20

business overvieW

01

Book-entry
transfer System
for Stocks, etc.
ongoing enhancements to this all-electronic
record system are bringing greater
convenience, speed, and ﬂexibility to stock
ownership transfers.

the Book-entry transfer system for stocks, etc.

Issuing company
shareholder registry
General Shareholders
General Shareholders Notification
notification

JasDeCtransfer
Account
Book

Book-entry transfer

transfer
Account
Book

Direct accountManagement institution

Direct accountManagement institution(securities companies, banks, etc.)(securities companies, banks, etc.)

indirect accountManagement institution(securities companies, banks, etc.)

participants

participants

participants(shareholders)(shareholders)(shareholders)Annual Report 2015

21
01 Book-Entry Transfer System for Stocks, etc.

The Book-entry Transfer System
for Stocks, etc., has been operating smoothly
The dematerialization system applies not only tostocks, but also to bonds with share options, shareoptions, investment units of Real Estate Investment Trusts(REITs), investment equity subscription rights, preferred
equity investment of cooperative financial institutions,Exchange Traded Funds (ETFs), beneficial interest in atrust issuing a beneficiary certificate such as Japanese
Depositary Receipts (JDRs), and similar products (herein
after referred to as “JDRs”).
As of March 2015, the total number of issues handled
was 3,884, including 3,602 share issues, 24 bonds withshare options, 20 share options, 52 investment units,
1 preferred share issue, 130 ETFs, and 55 JDRs. The
number of companies participating in the Book-entry
Transfer System, including JASDEC participants (directAMIs), indirect AMIs, and fund settlement corporations,etc., was 381. Foreign institutions designated by thecompetent minister are also allowed to participate in the
System as AMIs. As of March 2015, 62 foreign financial
institutions are indirect AMIs.

JASDEC launched its Book-entry Transfer System for
Stocks, etc., under the Act on Book-Entry Transfer ofCorporate Bonds, Shares, etc. (“Book-Entry Transfer Act”)
in January 2009. Under this system, listed securities aremanaged in the accounts opened at JASDEC or AccountManagement Institutions (AMIs) such as securities
companies and banks by electronic records registered intheir computer systems. The Book-entry Transfer System
has a variety of features that contribute to the safety andconvenience of securities settlement.
• Only the electronic records noted above determine
the vesting of rights pertaining to stocks, etc.; and therewriting of those records transfers those rights. This
reduces the cost of printing, storing and transporting
securities in physical form, along with the risk of loss
or theft.
• JASDEC provides issuing companies with allshareholder information as of the record date
(General Shareholder Notifications), which is needed
to compile shareholder registries. To ensure that
information is supplied efficiently, JASDEC maintains
centralized management of shareholder information.
For example, JASDEC preliminarily obtains andintegrates names, addresses and other shareholder
information from AMIs.

JASDEC participants and indirect AMIs (as of March 31, 2015)
JASDEC participants by category
Securities financecompanies
2 (1%)

Indirect AMIs by category

Banks, etc.
17 (15%)

Total

Total

111

178

Life & non-life
insurancecompanies
1 (1%)
Banks, etc.
20 (11%)

Note:	“Banks, etc.” include The Norinchukin Bank,Tokyo Shoken Shinyou Kumiai, and JapaneseBanks’ Payment Clearing Network.
	“Stock exchanges, etc.” include Japan Securities
Clearing Corporation, JASDEC DVP Clearing
Corporation, three securities agents and three
Tanshi companies (which offer short-term credit
brokerage services)

Stock exchanges, etc.
11 (6%)

companies

companies
Securities
companies, etc.
144 (81%)

Securities
companies, etc.
32 (29%)Annual Report 2015

Foreign indirect
AMIs
62 (56%)

22
01 Book-Entry Transfer System for Stocks, etc.

Ongoing enhancements to increase user convenience
JASDEC is continually developing a variety of enhanced
measures to ensure the smooth operation and to improvethe usability of the Book-entry Transfer System of Stocks,
etc. We also implement programs to inform participants
about these improvements.
First, we take appropriate steps in response to thelegal reforms. In December 2014, we implemented newmeasures in order to handle investment equity subscription
rights, to cancel investment units owned by the issuer andto merge investment trusts following changes to “the Act
on Investment Trusts and Investment Corporations” and“the Book-Entry Transfer Act”, based on relevant law1.
In May 2015, we revised our operations in order tohandle purchase accounts pertaining to share purchasedemands by shareholders who object to organizational
restructuring, etc., following amendments to “the BookEntry Transfer Act”, based on relevant law2.
We also continue to improve our business in responseto the situations and needs of participants. In January
2015, we implemented a new scheme in cases of
discontinuance to handle any issues of ETFs and JDRs.
In the past, ETF or JDR issuers had been required toissue beneficiary certificates stipulating those rights andallocate them to beneficiaries. Since the dematerializationof stock certificates, however, issuers and AMIs haveseen substantially reduced ability to manage and forward
certificates. For these reasons we modified our systems toallow monetary redemptions in place of the allocation of
beneficiary certificates. In January 2015, we also modified
our systems to enable ETF and JDR issuers to make thedemand for a General Beneficiaries Notice at any time,
subject to certain conditions.
In October 2014, in order to respond to the Social
Security and Tax Number (“My Number”) system fromJanuary 2016, we finalized the pending agenda andreleased the revised version of “the outline requirements
for My Number Act3 in relation to the Book-Entry Transfer
System for Stocks, etc.,” whose first edition had beenannounced in the previous fiscal year.
Issuers of book-entry shares are required to notify
JASDEC of the details of corporate actions when theydecided to initiate them. We conducted the review ofguideline to explain notification procedures, and publishedthe Guidebook for Notification in February 2015 which ismore intelligible for issuers. We also conducted promotion
activities for them to introduce notification procedures.

