01. About the KSD / 04
02. Repo Markets in Korea / 06
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service / 10
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service

04. Other Information / 24
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

REPO

Repurchase Agreement

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market
03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service

01

About the KSD

Securities Deposit &Settlement•Securities deposit•Securities registration•Clearing and settlement•CA processing for deposited securities•Gold custody and settlement•Transfer agent•SLB internmediary•Repo agent•Collateral management•Substitute securities management

04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

KSD Business Portfolio

Investment
Support•FundNet- Subsciription and redemption•redemption- Trade matching and instruction delivery•Fund administration(ETFs)•Voting rights exercise for funds•Retirement pension platform

Asset
Management
Support•Foreign securities deposit & settlement•CA processing for foreign investors•Local custodian•DR underlying share custodian•KDR depositary•CSD system consulting and implementation

1.Central Depository & Settlement service
providerGlobalServices

Other
Securities
Services•E-voting•E-proxy solicitation•LEI-K•Indenture trustee•Securities information
management

3.Core infrastructure of the capital market

KSD enhances the stability of security settlement processes and the

Securities depository and settlement infrastructure is required toefficiency of the financial industry by bridging the gap between security

execute large volumes of transactions in the capital market. As theadministration services and the financial sector in order to contributenation’s central securities depository, KSD aims to enhance efficiency into the development of the nation’s economy as a social overhead capitalsecurities issuance and circulation, as well as in financial transactions,infrastructure.

and help reduce social transactions costs for the economy.

2.Custodian for the Public's assets

The number of investors and scale of investment assets have increased

KOREA
SECURITIESDEPOSITORY

4.Provider of various services to the capital
market

KSD provides domestic and overseas financial institutions including

on the back of capital market growth. Most investment assets are thesecurities brokerages, banks, insurance companies, asset management

property of the public held in the form of securities. As the securities

companies, futures trading companies and pension funds with various

depository, KSD safeguards the assets of the investing public byfinancial services including securities depository, settlement, futures

securely managing them in its custody.

trading and derivative product services.

REPO Services

0405

01. About the KSD

02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market
03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service

02

Brokerage company
Repo trades are divided into direct trades and brokered
trades. In direct trades, participants themselves look for theircounterparties. If they have difficulty in finding a counterpart,
they may request a brokerage company to find one for them.
A brokerage company serves as a bridge between compatible
participants based on their trade conditions. There are fivebrokerage companies in the Korean Repo Market.

Repo markets in Korea* Brokerage company
KIDB(KIDB Money Brokerage Corp.)
KMB(Korea money Brokerage Corp.)
SMBS(Seoul Money Brokerage Services LTD),
KSFC(korea Securities Finace Corporation)
Dongbu Securities Corporation

04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

Tri-party repo agent
A Tri-party repo agent is an independent third party which
provides services including settlement and collateralmanagement services, after repo trades have been executed.
The KSD acts as a Tri-party repo agent that provides participants
with the aforementioned services to facilitate repo trades fromtheir initial execution through to their repurchase date.

1. Institutional Repo Market
Securities
tradedThe securities that are allowed to be traded in the institutional
repo market are those prescribed in the Financial Services andCapital Markets Act(FSCMA).

Repo
Settlement

Buyers assign purchased securities from sellers and most of
the institutional repo trades are settled through the KSD. The
KSD provides "Delivery versus Payment" and "Free of Payment"
settlement methods, as well as post-settlement management
services.

ParticipantMarket Players

KOREA
SECURITIESDEPOSITORY

The regulations for Financial Investments prescribe theparticipants eligible to take part in the institutional repo market,
most of which are financial institutions.
1. Commercial Banks in general 2. Korea Development Bank
3. Industrial Bank of Korea 4. Korea Exim Bank 5. National
Agricultural Cooperative Federation 6. National Federation ofFisheries Cooperatives 7. Insurance Companies 8. Financial
investment service providers 9. Securities Finance companies
10. Merchant banks 11. Money Brokerage companies 12. Financial
holding companies 13. Credit finance companies 14. Mutual
savings banks 15. National Forestry Cooperative Federation
16. Korea Federation of Community Credit Cooperatives 17.
National Credit Union Federation of Korea 18. Foreign Fanancial
Institutions according to Items 1 to 17 19. Korea Deposit Insurance
Corporation 20. Korea Asset Management Corporation 21. Korea
Housing Finance Corporation 22. Korea Investment Corporation
23. Collective investment vehicles 24. Credit Guarantee Funds
25. Korea Technology Finance Corporation 26. Fund and fundmanagement established under laws 27. Corporation carryingout mutual aid business under laws 28. Korea Post 29. Venture
capital Company 30. Discretionary investors who have signed aninvestment contract.
(All the institutions are specified according to the Act.)

