1

Asian Bond Clearing and Settlement Conference 2009

Presentation 3

Japan Securities Depository Center, Inc.

23rd June 2009 Hong Kong

2

INTRODUCTION

Barriers to cross-border investments, the purpose of our study

2

3

I. Outline of Work Plan for Subcommittee B

An examination and analysis of the barriers to effect cross-border bond transactions and settlements and associated regulations.

4

Work plan

Step 1 (Aug. – Oct.2008)Analysis of current conditions

Fact findings Market by Market

Step 2 (Nov.2008 – Jun.2009)Identification of barriers

Prioritize to removing barriers

Understanding legal and regulatory barriers

Step 3 (Jul.2009 – Mar.2010)Removal of barriers

Propose recommendations and road map Publish final written report

3

5

II. Step 1

Analyze the current environment for cross-border bond transactions and settlements.

6

III. Step 2

Identify the barriers to the efficient settlements for cross-border bond transaction in the ASEAN+3 region and prioritize the recommendations and approaches to lift such barriers.

OBJECTIVE

Based on the deliverables of step1, identify the barriers to the cross-border settlements. Also, understand legal and regulatory barriers to proceeding.

4

7

Market Survey Analysis

Questionnaire to understand the current environment and barriers to cross-border settlement.

message formats, pre-matching, DVP model, omnibus accounts, foreign investor registration, taxes, legal matters,

FX restrictions, derivatives, lending/repo… 25 major questions. Period: 19 Nov.2008 – Jan. 2009 Participants : sent to 100+ market participants

asset manager, institutional investor, broker/dealer, banks, global/regional/local custodians in ASEAN+3

Number of Respondents :58

8

Market Consultations Analysis

Interviews to understand the current environment and barriers to cross-border settlement.

in Singapore (14th-15th Jan. 2009)Investors: 6, (Global) Custodians: 2, Broker Dealers: 1

in Tokyo (27th - 30th Jan. 2009) Investors: 4, (Global) Custodians: 4, Broker Dealers: 2

in Hong Kong (9th -12th Feb. 2009) Investors: 6, (Global) Custodians: 4, Broker Dealers: 1

5

9

Market Profiles Analysis

The objective is to understand clearly about the markets to find a clue for improvements.

To have comprehensive understanding of each market (10 markets).

Items: Market access and foreign investors registration, FX restrictions, Cash account and overdraft restriction, Taxes, Settlement and custody, others.

10

Area of influence

Improve information flows in the marketsTimely information, uniform disclosure, price transparency, market statistics, information on corporate actions and legal information such as bankruptcy and insolvency laws.

Improve information flows in the marketsTimely information, uniform disclosure, price transparency, market statistics, information on corporate actions and legal information such as bankruptcy and insolvency laws.

Identification of Major Barriers

Messaging format

Settlement cycle

Securities numberingPre -

matching

FX controlsconversion, repatriation

Taxes

Physical certificates

Investorregistration

Omnibusaccounts

Cash controlscredit balances,

overdrafts

Nu

mb

er

of

mark

ets

in

vo

lved

More

Few

er

Private sector Public sector

Quotas

6

11

IV. Step 3

Propose recommendations and roadmap for removing the barriers.

OBJECTIVE

Propose practical recommendations and roadmap for removing the barriers.

(recommendations will not be legally binding)

12

Recommendations and Roadmap

Evaluating the findings and study results.

Considering recommendations to remove major barriers.

Discussing possible roadmap for improvements.

Interim report : GOE meeting in Sept. 2009.Final report : GOE meeting in Mar. 2010.

7

13

(Leader of Sub-Committee B)Merrill Lynch Japan Securities Co., Ltd.Japan Securities Depository Center, Inc.

E-mail : abmi@jasdec.com