“the Act on Partial Revision of the Financial Instruments and Exchange Act, etc.”“the Act on the Arrangement, etc. of Related Acts that Accompany the Enforcement of the Act on Partial Revision of the Companies Act”
3
The official name of My Number Act is “the Act on the Use of Numbers to Identify a Specific Individual in the Administrative Procedure”
12Book-entry transfers■ Stock-exchangetransfers(Billion shares)
396.7

400
345.1

321.0

350.3

335.7

(Billion shares)

300

1,500

200

1,000

100

500

0

(FY) 2010

2011

2012

2013

2014

1,241.82,0000Annual Report 2015

695.1

677.4

(FY) 2010

669.4

652.5

2011

1,111.3

797.2

656.8

2012

732.4

2013

724.7

2014

■ Transfers between
JASDEC participants■ Internal transfers
within the same
companies

23
01 Book-Entry Transfer System for Stocks, etc.

■A
 ccount balance (end of FY) ● Number of issues (end of FY)

Account balance and number of issues
Bonds with share options

Stocks(Billion shares)(Issues)

450

433.9

431.0

418.6

406.8

4,000

404.6

400

1,500

80
1,168.1

3,800

350

3,581

3,548
3,400

300
0

(FY) 2010

2011

2012

2013

0

2014

97%
0

499.6
16

(FY) 2010

2,791

2011

2012

22

24

133.4

163.8

2013

2014

(Thousand shareholders)

100
50

900
0

0

(FY) 2010

2011

2012

150,000

Number of general shareholder notifications(Issues)
15,000129,619 127,292

125,694

127,032

127,623

8,888

8,597

8,715

8,771

120,000
90,000● Number of issues● Total shareholders

8,723(Notifications, in billion)
1,001.1
1,000

12,000

800

9,000

600

60,0006,000

400

30,000

3,000

200

0

(FY) 2010

2011

2012

2013

2014

0

0

Number of shareholders(Data for shareholder notifications)
18,00016,459

961.8

2011

2012

2013

16,727

17,063

2,800

4,500

2012

2013

0

*Figures are as of
day of notification toissuers.

2014

2014

*Number ofshareholders (datafor shareholder
notifications) is
integration ofparticipant information
notified by AMIs.
*Figures are as of endof fiscal year.

1,000

2,649

2,428

9,000

2011

2014

1,021.4(Issues)
2,697

2,100

(FY) 2010

947.3(Notifications)
18,005

13,5000(FY) 2010

972.8

2013

Individual shareholder notifications(Thousand notifications)
17,547150

126

General shareholder notifications
Number of issues and total shareholders

3,409
154

4,384 200
185

93

1,800
20

2,339
111

2,563

40
27

500

3,600
2,700

43

(Issues)

4,500

60

959.7

3,602
3,600

3,561

(Million units)(Issues)

1,000
3,640

ETFs and JDRs

(Billion yen)

810

1,958

■N
 umber of
notifications●N umber of issues

2,392
800

720

626

600

1,400
400

401

412
700
0

200

(FY) 2010

2011

2012

2013

2014

0

Information requests4
Number of notifications

Number of issues(Notifications)
6,000

5,443
4,969

4,500
3,069
1,589
477
0

4

(Issues)
800654(FY) 2010● (Total record)
number of issues● (Partial record)
number of issues

580

600

3,000
1,500

■ (Total record)
notifications■ (Partial record)
notifications

482

3,252

2,688

400

314

302

87

77

57

(FY) 2010

2011

2012

1,857
200
375
2011

521
2012

2013

0

2014

114

122

2013

2014

 equests for information (total record) refer to requests for data recorded on book-entry transfer registries of either JASDEC participants (direct AMIs) or indirect
R
AMIs where shareholders in question have opened accounts. Requests for information (partial record) refer to requests for data recorded solely on book-entry
registries of JASDEC participants where shareholders in question have opened accounts.