Statistics(Unit : trillion KRW)

61

70
60

12,00052

50

10,000

39

40

8,000

30
30
20

23

3,764

13,332

25

11,277

16

10

4,464

5,620

6,000
4,000

8,069

2,000

2,076

Transaction Volume
Daily average balance

14,000

0

2011

2012

2013

2014

2015

2016

2017

0

REPO Services

06

07

01. About the KSD

02. Repo Markets in Korea

2. Customer Repo Market

1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market
03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service

3. BOK Repo Market

In the customer repo market, financial investment dealers
including but not limited to banks authorized to carry out
investment trading business, securities financial companies
and merchant banks are eligible to conduct repo trades against
corporations and individuals.

Players

In the customer repo market, the tradeable securities are limited
to investment grade bonds. "Investment grade bond" means 1)
any bond that is marketable and for which the mark-to-market
valuation is available on a daily basis, 2) any bond with a BBB
credit rating, or higher, according to credit rating agencies. Suchbonds must be issued / guaranteed by financial institutions
designated by the Governor of the FSC or guaranteed by thecentral or local government. Such requirements are establishedto protect corporations and individuals who have relatively
less access to financial information compared to financial
institutions.

04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

Securities
tradedStatistics(Unit : trillion KRW)

Players

The Bank of Korea selects and announces those institutions
eligible to take part in the market in accordance with the open
market operational regulations each year. As of the year 2017, 23
institutions participate in the BOK repo market.

Securities
tradedGovernment bond, Government guaranteed bond, Monetary
Stabilization bond, Mortgage Backed Securities

Repo
Settlement

Delivery versus Payment through the KSD (same as theinstitutional repo market). The KSD provides trade management
services after settlement.

20
18
16

800

17
16
15

15

700

14

15

14
600

14

Hold-in Custody repurchase transaction
Securities sold through the customer repo market are held by
the relevant financial institution, and a bankbook is distributed
to the individual customer. Financial institutions shall deposit
customers' securities with the KSD without transferring them tocustomers.
The market price of the bonds deposited with the KSD shall be
no less than 105 percent of the repurchase price.

Repo
Settlement

500

12
10

739
693

691

690

400

683

629

8

604

300

6
200
4

Transaction Volume

2

Daily average balance

0

100

2011

2012

2013

2014

2015

2016

2017

0

Statistics(Unit : trillion KRW)

Balance as of the end of year

85

79

80

77

78
76

75

70

70

67

67

2011

2012

65

KOREA
SECURITIESDEPOSITORY

60

2013

2014

2015

2016

2017

REPO Services

08

09

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service
04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

03

KSD Repo Service
1. Introduction

Item

Content

OptionRepo Position

Repo position

Buy / Sell

Type ofTransaction

Term: Fixed Maturity(Enter transaction period)
Open: No fixed maturity (No need to enter transaction period)

Term/Open

Transaction/Single Agreement

Choose whether to combine the transaction with other repo
trades and form a single agreement.
Transaction : to separate from existing trades with the same
counterparty and enter into a transaction.
Single agreement : combine with other repo transactions enteredinto with the same counterparty to form a single agreement.

Transaction / Single

Settlement
Agent

If the party wishes settle through its settlement agent, the nameof the settlement agent needs to be entered.
(The details of the settlement agent shall be registered inadvance.)

The number of securities
account held with thesettlement agent

Methods ofSettlement

DVP : Simultaneous settlement through DVP system between BOK
and KSD (except for foreign currency repo transaction)
FOP : Separate settlement of securities and payment (theparticipant may choose the type of payment)

DVP/FOP

Base Currency

A range of currencies are available for purchase.

