Business
Overview
01

Custody Services for
Foreign Stock Certificates, etc.
¥152 million
Pre-settlement Matching System (PSMS)

Book-Entry
Transfer System
for Stocks, etc.
P16

¥1,322 million
DVP Settlement System for NETDs

02

Book-Entry Transfer
System for Commercial
Paper andCorporate Bonds P20

03

Book-Entry
Transfer System for
Investment Trusts

P24

04

DVP Settlement
System for NETDs¥511 million

Revenues by
Operation
Year ended March 31, 2013

Book-entry Transfer forCommercial Paper



P27

Pre-Settlement
Matching System(PSMS)


P30

Custody Services
for Foreign Stock
Certificates, etc.
P33¥463 million

05

Book-entry Transfer System for
Corporate Bonds¥1,212 million
Book-entry Transfer System for
Investment Trusts

06¥1,055 million
Book-entry Transfer System
for Stocks, etc.
¥12,602 million

Business Overview

01

Book-Entry
Transfer System
for Stocks, etc.
Ongoing enhancements to this allelectronic record system are bringing
greater convenience, speed, andflexibility to stock ownership transfers.

16
Annual Report 2013

The Book-Entry Transfer System for Stocks, etc.

Issuing company
Shareholder registry
General Shareholders
Notification

JASDEC
Transfer
Account
Book

Book-entry transfer

Direct AccountManagement Institution

Transfer
Account
Book

Direct AccountManagement Institution(securities companies, banks, etc.)(securities companies, banks, etc.)

Indirect AccountManagement Institution(securities companies, banks, etc.)

Participants(shareholders)Participants(shareholders)Participants(shareholders)01 Book-Entry Transfer System for Stocks, etc.

The Book-entry Transfer System for
Stocks, etc., has been operating smoothly
As of March 2013 the total number of issues handled
was 3,753, including 3,561 share issues, 16 bonds withshare options, 8 share options, 41 investment units,
one preferred share issue, 106 ETFs, and 20 JDRs.
The number of companies participating in the bookentry transfer system, including JASDEC participants,
indirect AMIs, and fund settlement corporations, etc.,
was 383, including 58 foreign financial institutions as
indirect AMIs.

The dematerialized Book-entry Transfer System for
Stocks, etc., launched in January 2009 has been
operating smoothly. The system is based on electronic
records registered and managed by computer systems
within accounts opened at JASDEC or AccountManagement Institutions (AMIs) such as securities
companies and banks. Instead of stock certificates,
these computer records represent share ownership.
Transfer of shareholders’ rights is also processed
electronically based on the records in the accounts.
This dematerialization system applies not only to stock
certificates, but also to bonds with share options, shareoptions, investment units of Real Estate Investment
Trusts (REIT), preferred equity investment of financial
institutions established by cooperative associations,Exchange Traded Funds (ETFs), Japanese Depositary
Receipts (JDRs, etc.), and other negotiable securities.

17
Annual Report 2013

JASDEC participants and indirect AMIs (as of March 31, 2013)
JASDEC participants by category
Securities financecompanies
3 (2%)

Indirect AMIs by category

Banks, etc.
17 (17%)

Total

Total

101

189

Life & non-life
insurancecompanies
1 (1%)
Banks, etc.
20 (10%)companies

companies
Securities
companies, etc.
154 (81%)

Foreign indirect
AMIs
58 (57%)

Securities
companies, etc.
26 (26%)Book-entry
transfers

Book-entry
transfers■ Stock-exchangetransfers(Billion shares)
400

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%)

369.0(Billion shares)
1,500

345.1

321.0

718.0

695.1

333.7

797.2
669.4

300

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

1,000
200
500
100

0

308.5

670.1

677.4

652.5

656.8

84.4

(FY) 2008

2009

2010

2011

2012

*Figures include the
Depository and Bookentry Transfer System
for Stock Certificates.

0

175.7
(FY) 2008

2009

2010

2011

2012

*Figures include the
Depository and Bookentry Transfer System
for Stock Certificates.

Ongoing enhancements
to increase user convenience18
Annual Report 2013

JASDEC has organized three subcommittees to
examine further improvement of the book-entry
transfer system: the Subcommittee for Stocks, theSubcommittee for Bonds with Share Options, andthe Subcommittee for ETFs. These committees havepromoted a number of initiatives.
In April 2012, to increase efficiency and facilitateprocedures for commitment type rights offerings, wedeveloped a system to enable uninterrupted handlingof share options under the book-entry transfer system
until commitment securities companies finish exercising
share options. With the previous system, handling ofthese share options was closed on the day the issuing
company acquired all unexercised share options basedon the call provisions. For this reason, it was necessary
to handle both the subsequent transfer of the shareoptions from the issuing company to commitment
securities companies and the exercising of the share

Bond with share option account balance andnumber of issues

Stock account balance andnumber of issues(Billion shares)(Issues)

420

418.6

412.9

406.8

404.6

394.8
3,839

380

340

■ Balance in custody(end of FY)● Number of issues(end of FY)

2009

2010

3,581

3,600
3,561

2011

2012

(Million accounts)

2,100

0

2,339

1,400

111

1,873

66

■ Account unit balance(end of FY)● Number of issues(end of FY)

105

77

70

35

0

0

2009

2010

70
1,154.5

1,211.5

1,168.1

2011

2012

*Figures include the
Depository and Bookentry Transfer System
for Stock Certificates.