Annual Report 2015

24

business overvieW

02

Book-entry
transfer System for Commercial
paper and Corporate Bonds
JASDeC is maintaining the security of the
Cp and corporate bond book-entry transfer
system whose daily settlement value typicallysurpasses the trading value per day at the
tokyo Stock exchange.

Flowchart for Book-entry transfer for CP/Corporate Bonds (DVP)① tradeseller② trade matching③ notice of settlement
matching status

settlement
parties

Buyer

JasDeC④ notice of settlement status(Awaiting fund settlement)② trade matchingaffirmation
settlement matching
Pre-Settlement
Matching Systemsecurities transfer③ notice of settlement
matching status④ notice of settlement status(Awaiting fund settlement)

settlement
partiesBook-entry Transfer
System for
CP/Corporate Bonds⑨ notice of securities
transfer completion⑨ notice of securities
transfer completion⑧ notice of payment completion

Fund
settlement
corporation⑧ notice of payment completion⑤ payment instruction

Bank of Japan⑥ payment request⑦ payment instruction

Annual Report 2015

Fund
settlement
corporation

25
02 Book-Entry Transfer System for Commercial Paper and Corporate Bonds

Supporting seamless and secure CP and corporate bond settlement
As a means of managing participation in JASDEC’s
Book-entry Transfer System, we set up a multilayer
holding structure for direct/indirect Account Management
Institutions (AMIs) to address the diverse needs of investors
and financial institutions. For example, direct AMIs can open
an account directly at JASDEC and indirect participation ispossible by opening an account at a direct AMI. Anotheroption for indirect participation is through the opening of an
account at an indirect AMI. Upon the payments of principal
and interest of corporate bonds to bondholders, AMIs
receive principal and interest from paying agents or their
upper AMIs through the multilayered structure on behalf of
their bondholders.

In March 2003, JASDEC launched the Book-entry Transfer
System for Short-Term Corporate Bonds (dematerialized
CP), and this was followed by the launch of the Book-entry
Transfer System for Corporate Bonds in January 2006. Ineach system, settlement procedures—issuance, transfer(trading), and redemption—are conducted based on thebalance electronically recorded in the transfer accountbooks. In addition, at all stages of issuance, transfer, andredemption of CP and corporate bonds, DVP settlement
is available by the linkage between JASDEC’s book-entry
transfer system and the Bank of Japan Financial Network
System (BOJ-NET). Furthermore, interfacing the bookentry transfer system to its PSMS (Pre-Settlement Matching
System; see page 34, JASDEC has realized Straight
Through Processing (STP), which fully automates the entire
process through trade matching to settlement of securities
and funds.

Participants in Book-entry Transfer System for CP (as of the end of March 2015)

Issuers 498

Issuing/
paying agents

18

JASDECJASDEC
participants(Direct AMIs)

66
Fund settlement corporations 139

Annual Report 2015

Indirect
AMIs

46

CP holders

26
02 Book-Entry Transfer System for Commercial Paper and Corporate Bonds

The Book-entry Transfer System
for Commercial Paper continues to operate efficiently
Commercial Paper (CP) currently refers to short-term
corporate bonds in a dematerialized form issued bycorporate entities as a means of procuring short-term
funds. As CP was previously drawn as promissory notesin physical form, there were always some risks of theft orloss when notes were transferred or deposited, as wellas costs of a documentary stamp tax upon transfers. To
eliminate such risks and costs, the fully electronic Bookentry Transfer System for dematerialized CP was launchedin 2003. Almost all CP issued in Japan is handled by thissystem.
In fiscal 2014, improving business performance andother factors were reflected in lively issuing activity by
issuers in a wide range of industries, and the accountbalance increased from the ¥16 trillion level to the ¥17

CP account balance (nominal value) andnumber of issues(Trillion yen)
25

4,392

(Issues)
5,000

4,447
3,926

trillion level in the second half of the fiscal year. Although
the account balance fell sharply toward the end of the
fiscal year because of a combination of factors specific to
the year-end period, it stood at ¥14.2 trillion as of March
31, 2015, an increase of ¥1.6 trillion from the position at
the end of the previous fiscal year. A total of 3,717 issues
were being handled, an increase of 165 from the end of
the previous fiscal year. The settlement methods used for
new records, redemptions and book-entry transfer are“DVP settlement,” which links CP records by JASDEC withsettlements using the BOJ-NET, and “non-DVP settlement”
for other types of transactions. DVP settlements accounted
for 66% in terms of the number of settlements and 75% ofsettlements on a value basis.