KRW/USD/JPY/EURO/AUD/CAD/CNY/GBP/HKD/
SGD

PeriodTermination date of repo trade(※ Information on termination date is required only in case ofTerm Repo)

Charges

Who pays the service charges to KSD

Both parties / Seller /BuyerInterval of
Repo Interest
Payment

Enter the interval in case it is agreed that the repo interest shallbe paid/received on a regular basis

Daily / Monthly / Yearly

Whether to choose KSD'S MTM option

Yes / No

ThresholdTo specify the ratio or amount of exemption from the obligation
to maintain the margin("threshold")

Margin amount or ratio

Margin Ratio

Enter the agreed margin ratio, if any
In case a margin ratio is not specified, the market value of thepurchased securities at the time the contract is entered into
divided by the purchased price is automatically entered by KSD
Repo System

Purchased
Securities Details

Enter the type and amount of the purchased
securities

The KSD, a Tri-party repo agent, delivers such services as settlement,
custody and management of purchased securities, MTM, and income
payment followed by repo transactions. The Tri-Party Repo service
rendered by the KSD provides relatively high stability and efficiency inrepo transactions particularly because they are conducted through an
independent third party in a fair manner.
PlayerInstitutions eligible to participate in the institutional repo market
may use KSD service.

Securities
tradedAny securities prescribed in the FSCMA can be traded in theinstitutional repo market.

Account

Application forparticipation

A participant can use securities depository account held with the
KSD for deposit, withdrawal and transfer of purchased securities
under repo trades. The settlement of securities under repo
trades is transferred to the account of the purchaser from thesecurities account of the seller.
Those who wish to use the KSD's repo service shall open asecurities account with the KSD. Existing participants who have asecurities account with the KSD would apply for participation to
repo services.
However, if a non-resident investor wishes to use the service, he/she shall submit a registration certificate of investment for the
relevant foreign corporation together with a copy of a standing
proxy agreement.

Daily MTM
(daily marking to market)

2. Trade Matching1) Submission of Details of Repo Trade
When repo transactions are conducted, seller (for direct trades) or the
brokerage firm (for brokered trades) shall submit the details of therepo trade to KSD. The KSD then checks the details furnished by theparticipants (for any discrepancy between the details submitted by the
KOREA
SECURITIESDEPOSITORY

parties), distribute a written trade confirmation letter to each party andproduces the settlement data.

REPO Services

1011

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service

2) Transaction Matchingused for other purposes and instructs the buyer to transfer the funds.

If there is no discrepancy between the details of repo trades submitted

Upon the buyer’s completion of the payment, based on such instruction,

by both parties, KSD would give the trade a repo number and send

the settlement of the purchased securities is executed.

a written confirmation letter to each party by electronic means to② FOP : Free of Payment

prepare for the settlement.

If the details submitted by each of the trade parties exactly match,

Direct Trade

Telephone messenger

04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

Checking thecounterparty

Repo seller

Telephone messenger

the KSD repo system checks the number of securities in the seller’s

Brokered Trade

Repo buyer

Repo seller

securities account and (if the number is sufficient) locks securities

Telephone messenger

intermediarybalance for settlement. The trade parties then make payment for
settlement using the agreed-upon payment means, and the seller

Repo buyer

needs to notify that settlement has been made through the KSD repo
Entering into
an agreement

enter into a RP
agreement

enter into a separate
agreement

direct checking on the counterparty(via telephone or messenger)

enter into a RP
agreement

system. Upon such notice by the seller, the settlement of the purchased

enter into a separate
agreement

securities is completed.

indirect checking on the counterparty
through an intermediary(via telephone or messenger)<N.B.> Settlement Process of the Purchased Securities
Settlement of securities in repo trades is done by book entry transfer

brokerage company
input (trade details)

Entering thedetails of the
trades in the
RP system

maunal input(details of thecontract)

Repo seller

maunal input(details of thecontract)

Telephone messenger

trade details
confirm

Repo buyer Repo seller

manually input the tradedetails of participantsTrade matchingfrom the seller’s securities account to the buyer’s account. For closeleg settlement, settlement is achieved by book entry transfer from thetrade details
confirm
RP system

buyer’s securities account to the seller’s account.