0

60

43

40
499.6
16

(FY) 20082009■B alance in custody(end of FY)●N umber of issues(end of FY)

959.7

400

93

700

(FY) 2008

8027*Figures include the
Depository and Bookentry Transfer System
for Stock Certificates.

(Issues)
2,791
140
126

2,563
2,306

(Issues)

800

Exchange Traded Fund (ETF) etc., account balance andnumber of issues
2,800

1,600

1,200

3,400

(FY) 2008(Billion yen)

50

300

0

4,000

3,800

3,727
3,640

options by the securities companies outside the bookentry transfer system.
In February 2013, to increase efficiency and reliability
for users holding and exercising unlisted bonds withshare options and share options, we developed asystem to handle all unlisted bonds with share options
and share options issued by listed companies underthe book-entry transfer system, in the same way listed
securities are handled. Among the unlisted bonds
with share options and share options issued by listedcompanies, only those which were allocated to financial
institutions were previously handled through the bookentry transfer system.
These new measures have enhanced convenienceand safety for users. We will continue our efforts tocommunicate effectively with relevant parties, aiming toensure stable operation while meeting the needs of themarket for convenience and user-friendliness.

2010

2011

2012

20

0

*Figures include the
Depository and Bookentry Transfer System
for Stock Certificates.

01 Book-Entry Transfer System for Stocks, etc.

General shareholder
notifications

Number of issues andtotal shareholders■ General shareholder
notifications(Notifications, in billion)
1,000

1,001.1

946.3

972.8

(Thousand shares)
150,000

947.3

800

(Issues)
127,240

90,000

400
200
20.8

0

(FY) 2008

2009

2010

2011

2012

*Figures are as of
day of notification toissuers.
*FY2008 represents
figures between
January and March
2009.

Individual shareholder
notifications(Issues)

2,800

2,697

2,656

2,428

2,100

8,597

412

1,400

700

■ Number of notices● Number of issues

800

401

3,000
4,094

551

(FY) 2008

600

13,500

400

9,000

2011

0

2012

3,069

3,000

0

(FY) 2008■ (Total record) notifications■ (Partial record) notifications

2,500
2,000

1,857
1,589
1,155

1,000

0

131 45(FY) 2008

356
2009

477

2010

375
2011

521

2012

*Requests for information (total record) refer to requests fordata recorded on book-entry transfer registries of either
JASDEC participants (direct AMIs) or indirect 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.
*FY2008 represents figures between January and March
2009.

Information requests(Number of issues)(Issues)482

500● (Total record) number of issues● (Partial record) number of issues

400
314
300

302

212
200
79

87

77

2009

2010

2011

27
16
(FY) 2008

2011

2012

0

*Figures are as of
day of notification toissuers.
*FY2008 represents
figures between
January and March
2009.

57
2012

■N
 umber ofshareholders
16,287

16,45916,727

17,063*Requests for information (total record) refer to requests fordata recorded on book-entry transfer registries of either
JASDEC participants (direct AMIs) or indirect 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.
*FY2008 represents figures between January and March
2009.

2009

2010

2011

2012

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

19
Annual Report 20132010

(Notifications)

500

2010

4,500
*FY2008 represents
figures between
January and March
2009.

Information requests(Notifications)

1,500

2009

(Thousand notifications)

14,93572
2009

30,000
0

9,000
6,000

18,000200359(FY) 2008

8,723

60,000

720

1,958
448

0

8,888

Number of shareholders(Data for shareholder notifications)(Notifications)100

125,694
12,0009,260

015,000129,619 127,292

120,000

600●N umber of issues●T otal shareholders

Business Overview

02

Book-Entry
Transfer System forCommercial Paper andCorporate Bonds
JASDEC is maintaining the security of CP
and corporate bond electronic book-entry
transfer system whose daily settlement value
typically surpasses the trading value per day
at the Tokyo Stock Exchange.