Issuance, transfer andredemption of CP (daily average)● Number of issues(end of FY)■ Account balance(end of FY)

7.0

4,000

14.2

3,000

4.0

10

2,000

3.0

5

1,000

15

0

14.0

(FY) 2010

13.6

2011

13.7

2012

3,552
12.6

2013

0.4
5.6

6.0

3,717

20

■R
 edemptions■T ransfers■ Issuance(Trillion yen)

5.0

2014

0

*Nominal value isthe value at time ofissuance (based on
the amounts for each
bond)

0.4
3.8

0.5
4.0

0.4
4.1

0.4
4.1

0.5

0.4
2012

0.4
2013

2.0
1.0
0

0.4
(FY) 2010

2011

0.4
2014

Continually adapting to CP market needs
The total settlement amount of issuance, transfer andredemption of CP handled by JASDEC’s Book-entry
Transfer System averages ¥6.5 trillion per day. In addition,month-end settlements sometimes surpass ¥13 trillion.
This means that the settlement value of CP at JASDEC
is more than the daily trading value at the Tokyo Stock
Exchange.
In fiscal 2014, lively trading activity lifted the value of
settlements by over 30% year on year to ¥1,300 trillion. In

addition to an increase in the amount of issues, this trend
also reflects a growing need for investment in CP.
This huge settlement amount reflects the importanceof CP in the Japanese financial market. JASDEC is willingto continue maintaining a high level of safety in the Bookentry Transfer System for CP, which is a critical role forsecurities settlement infrastructure, while rapidly reflecting
market needs in the system.

Annual Report 2015

27
02 Book-Entry Transfer System for Commercial Paper and Corporate Bonds

The Book-entry Transfer System for Corporate Bonds
operates with security and reliability
At the request of the Study Group to Vitalize the
Corporate Bond Market, which is administered by the Japan
Securities Dealers Association, JASDEC explored ways
to create a framework to ensure the efficient transmissionof information, including issuer-related information, tobondholders in Book-entry Transfer System for Corporate
Bonds. This resulted in the publication of Outline of Bond
Information Transmission Service in January 2015. We will
next establish detailed administrative procedures based on
the Outline in preparation for the introduction of services
before the end of fiscal 2015.
In January 2016, integrated taxation on financial income
and gains will be introduced. JASDEC is making thenecessary preparations, including the disclosure of technicalspecifications, to ensure smooth connection to the new
system.

JASDEC’s Book-entry Transfer System for Corporate
Bonds handles various types of bonds, both through public
offerings and private placements. These include bonds
issued by business companies, municipal bonds, bonds ofspecial corporations, such as quasi-government and local
government bodies, bonds issued by investment firms,
specified bonds issued by special purpose companies(SPCs), Samurai bonds (yen-denominated bonds issued
in the Japanese bond market by foreign governments orentities), J-Sukuk (Islamic financial instruments similar tobonds) and others.
In fiscal 2014, both new records and redemptions werearound the same levels as the previous fiscal year. As of
March 31, 2015, the number of issues being handled was
54,294, a decrease of 1,301 from the end of the previous
fiscal year, and the account balance was ¥1.4 trillion lowerat ¥251.7 trillion. Meanwhile, demand for foreign currency
denominated funding expanded in the previous fiscal year,
and that trend continued in the year ended March 2015. In
particular new issues denominated in U.S. dollars increased.
On a face value basis, the account balance of U.S. dollars
denominated bonds rose by US$2,695 million year on year
to US$6,168 million as of March 31, 2015.
The settlement methods used for new issues,
redemptions and book-entry transfer are “DVP settlement,”
which links corporate bond records by JASDEC withsettlements using the BOJ-NET, and “non-DVP settlement”
for other types of transactions. DVP settlements accounted
for 28% in terms of the number of settlements and 49% ofsettlements on a value basis.

Corporate Bonds account balance andnumber of issues(Trillion yen)
400

(Issues)
75,00067,78860,701

300
250.0

252.4

58,48655,59554,294

253.2

251.7

252.7

●N
 umber of issues(end of FY)■A ccount balance(end of FY)

50,000200
25,000100
0(FY) 2010

2011

2012

2013

2014

0

Participants in Book-entry Transfer System for Corporate Bonds (as of the end of March 2015)
Issuers 2,682*

Issuing/
paying agents

198

JASDECJASDEC
participants(Direct AMIs)

85
Fund settlement corporations 139

Indirect
AMIs

434

Bond holders*Issuers do not include unlisted companies, etc., that issued
private offering bonds only.

Annual Report 2015

28

business overvieW

03

Book-entry
transfer System for
Investment trusts
JASDeC is streamlining the process fortrustors, trustees and beneficiaries, ensuring
security and convenience for a system thatserves virtually all investment trusts in Japan.