Repo buyer

manually input the tradedetails of intermediary
verify the trade details of participants

trade matchingtrade matching and preparation of settlement

3. Settlement Service

BOK③ Money Settlement

Repo seller

1) Start-leg Settlement④ notify the Settlement details① DVP : Delivery versus Payment
The delivery-versus-payment system functions through a direct link
between the securities settlement system of the KSD and Bank of Korea

matching
rp trades① check the balance of the purchased
securities/to lock securities balance

autormatic process

Repo buyer② order the Settlement(money)

RP System⑤ order the Settlement(securities)(BOK) Wire. This allows real time and simultaneous settlement on agross, trade-by-trade basis.
If the trade details from each of the trade parties are matched, the KSD
repo system checks whether there are sufficient numbers of securities
for the transactions in the seller’s securities account. If there are
KOREA
SECURITIESDEPOSITORY

securities sufficient to cover the purchased securities in the account,
the KSD system locks securities balance to prevent them from being

KSD

Repo seller

Securities
account

Repo buyer

RP

Securities

account

account

RPaccount⑥ Securities Settlement

REPO Services

1213

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service2) Close-leg Settlement
Repo trades are principally terminated on the repurchase date.
However, if the trade parties agreed otherwise, or in the event of either

4. Trade Management
1) Rollover

party’s breach of contract, repo trades may be terminated. Settlement

The parties may apply for roll-over on the termination date. In this case,of the close-leg goes through the settlement of in the opposite

only the outstanding transactions are terminated on the day when suchdirection of the start-leg on the termination date with the reverse party

an adjustment is made and the parties engage in a new transaction. The

transferring securities to and receiving the principal and interest fromsettlement may be completed by making payment of the repo interest.

the repo party.

Conditions other than the termination date would consistently apply tothe new transaction.

04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

Termination at Maturity
In cases of Term Repo, repo transactions terminate at maturity.

2) Substitution of Purchased Securities
The seller in a repo transaction may substitute the purchased securities

Termination before Maturity

in whole or part, for other securities with the consent of the buyer.

In cases of Term Repo, transactions can be terminated even
before maturity if the trade parties mutually agree to such.

Meanwhile, if the issuer of the purchased securities is under suspension

Termination of Open Repo Transactions
In cases of Open Repos with no fixed maturity date, transactions
can be terminated on request by either party. In requesting toterminate transactions, the party may designate the termination
date as three (3) business days following the request date. The
counterparty should prepare for settlement of the close-leg forthe period. However, if both parties agree, transactions can beterminated on the date the request was made.

Close of
Repo trades

Termination by notice of either party
In the event of a breach of contract as prescribed in the Master
Agreement entered into between the parties, including but notlimited to composition or bankruptcy, the relevant repo trades
can be terminated on notification. In such a case, the relevant
party must inform KSD of the fact that a reason for repurchasehas occurred and submit KSD evidential materials. In this case,the day KSD checked is considered as the termination date andsettlement of the close-leg proceeds.

of transactions, adjudication of bankruptcy, etc., the buyer shalldemand repo adjustment by replacing such purchased securities withother securities. The seller should comply with such a request.

3) Change in Repo Trade Conditions
The parties may change part of trading conditions if necessary. In thiscase, the new conditions will apply only to the changed part and allother terms and conditions will remain constant.
Change in Repo Transaction Conditions :Interval of repo interest payment, next payment date, repo interest,
applicable exchange rate,
margin securities pool, use of purchased securities, automatic paymentof margin, threshold amount/ratio, method of settlement

Repurchase in Cash
If the buyer fails to deliver securities equivalent to the valueof the purchased securities, in the start-leg settlement, by
the repurchase date, cash reflecting the market value of the
securities could replace the securities with the consent of thecounterparty. This is designed to prevent failure of settlementfrom occurring due to lack of liquidity of securities. In somecircumstances, a penalty could be levied.

KOREA
SECURITIESDEPOSITORYREPO Services

14

15

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service
04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

5. Risk management① Margin Ratio1) Evaluation of Purchased Securities

the initial date of a repo transaction, divided by purchased price, ThisThe KSD gathers information on the price of securities, on a daily basis,

The margin ratio means the market value of purchased securities, on
figure is used as a base ratio in calculating MTM.

from four bond pricing companies designated by the Governor of
the FSS. In this way, it can evaluate the purchased securities in a fairMargin Ratio = (Market value of purchased securities on the initial
date) ÷ (purchased price)manner and uses the arithmetic means of those prices as the price ofthe purchased securities.

