INVESTOR ACCOUNT SERVICE IN CCASS
The 8th ACG Cross Training SeminarHong Kong Securities Clearing Company Limited
27 – 28 June 2006
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Agenda
1. Background
2. Admission Requirements
3. Scope of Services
4. CCASS Service Fees
5. Benefits
6. Stock Segregated Account with Statement Service
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BackgroundProfile of HKSCC
• 1989 - incorporation of HKSCCHong Kong Securities Clearing Company Ltd
• 1992 - recognised as clearing house and became operator of CCASS
Central Clearing And Settlement System A computerised book-entry clearing and settlement system for transactions in
securities listed on the Stock Exchange of HK
• May 1998 - introduced Investor Account Service
• Mar 2000 - became a wholly owned subsidiary of HKEx
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BackgroundHKSCC Participantship
• Brokers (433)
• Clearing Agency (1)
• Custodians (37)
• Stock Lender (0)
• Stock Pledgee (6)
• Investor Participants ( ~14,700)Figures as of 31 May 2006
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BackgroundInvestor Account Service
• May 1998
- introduce for individual and corporate
investors in HK
• Dec 1999
- accept BVI incorporated companies
• Jun 2006
- open for Macau residents and corporations
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BackgroundInvestor Account Service
Three common options for shares Three common options for shares custody in HK:custody in HK:
There is another option:There is another option:
Entrust with HKSCCEntrust with HKSCC
Keep physical certificatesKeep physical certificates
Entrust with a BrokerEntrust with a Broker
Entrust with a Custodian Entrust with a Custodian BankBank
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BackgroundInvestor Account Service
A A SafeSafe alternative….. alternative…..
…….. Legal protection for shares deposited with .. Legal protection for shares deposited with HKSCCHKSCC … ….. No need to worry about loss of physical .. No need to worry about loss of physical certificatescertificates
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Admission Requirements
Individual Investor Accounts• HKID / Macau Resident ID Card Holder aged
18 or above
Joint Individual Investor Accounts• HKID Card Holders aged 18 or above• Up to a maximum of 4 Investors per account
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Admission Requirements
Corporate Investor Accounts• Corporations incorporated in HK under the HK
Companies Ordinance, or by any legal entity incorporated in HK under HK Law
• Overseas Corporations incorporated in the British Virgin Islands (BVI) under the International Business Companies Act (IBC Act)
• Corporations incorporated in Macau under the Commercial Code of Macau
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Admission Requirements
• Maintain a correspondence address in Hong Kong / Macau
• Maintain a HKD Designated Bank Account for CCASS money settlement purpose
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Scope of ServicesNature of Investor Account
• NOT mandatory
• A depository account for share custody
• Purchases and sales of stocks made by Investor Participants (“IP”) and the resulting settlements will continue to be handled by CCASS Broker or Custodian Participants
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Scope of ServicesTransaction Flow
CCASS
Broker IP A/C
Designated Bank
IP’s Designated Bank
1 Place Order
2
Input Trade Order
3 Order Matching
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Order Matching Result
5Transactions transmit to CCASS
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Input ISI
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Affirm ISI
8ISI
settlement
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IPIPBroker
AMS/3
Broker’s Designated Bank
Money Settlement
Money Settlement
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Scope of Services
• Stock transfer and settlement
• Custodial services
• Nominee services
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Scope of ServicesStock Transfer
What is ISI ?