Basic Model of Book-entry transfer system for Investment trusts

Flow of funds
Flow of data

Investors(beneficiaries)

private vendor financial network systems/fax

Fund
distributors

Issuers(trustors)(securities companies,
banks,
insurance companies,
etc.)

aMIs

Fund settlement
corporations(BoJ-net Fund
settlement
corporations)

JasDeCBank of Japan
Japanese banks’
payment clearing
network

Annual Report 2015

trustees

Fund settlement
corporations(BoJ-net Fund
settlement
corporations)29
03 Book-Entry Transfer System for Investment Trusts

A faster, safer approach to investment trust administration
The Book-entry Transfer System for Investment Trusts
is a computer system for managing beneficial rights ofinvestment trusts.
The system covers contract-type investment trusts(hereinafter, simply called “investment trusts”), which
involve three parties—a trustor, a trustee, and a beneficiary
who is an investor in the investment trust. (Exchange
Traded Funds (ETFs) and investment trusts of the nontrustor instruction type are outside the scope of thesystem.) Since the system was launched on January 2007,
all trustors and trustees involved in investment trusts haveparticipated in the system, and thus almost all investment
trusts issued in Japan have been dematerialized.
Diverse institutions, including fund distributors,
participate in the Book-entry Transfer System for
Investment Trusts as Account Management Institutions(AMIs), which open accounts at JASDEC to record
Beneficial Interest in Investment Trusts owned by investors.
They consist of not only securities companies, but also
entities such as banks, insurance companies, Shinkinbanks, credit cooperatives, agricultural cooperatives, andinvestment trust management companies engaged indirect marketing. The total number of institutions having
accounts at JASDEC as AMIs or JASDEC participants was
823 as of March 31, 2015.
The Book-entry Transfer System for Investment Trusts
enables direct or indirect connection between trustors,
trustees, AMIs, and JASDEC. This ensures greater
security, accuracy, and speed of processing through theelectronic management of the accounts of investment
trust beneficiaries.

Participants in Book-entry Transfer System for Investment Trusts (as of the end of March 2015)
Issuers 88

Trustees 11

JASDECJASDEC participants 171

BOJ-NET Fund settlement corporations

43

Designated fund distributors 345
Indirect AMIs 652

Indirect AMIs

JASDEC ParticipantsLife and non-life
insurance companies
9 (2%)

Others1 (0%)

Securities companies
68 (10%)Banks
95 (14%)

Investment
trust managementcompanies 3 (0%)

Others7 (4%)

Investment trust
management companies
21 (12%)

Total

652

Financial institutions
for small businesses
11 (6%)Banks
35 (21%)

Annual Report 2015

Total

171

Financial institutions
for small businesses
476 (73%)*Others: Securities agents, securities exchanges, CCPs, call loan dealers, etc.

Life and non-life
insurance companies
5 (3%)

Securities companies
92 (54%)

30
03 Book-Entry Transfer System for Investment Trusts

Strong support from users

Investment trusts account balance andnumber of issues

The total number of investment trusts handled by JASDEC
as of March 31, 2015 was 8,956 issues (a 1,016-issue
increase from March 31, 2014), comprising 5,412
publicly offered and 3,544 privately placed investment
trusts. The number and balance of new trusts recorded(purchases) remained high, reflecting a favorable investment
environment and the introduction of the Nippon Individual
Savings Account (NISA) tax exemption scheme for small
investments in January 2014. Throughout the entire
business year, the account balance increased consistently.
As a result, the outstanding balance as of March 31, 2015
increased ¥17.3 trillion year on year to ¥141.8 trillion,
comprising ¥98.3 trillion in publicly offered and ¥43.4 trillion
in privately placed investment trusts.
Fund settlement systems in the Book-entry Transfer
System for Investment Trusts include DVP settlement (linking
record by JASDEC with settlements using the Bank ofJapan Financial Network System) and non-DVP settlement(using the Japanese Bankers Association’s financial
network system for online fund settlement between financial
institutions). In fiscal 2014, the proportion of settlements
using DVP was 27% by transaction volume and 61% byprincipal value.

(Trillion yen)

8,956

150

8,000
141.8

7,940
6,575
114.9

100

7,112
6,868
115.3
112.5

(Issues)

124.5

6,000
4,000

50
2,000
0

(FY) 2010

2011

2012

2013

0

2014

■P
 urchases■C ancellations(Transactions)
10,0007,634
6,906 6,710
6,293
6,064
5,685

8,000
6,000

8,619
8,119

9,467

9,028

4,000
2,000
0

(FY) 2010

2011

2012

2013

2014

Principal values of investment trusts for purchases andcancellations (Daily average)
479.2

500

Amendments to the Act on Book-Entry of Corporate
Bonds, Shares, etc. in December 2014 resulted in theestablishment of provisions relating to transfer accountbook entries and record procedures pertaining to themerger of investment trusts. We made the necessarychanges to our procedures, including Business Regulations
Relating to Corporate Bonds, etc. We also formulated andpublished administrative rules concerning the treatment oftrust mergers under the Book-entry Transfer System for
Investment Trusts, which stipulate administrative processes
pertaining to the parties to a trust merger.
JASDEC will continue to implement measures thatenhance the user-friendly Book-entry Transfer System for
Investment Trusts, while maintaining the high level of safety
required for settlement infrastructure.