If otherwise agreed on by the parties, the margin ratio can be2) Mark-to-Market

determined in different ways.

Mark-to-Market (MTM) means the act of revaluing securities to current
market values. In order to minimize market risk, the KSD repo service② Threshold

carries MTM. The KSD compares the market value of the purchased

The change in the market value of the purchased securities and the

securities to base margin (repurchase price x margin ratio), on a daily

repurchase price results in exposure on a daily basis. For this reason,basis, during the period of repo, calculates the exposure for each party

the parties need to pay the margin to limit such exposure. However,and sets an additional margin for either party, if necessary.

the parties may agree, in advance, to specify a threshold for exemption

Since the purchased securities could be used as collateral in repo

from the margin maintenance requirement.

trades, the value of the purchased securities in a repo transaction must

The range of the threshold could be established either in ratio or

be monitored on a daily basis to ensure that it does not drop below aamount. If the exposure falls within the range of the predeterminedcertain range. The parties minimize exposure to the risk arising fromthreshold, the margin maintenance requirement would not beprice fluctuation and enhance the stability of the repo trade throughapplicable.

MTM. When the repo transaction is terminated, the KSD repo system

The range of the threshold is subject to change by the mutual

returns any margin involved in the transaction to each paying party.

agreement of the parties.

KOREA
SECURITIESDEPOSITORYREPO Services

16

17

01. About the KSD

3) MTM Procedure

02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service
04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

Calculation of
Exposure4) Margin Transfer

The risk arising from a movement of the market value of thepurchased securities is called "exposure". The party needs to pay
the margin to the counterparty suffering exposure.
* exposure = the market value of the purchased securities – basemargin (repurchase price x margin ratio)① Margin Transfer
Any participant who receives the notice of margin call shall pay therelevant amount (in cash or margin securities) to the KSD no later than
14:00 of the same day.
When securities are delivered for the margin, the securities aretransferred to the securities account of the counterparty. When cash

Calculation of
MarginShortage and
The Range ofThresholdIn case the exposure exceeds the threshold, the amount of margin
shortage should be calculated. If there is any margin already paid
and the amount thereof is less than the exposure, the difference
would be considered as the margin shortage.
In cases the exposure falls within the range of the threshold, there
would be no margin call regardless of the amount of the margin
already paid.

is used for the margin transfer, the counterparty in receipt the margin
will manage the paid amount and would pay the interest accrued on the
cash margin to the payer on the repurchase date.

② Deferment of Margin Payment
Following the margin call, the margin payment in whole could be

Margin Call

If there is any margin shortage as a result of MTM, the KSD will
notify the relevant party of such a fact and require them to pay themargin.

deferred if the party entitled to receive the relevant margin wishes to
do so. However, the party may withdraw such an intention at any timeand require the counterparty to pay the margin.

③ Adjustment of Transaction

Transaction conditions :purchased price: 100,
bond: 105 (same as the face value of the valuation on T),
margin ratio: 105%,
exempted amount ±5,
Repo ratio: 0%

The parties may adjust the size of the purchased securities or thepurchased price. For such an adjustment, the parties need to apply to
the KSD with the details of the purchased securities or the purchased
price subject to the adjustment. In this case, as the existing trade

Case in Point
(MTM)

T

T+1

T+2

Valuation of Bond

105

108

115

120

(purchased price)(repurchase price)

100

100

100

100

Base Margin

105

105

105

105

Exposure-3(Seller)

10(Seller)

15(Seller)

Threshold-100~110100~110100~110

Margin Shortage-

0

10(Buyer)15(Buyer)

Margin already paid-00(Buyer)10(Buyer)

Margin Call-010(Buyer)5(Buyer)is considered as terminated and the parties as engaging in a newtransaction, only netted amount of securities and cash are settled(butrepo interest accrued till the adjustment date should be paid). All otherconditions of the transaction remain the same.

KOREA
SECURITIESDEPOSITORYREPO Services

18

19

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service
04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges5) Default
Either party can default if they fail to perform the following specified
duties: the existing transaction goes through to settlement of theclose-leg. If the settlement of close-leg is practically impossible, theKSD would terminate the relevant transaction by deleting it from thesystem. Default is generally categorized into non-performance ofsettlement, failure to pay a margin, failure to substitute purchased
securities and failure to transfer the proceeds. In case where a single
agreement is entered into, a default occurring in a separate transaction
would constitute termination of the entire repo trades.