• Investor Settlement Instructions (“ISI”) are
used to initiate stock transfer and money
settlement electronically through CCASS
between IP and Broker, Custodian or Stock
Pledgee Participants
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Scope of ServicesMoney Settlement
Electronic money settlement between CCASS and Participants:
CCASS generates the following instructions for money settlement
Electronic Payment Instruction (EPI)
Direct Debit Instruction (DDI) /Direct Credit Instruction (DCI)
To process the moneysettlement of an ISI
between an IP and a Broker/Custodian Participant
To process the moneysettlement between an IP
and CCASSe.g. dividend payment / fees
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Scope of ServicesMoney Settlement for ISI
Three payment options are available for ISI
transactions:
• Free of Payment (FOP)
• Delivery versus Payment (DVP)
• Realtime Delivery versus Payment (RDP)
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Scope of ServicesMoney Settlement
Free of Payment (FOP)
• Money settlement is to take place outside
CCASS and HKSCC is not involved
• IP should arrange with their counterparties if
money settlement is required outside CCASS
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Scope of ServicesMoney Settlement (DVP)
Delivery versus Payment (DVP)
• Shares settled in advance to money
settlement
• An EPI will be generated and funds settled
through the overnight interbank clearing
• Receipt of payment must be monitored by
both delivering and receiving parties
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Scope of ServicesMoney Settlement (RDP)
Realtime Delivery versus Payment (RDP)
• Shares will be put on-hold in the delivering
Participant’s stock account
• CHATS payment instruction will be generated
• If payment is confirmed, the shares will be delivered
to the receiving party immediately; Otherwise, the
shares will be released back to the delivering party
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Scope of ServicesCustodial Services
• IP can deposit or withdraw physical share certificates into or from CCASS
• Shares deposited in CCASS are re-registered under the name of HKSCC Nominees Limited
• Shares withdrawn from CCASS are required to be re-registered to the name of IP
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Scope of ServicesNominee Services
Entitlement Distribution & Election
Entitlement Distribution & Election
ReceiveCorporate Documents
ReceiveCorporate Documents
VotingVotingSubscriptionSubscription
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Scope of ServicesNominee Services
• Receive corporate information directly
from listed issuers, e.g. annual reports
and notices
• HKSCC will collect benefit entitlements
for IPs and distribute to their stock /
designated bank accounts electronically
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Scope of ServicesNominee Services
• HKSCC will credit the entitlement in relation to corporate actions (such as rights subscription, open offer / takeover, etc) directly to stock / designated bank accounts of IPs
• Choose to attend corporate meetings in person, appoint representatives to attend meetings or appoint HKSCC to vote for them
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Scope of ServicesOthers
• HKSCC will send statements and provide enquiry
function to IP about the corporate actions and
deadlines, such as subscription, voting & dividend
election requiring their action
• Apply for initial public offering (IPO) and tender
electronically via CCASS and have HKSCC credited
allotted shares into their stock accounts and refunds to
their designated bank accounts directly
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Scope of Services - optionalShort Message Services (SMS)
Short Message Services (SMS) include:
• Investor Settlement Instructions (ISIs)
• Announcement summary and deadline for dividend
election and voting instructions
• EIPO and tender announcements
• Rejected transactions such as Direct Debit Instruction
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Scope of Services Communicating with CCASS
CCASSCCASS Internet System
CCASS Phone System Counter Service
IP a/c - 1Stock a,b,c….
IP a/c - 2Stock a,b,c….
IP a/c - 3Stock a,b,c….
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CCASS Service Fees
Stock Custody Fee
• $0.012 per board lot or odd lot
• minimum fee of $20 and maximum fee of $3,000
• per month
HKSCC charges IP the same fees as it charges other CCASS Participants (subject to adjustments in minimum and maximum fees, where appropriate)
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CCASS Service Fees
Dividend/Interest Collection Fee• 0.12% of the cash amount of dividend/interest• minimum fee of $10 and maximum fee of $500• per stock/debt in one currency on the same day
ISI Stock Settlement Fee• 0.002% of the gross value for each ISI transaction• minimum fee of $2 and a maximum fee of $100• each transaction
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Benefits
Stock
Custody
Nominee
Service
s
Other
Service
s
• Stock Deposit
• Stock Withdrawal
• Electronic Share Transfer
• Electronic Money Settlement
• Receive Corporate Documents
• Entitlement Distribution & Election
• Subscription
• Voting
• eIPO
• SMS Alert Message
Stock
Custody
Nominee
Service
s
Other
Service
s
• Stock Deposit
• Stock Withdrawal
• Electronic Share Transfer
• Electronic Money Settlement
• Receive Corporate Documents
• Entitlement Distribution & Election
• Subscription
• Voting
• eIPO
• SMS Alert Message
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Benefits
• Control over the movement of shares
deposited in CCASS
• Receive records of shareholdings in CCASS
• Enjoy better legal protection of shareholdings
in CCASS
• Enjoy a variety of communication channels
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Stock Segregated Account with Statement Service (SSA)
• Investors has to open SSA via brokers / custodians
• SSA is owned by brokers / custodians
• No legal relationship between HKSCC and SSA holders
• Stock in custody of and movement is controlled by brokers / custodians
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Stock Segregated Account with Statement Service (SSA)
• A service enabling investors to reconcile their stockholdings and trading records kept by their brokers or custodians with statements issued by HKSCC
• Receive corporate communications direct from share registrars
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Thank You