Account balances
are calculated bymultiplying the principal
amounts for eachissue by the number ofaccounts

Purchase and cancellation transactions(Daily average)■P urchases■C ancellations(Billion yen)

Dedicated to ongoing improvement●N umber of issues(end of FY)■A ccount balance(end of FY)

400
300

311.0

289.6
288.5 282.5

487.3
439.1

412.6

341.5 326.7

200
100

Annual Report 2015

0(FY) 2010

2011

2012

2013

2014

31

business overvieW

04

DVp
Settlement System
for netDs
JASDeC has combined delivery and payment
into a single, smooth reciprocal system,
reducing risk and raising convenience forparticipants on both sides of the trade.

Reducing principal risk by using the DVP settlement method

Delivery of securities
Transfer of securities and payment carried out separately

seller

Buyer

Payment of settlement amountuse of DVP settlement

Account delivery through JASDEC
seller’s
account

Securities
data

account of JasDeC
DVP Clearing Corp.

Stocks data transfer and payments are linked on

Securities
data

Buyer’s
account

the system, enabling secure and reliable settlement

Provision/receipt of funds through current accounts at the Bank of Japanseller’s
account

Funding dataaccount of JasDeC
DVP Clearing Corp.

DVP system is a system that links the delivery of stocks with payments, enabling secure settlement.

Annual Report 2015

Funding data

Buyer’s
account

32
04 DVP Settlement System for NETDs

Providing safe,
secure securities transactions
The Non-Exchange Transaction Deliveries (NETDs) referto Book-entry Transfers for Stocks, etc., carried out by
JASDEC for non-exchange transactions, and the majorityof them consist of such trades of domestic and overseas
institutional investors buying and selling Japanese stocks,
etc., through the DVP settlement system for NETDs.
Previously, the delivery of the securities and thepayment of the settlement amounts for non-exchangetransactions have mostly been processed separately, so
the transactions have been exposed to the risk (principalrisk) that settlement payments may not be made eventhough the securities have been delivered. The use of the
DVP settlement system for NETDs links the delivery of the
securities and the payment of the settlement amounts
through the system, diminishing the risk and making
it possible for securities settlements to be conductedsafely and reliably. To further support reliability, the entire
administrative process is handled automatically andelectronically using Straight Through Processing (STP).
Since May 2004, the DVP settlement system for
NETDs has been administered by JASDEC’s wholly
owned subsidiary, JASDEC DVP Clearing Corporation(JDCC). JASDEC participants applying to make use of
the system are examined for their suitability in terms offinancial condition, organizational structure, and other suchfactors before receiving authorization from JDCC. In orderto ensure stringent risk management of all participants,
JDCC secures collateral in advance, comprising assets(assurance assets) with the appraisal value that exceeds
the net debit (total payables – total receivables) of eachparticipant, and sets an upper limit to the value of theliabilities payable (the net debit cap) in proportion to the
trading status of each participant. Settlement within
the DVP settlement system for NETDs is conducted inaccordance with the so-called “Gross-Net DVP model”
system by which securities pass through the JDCC
account within JASDEC and the transfer of the securities
from the seller’s into the buyer’s account is conducted
separately for each transaction (gross). Meanwhile, thesettlement amounts pass through the JDCC’s accountwithin the BOJ-NET funds transfer system, and settlement
is concluded by the appropriate net calculated amount offunds being paid on each settlement date (net).
The DVP settlement system for NETDs mainly deals
with securities handled by JASDEC through its Bookentry Transfer System for Stocks, etc., such as sharesand bonds with share options, etc. In January 2014,
we commenced DVP settlements for stock lendingtransactions.

DVP settlement for NETD transactions(Daily average)(Transactions)
160,000
56,18652,591
48,537

114,555
98,68983,29982,52280,23540,000

Annual Report 20150■N
 on-DVP
transactions■D VP transactions

45,570120,000
80,00046,899(FY) 2010

2011

2012

2013

2014

DVP transactions are
the number of transfers
executed (transfer from
DVP participants to
JASDEC DVP Clearing
Corporation)

33
04 DVP Settlement System for NETDs

As of the end of March 2015, 54 companies(comprising 12 banks and 42 securities companies) wereparticipants in the DVP settlement system for NETDs.
Excluding internal transfers within the same company,
DVP transactions accounted for about 70% of NETD
transactions—evidence that use of the system has
become firmly established as an important customer-side
settlement method.
In fiscal 2014, the usage of DVP settlements continued
to increase. Considering this situation, we refunded
settlement fees according to each participant’s usage level
between April 2014 and February 2015. Total refunds infiscal 2014 amounted to ¥ 277 million.