① Event of Default

Non-performing ofsettlement

Should either party fails to meet the settlement
requirements at maturity.
(The seller fails to pay the repurchase amount or thebuyer fails to repurchase the purchased securities.)

Failure to pay amarginEither party fails to transfer a margin after margin callis triggered.

Failure to replacepurchased securities

Should the seller fails to comply with the buyer’s
request for replacement of the purchased securities.

Failure to pay theproceeds

The buyer can use the purchased securities until thetermination date. However, the buyer is obliged to
pay the interest accrued on the relevant securities tothe seller. In this case, the KSD requires the buyer tonotify the seller of the interest accrued and to pay
the proceeds. (Failure to pay the proceeds implies thefailure of the buyer to perform their aforementioned
duty.)② Compulsory Termination as a result of Default
In the event of default by either party, the transaction must continue
through the settlement of the close-leg. However, if settlement is not
executed for some reason, the KSD will delete the relevant transaction
from the repo system, which leads to compulsory termination. In thiscase, the parties need to settle the transaction based on the Master
Agreement between them.

* Compulsory Termination
In cases of default by the seller, the KSD would deliver the marginand purchased securities to the buyer, and in case of default by thebuyer, the margin would be delivered to the seller and the relevant
repo transaction would be forcibly terminated. Following such atermination by the KSD, the parties need to settle the transaction
KOREA
SECURITIESDEPOSITORY

based on the Agreement (KOFIA Agreement/GMRA) between them.

REPO Services

20

21

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service
04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

6. Income Payment Management

Case 1 In case the buyer holds the securities in the buyer’s account,the interest would be automatically paid to the seller.

1) Interest accrued on the purchased securities
In repo trades, securities are transferred to the buyer as settlement,

As shown by <Picture 2>, if the buyer holds the securities in the buyer’s

and the buyer is obliged to return the interest accrued on the securities

account, the KSD Repo system would directly pay the interest to theto the seller. So, on the interest payment date, during the life of theseller on the relevant interest payment date.

repo trade, the buyer would have to pay the interest to the seller.
Picture2_ If the securities are held in a buyer's account

The KSD assists the buyer’s interest payment process in order toenhance the convenience for the participants.

Repo Seller
Securities accountSellerCustomer

Repo Buyer
Securities account
Buyer

Customer

Picture1_ Repo settlement process
Repo Seller
SellerCustomer

Ropo contract is signed

Repo Buyer
Buyer

CustomerIn this case, the KSD would pay the interest to the seller after
withholding tax at the source from the interest proceeds.

Case 2  In case the buyer disposes of the securities from the account,the buyer would pay the interest to the seller on the interest
As shown by the <Picture 1>, the settlement of the purchased securities

payment date(through KSD)

is done by book-entry transfer from the seller’s securities account tothe buyer’s account. The methods of the interest payment would vary

Picture3_ If the securities are disposed from the buyer's accountdepending on whether the buyer holds the relevant securities in the

Repo Seller

Repo Buyer

Securities accountSecurities accountbuyer’s account.
SellerCustomer

Buyer

Customer

As shown by <Picture 3>, in case the buyer disposes of the securities
from securities account, the KSD would receive the interest from thebuyer and provide it to the seller. This is called “substitution payment”.
In this case, the KSD would pay the interest to the seller after
withholding tax at the source from the interest proceeds.

KOREA
SECURITIESDEPOSITORYREPO Services

2223

7. GCF Repo Service

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market

GCF(General Collateral Financing) is a Repo transaction which is
executed based on the type of securities-government bonds, monetary

03. KSD Repo Service

stabilization bonds, special bank bonds, government-guaranteed bonds,

1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service

and mix of the above, not specifying the specific security at the time of
execution.
One of the features of Korean GCF Repo is that there is an option on

04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges‘comprehensive consent on collateral substitution’ which makes it
possible for repo sellers to change posted securities(collateral) easily
without getting approval from repo buyers by each transaction.
By replacing their securities on time, repo sellers can have stablelong-term financing plan. It could help repo buyers as well, by getting
corresponding repo interests which enables them to achieve higher
repo returns.
KSD has been in operation of GCF Repo system since 2013, and

2) Interest accrued on the margin securities
The margin securities are held in the securities account of thereorganized the system to support the government’s policy to activatemoney market by boosting term repo in July 2017.

counterparty. Therefore, if any interest is accrued on the margin
securities, the KSD will directly pay the interest to the party who paid
the margin securities the same as Case 1 or Case 2 above.

