Investments

SuccessfulPrivatization

SuccessfulPrivatization

Funding fromIssuing Market

Funding fromIssuing Market

Strengthening Financial Status

Strengthening Financial Status

Enhancing Uzbek Economy

Enhancing Uzbek Economy

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Future Development

Memorandum of Understanding

Mutual visits between UzSCSD and KSD

Final Consultative Report

Training Program

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