DVP settlement for NETD fund settlement(Daily average)(Billion yen)

(%)

2,000
12.2

11.9

1,500
1,000

12.7

12.2

844.2

15

1,687.4

1,498.5
963.7

12.8

10

876.2

■ Total payments■ Total value of net
settlement payments● Rate of reduction(Total value of net
settlement payments/
Total payments
× 100)

5
500
118.0
0

(FY) 2010

100.1
2011

111.3
2012

183.5
2013

216.8
2014

0

Securities covered: Stocks, bonds with share options (convertible bonds), ETFs, REITs, share options(share subscription warrants), foreign stocks, etc.
Total payments is the total amount used for execution of securities transfers.
Total value of net settlement payments is the total amount used for a net transaction basis.

Annual Report 2015

34

business overvieW

05

pre-Settlement
Matching System(pSMS)In January 2014, JASDeC launchedbrand new services in pSMS for further
enhancement of Stp, including introduction of
the ISo 20022 standard and SWIFtnet.

PsMs for non-residents’ transactions
Overseas
Order

Investment
managers

securities
companies

Notice of execution
Allocation, matching

Settlement instruction

globalcustodiansJapan

Settlement
instruction

Settlement instruction

Settlement
instruction

subcustodians

Notice ofmatching status

Pre-settlement
Matching system*

Settlement
instruction
Notice ofmatching status

Request for DVP transfer

linkage with book-entry transfer systems for stocks, etc., corporate bonds and Cp(excluding Japanese government bonds)* From January 2014, onward, “Tolerance Matching” function is available.

Annual Report 2015

Notice ofexecution

Order

securities
companies
Notice ofexecution

Order

stock
exchanges

35
05 Pre-Settlement Matching System (PSMS)

Pre-Settlement Matching System (PSMS)—
for smooth and secure matching infrastructure in the Japanese securities market
It is crucial for financial institutions to smoothly andsecurely complete the settlement of a huge number oftransactions. While our Book-entry Transfer Systems(BETS) realize secure settlement, PSMS realizes smoothsettlement on top of that.
Since the launch of PSMS in September 2001,
JASDEC has promoted Straight Through Processing(STP) in Japanese securities market, by matching thetrade and settlement information for institutional investors,
and others. PSMS has three basic attributes below, as abridge between trades and settlements.
1. Rapid post-trade process
2. Automatic data linkage to Central Counterparty(CCP) and BETS for Delivery Versus Payment (DVP)
settlement
3. Globally standardized protocol suitable to both
domestic and non-resident transactions

Following the booming stock market in Japan, in
fiscal 2014, the number of input/output transactions of
PSMS significantly increased to 1,766 thousand on a daily
average. Furthermore, 681 users are utilizing PSMS as a
primary matching infrastructure in the Japanese market.

Total number of PSMS input/output instructions
using the PSMS system (Daily average)(Thousand)
2,000

1,766
1,577

1,500

1,315

1,360

1,353

(FY) 2010

2011

2012

1,000
500
0

2013

2014

More Standardized Communication—
ISO 20022 and SWIFT Network
With non-residents now accounting for more than half ofthe stock transactions, it is important to provide smoothcommunication to the Japanese market from overseas.
As one of the first major adoptors in the world, JASDEC
leveraged the ISO 20022, the new international standard
for financial messaging, in its system. JASDEC now
supports system connectivity via SWIFT network as well.
The adoption of ISO 20022 will not only improvesystem connectivity, but will also help to enhanceharmonization with worldwide and Japanese market

practices. JASDEC has been actively participating inmarket practice groups like the global Securities Market
Practice Group (SMPG), as well as ISO 20022 Securities
SEG.
All JASDEC participants are required to migrate fromthe old message format to the ISO 20022-based format
by the end of 2018. As of March 31, 2015, 51 companies
out of total of 172 had completed the migration to the ISO
20022-based format.

Annual Report 2015

36
05 Pre-Settlement Matching System (PSMS)

Further actions for ongoing progressquite large. JASDEC believes a shorter settlement cycle
would contribute to reduction of settlement risk as a direct
effect, as well as improvement in market liquidity andenhancement in competitiveness among overseas markets
as an indirect effect.
JASDEC is currently making system preparations
to start T+1 settlements (T+0 settlements for GC repo
transactions) for outright transactions in JGB from 2017
onward. System implementation includes revision of
trade matching functions, linking matched trade data to
Japan Securities Clearing Corporation (JSCC), and the
distribution of JSCC notices to PSMS users.

JASDEC has been continuously working on initiatives thatwill contribute to further efficiency improvements in theJapanese securities market. In November 2015, the Japan
Securities Dealers Association (JSDA) plans to enforcea system that will disclose trade information of specificcorporate bond transactions, aiming at revitalization in
the Japanese bond market. JASDEC cooperates on the
project by making use of transaction data of corporate
bonds sent to PSMS.
With market participants, JASDEC also takes partin the discussion on shortening the settlement cycle forJapanese Government Bonds (JGB). The balance of JGB
has tended to rise over the years, and the market is now

PSMS for domestic stock transactions (Centralized matching for three parties)

Stock exchanges
Notice of execution

Investment trust
management/
investment
advisory
companies

Order

Order
Notice of execution
Allocation

Pre-Settlement
Matching System (PSMS)
Investment instruction
Investment instruction andtrade report

Trade matching

Trade report

Trade report affirmation

Trust banks

SSI

Settlement
matching
Request for DVP transfer*

Linkage with book-entry transfer systems for stocks, etc., corporate bonds and CP(excluding Japanese government bonds)* From January 2014 on, DVP settlement for Stock Lending and Borrowing (SLB) transactions is available.