3) Exchange of the purchased securities at maturity
The KSD notifies the parties concerned of the impending maturity datea full five days in advance of the maturity of the purchased securities.
The buyer should request substitution of the purchased securities until
one business day before the maturity date and the seller should comply
with such a request.

4) Exchange of the margin securities at maturity
When the margin securities mature, the relevant margin must be
returned to the paying party in the morning upon opening of business.
If any exposure arises to either party as a result of the return of the
securities margin, the KSD will request the margin transfer to the
KOREA
SECURITIESDEPOSITORY

relevant party.

REPO Services

24

25

01. About the KSD
02. Repo Markets in Korea
1. Institutional Repo Market
2. Customer Repo Market
3. BOK Repo Market
03. KSD Repo Service
1. Introduction
2. Trade Matching
3. Settlement Service
4. Trade Management
5. Risk Management
6. Income Payment Management
7. GCF Repo Service

04

Other Information

2. Cross Currency Repo
The seller can take cash in other currencies (USD, JPY, EURO) other than
KRW. The parties should select a currency for the transaction when
they submit details of the repo trade to the KSD, which will convert thetransaction amount denominated in foreign currency into KRW to apply
to the MTM.
* Cross currency repo refers to a repo in which securities have been

04. Other Information
1. Tax
2. Cross Currency Repo
3. Business Hours and Charges

denominated in a different currency to the collateral transaction.
* Foreign exchange rate option available- Fixed Rate : The parties mutually fix the exchange rate.
- Base Rate : The base rate at the preceeding date as notified by theSeoul Money Brokerage Service- Closing Rate : The closing rate at the preceeding date notified by

1. Tax1) Interest related Tax (including coupons)
The party who pays the interest accrued on the securities needs towithhold tax at the source from the interest amount accrued for the

Shinhan Bank

3. Business hours and Charges
Closing time for each business is as follows.

holding period of the securities. If the securities are sold before theBusiness

Closing Timeinterest payment date, such tax would be deducted when the securities

Margin Payment

14:00

are sold.

Institutional Repo

17:00

Customer Repo

21:40

BOK Repo

17:30* Exception for Repo Transactions: When the securities are sold under arepo transaction, withholding tax imposed based on the holding period
would not be deducted. However, if the repo buyer sells the purchased
securities, the withholding tax imposed during the holding period(from the purchase date to the date of sale on the market) would be
deducted. The buyer may apply for a tax return the following month.

2) Repo interest related Tax

A charge of KRW20 on the first day and KRW18 from the second day
will be imposed on every KRW100 million in a daily balance. The KSD
calculates the charges from the first day through to the last day ofeach month and notifies each participant that payment must be madefor such no later than the 20th of the following month.

Repo interest is considered to be interest income and is subject totaxation. For repo interest, withholding tax is deducted at the time of
the interest payment. However this shall not apply to domestic financial
KOREA
SECURITIESDEPOSITORY

institutions. Withholding tax for foreign investors is deducted according
to the tax rate prescribed in the relevant tax law.

REPO Services

26

27

Term Repo

Overnight Repo

Delivery Repo
Hold-in-Custody Repo

REPO

Tri-party Repo

Repurchase Agreement
Open Repo

PUBLISHER
Korea Securities Depository

ADDRESS
Repo Team, Securities Financing Department
Korea Securities Depository
Seoul Office : 4Gil 23 Yoinaru, Youngdeungpo-gu, Seoul 07330, Korea
Tel. 82-2-3774-3340, 3278 / Email. repo@ksd.or.kr

DATE
2018. 2. 28

DESIGNKOREA BLIND UNIONCOMPLETION OF RISK REVIEW (RISK-233, 2018. 1. 29)

CONTACT
repo@ksd.or.kr

NOTICEThe purpose of this guidebook is to facilitate our participants' understanding of KSD's Repo Service. Please consult theapplicable laws and regulations when carrying out business operations. KSD hereby declares that we are not legally
responsible for this guide.