Annual Report 2015

Securities
companies

37

business overvieW

06

Custody Services
for Foreign Stock
Certificates, etc.
Making it easier for Japanese investors toinvest in foreign companies by handling thecomplicated procedures involved in transfers,
dividend payments and taxation.

Overview of the system relating to foreign stocks

Share-handling service agents (trust banks)

notice ofbeneficial
shareholders

overseas CSDs
Japan Securities Clearing Corporation

Stockexchange
DVp

Dividend
information

Shareholder notice host

Account transfer host(handling of information concerning beneficial
shareholders, dividends, etc.)

Collateralmatching

Beneficial
shareholder
reportDividend
information

Custodian banks

notice ofbalance(settlement)

non-DVptransfer
for netD

DVp transfer
for netD

AMIs (Securities companies and banks)

Beneficial shareholders of foreign stock certificates, etc.

Annual Report 2015

local
custody/transfer

Communication
server with foreign
CSDs/banks

38
06 Custody Services for Foreign Stock Certificates, etc.

Safe and secure settlement infrastructure andservices for listed foreign securities
In May 2006, JASDEC commenced services to process
deposits, transfers, and corporate actions for foreign stock
certificates, etc., listed on Japanese stock exchanges.
Although foreign stock certificates, etc., are generally
deposited with CSDs or custodians in the same countries
as the issuing companies, settlements of transactions at
Japanese stock exchanges are conducted through bookentry transfers in JASDEC.
JASDEC entrusts dividend payments to relevant
share-handling service agents and dividend-paying banks.
Information on beneficial shareholders at the dividend
record date is transferred from the JASDEC participants tothe share-handling service agents through JASDEC.
Based on this information, the share-handling service
agents calculate the amount of dividends, which arethen paid directly to the beneficial shareholders from thedividend-paying banks.

Foreign stocks, etc. account balance andnumber of issues (excluding foreign covered warrants)(Thousand shares)(Issues)

150,000

50
41

120,000
90,00089,90538

37

88,93086,57739
92,422■ Account balance● Number of issues

JASDEC also undertakes the necessary procedures
regarding dividend taxation for local tax authorities andother such entities, for tax relief under tax treaties withthe countries concerned. Beneficial shareholders canalso exercise their voting rights at general meetings ofshareholders through instructions issued to JASDEC.
JASDEC therefore provides the infrastructure andservices necessary for reliable settlement of trading
activities in foreign stock certificates, etc., smooth exerciseof shareholder rights, and error-free receipt of dividends
and other payments.

Number of sharesdeposited/withdrawn

118,585
115,478

39

40
105,96430■N umber of sharesdeposited■N umber of shares
withdrawn(Thousand shares)
150,000
131,801

100,000
71,16760,00020

30,000100(FY) 2010

2011

2012

2013

2014

59,72750,00041,84015,6500

0Annual Report 2015

(FY) 2010

2011

2012

22,62816,8632013

28,3062014

39
06 Custody Services for Foreign Stock Certificates, etc.

Service improvements forbeneficial shareholders and participants
As a part of the revision of service, we introduced a newcustodial fee structure in October 2014. Specifically,in order to ensure that custodial fees can be levied
appropriately according to the price level for each issue,
we have amended the custodial fee structure for thoseissues of which the trading unit was not determined based
upon the price level when such issues were newly listed.
We also took appropriate steps in response tochanges in the QI withholding tax system relating to U.S.
shares, etc., as a result of the enforcement of the U.S.
Foreign Tax Compliance Act (FATCA) from July 1, 2014.
For example, we modified our format between JASDEC
and JASDEC participants for tax relief of dividends on U.S.
shares, etc.
In addition, JASDEC worked to improve services forbeneficial shareholders and participants, including a study
concerning the handling of listed products from various

countries that are likely to be listed on Japanese stock
exchanges.
At present, there are four types of foreign securities
that are handled by JASDEC, such as, foreign stocks,
foreign investment trust beneficiary certificates, etc.,
foreign investment securities, etc., and depository receipts
of foreign stocks. As of March 31, 2015, the total number
of issues handled by JASDEC was 39.

Book-entry
transfers■ Non-exchangetransaction deliveries■ Exchangetransaction transfers(Thousand shares)
400,000
300,000
200,000

365,437
302,746
258,701

163,944
133,511

100,0000(FY) 2010

242,710

236,159

158,5732011

116,370

115,001

2012

2013

2014

Annual Report 2015