20
Annual Report 2013

Flowchart for Book-Entry Transfer for CP/Corporate Bonds (DVP)① TradeSeller
② Trade matching③	Notice of settlement
matching status

Settlement
parties

Buyer

JASDEC④	Notice of settlement status(Awaiting fund settlement)

Affirmation
Settlement matching
Pre-Settlement
Matching System

Securities transfer② Trade matching③	Notice of settlement
matching status④	Notice of settlement status(Awaiting fund settlement)

Settlement
partiesBook-entry Transfer
System for
CP/Corporate Bonds⑨	Notice of transfer
completion⑨	Notice of transfer
completion⑧ Notice of receipt completion

Fund
settlement
corporation⑧ Notice of receipt completion⑤ Payment instruction

Bank of Japan⑥ Payment request⑦ Payment instruction

Fund
settlement
corporation

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 Account Management Institutions(AMIs) to address the diverse needs of participating
investors and financial institutions. For example, direct
AMIs can open an account directly at JASDEC andindirect participation is possible by opening an accountat a direct AMI. Another option for indirect participationis through the opening of an account at an indirect AMI.
Principal and interest payments to bondholders are
made in accordance with the multilayered structure,
where AMIs receive payments from paying agents ortheir upper AMIs 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 launchof the Book-entry Transfer System for Corporate Bonds
in January 2006. In each system, custody procedures—issuance, transfer (trading), and redemption—are
conducted based on the balance electronically recordedin the transfer account books. In addition, all transactions
related to issuance, transfer, and redemption of CP
and corporate bonds can be processed by the DVP
settlement link with the Bank of Japan Financial Network
System. By linking the book-entry transfer system with
its PSMS (Pre-Settlement Matching System; see page30), JASDEC has realized Straight Through Processing(STP), which fully automates the entire process, including
trade matching and fund/securities settlement.

21
Annual Report 2013

Participants in Book-Entry Transfer System for CP (as of the end of March 2013)
Issuers 494

Issuing/
paying agents

20

JASDECJASDEC
Participants(Direct AMIs)

67

Fund settlement corporations 142

Indirect
AMIs

45

CP holders

A decade of CP
transaction efficiency

22

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
notes in physical form, there were always somerisks of theft or loss when notes were transferred ordeposited, as well as costs of a documentary stamp
tax upon transfers. To eliminate such risks and costs,
the fully electronic book-entry transfer system fordematerialized CP was launched in 2003. Ten years
after the launch, almost all CP issued in Japan ishandled by this system.
During fiscal 2012 (to March 31, 2013), our accountbalance held at around ¥16 trillion on average, thesame level as throughout most of fiscal 2011, mainly
as a result of recovery in issuance by corporate entities

Annual Report 2013

CP account balance (nominal value) andnumber of issues(Trillion yen)
5,869
25
20

18.7

(Issues)
6,000
4,730

14.1

15

4,392
14.0

3,926
13.6

2010

2011

■R
 edemptions■T ransfers■ Issuance(Trillion yen)
6.0
0.5
4.3

0.4
4.2

4.0

13.7

2,000

2009

● Number of issues(end of FY)■ Account balance(end of FY)

4,000

5

(FY) 2008

Issuance, transfer andredemption of CP (daily average)

4,447

10

0

in general following the Great East Japan Earthquake,
despite a decrease in issuance by financial institutions
and electric power and gas companies. However,as of March 31, 2013, the total account balance
had significantly declined to ¥13,760 billion (a ¥145
billion increase from the end of FY2011) because of
a combination of seasonal factors at the fiscal yearend. The number of issues stood at 3,926 issues (a 521
issues decrease from the end of FY2011).

2012

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

0.5

0.4
2012

2.0

0

0.5
(FY) 2008

0.4
2009

0.4
2010

2011

Continually adapting to
CP market needs
The settlement amount of issuance, transfer, andredemption of CP handled by JASDEC’s bookentry transfer system averages ¥5 trillion per day. In
combination with month-end settlements of morethan ¥10 trillion, this means that JASDEC settlements
surpassed the daily trading value at the Tokyo Stock
Exchange. In fiscal 2012, the annual aggregate
settlement amount surpassed ¥1,000 trillion, marking

active trading at the highest level since fiscal 2009.
This huge settlement amount reflects the importanceof CP, which accounts for the bulk of fundraising by
business entities in Japan. JASDEC is willing to continue
its practice of maintaining a high level of safety in thebook-entry transfer system of CP, a matter of criticalimportance for securities settlement infrastructure, while
rapidly reflecting market needs in the system.

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

Expansion of bond types
handled by JASDEC
Nevertheless, a slowdown in redemptions contributed
to a nominal account balance of ¥256.1 trillion reachedon December 19, 2012, the highest since the start ofthe system. As of March 31, 2013, the number of bonds
eligible in the system was 58,486 issues (a 2,215 issues
decline from the end of FY2011), and the nominal
account balance stood at ¥252.7 trillion (a ¥0.3 trillion
increase from the end of FY2011).
In January 2013, a special reconstruction income
tax was instituted accompanying the promulgation of
the Act on Special Measures for Securing Financial
Resources Necessary to Implement Measures for
Reconstruction Following the Great East Japan
Earthquake. In order to respond this taxation, we
implemented the required system arrangement
concerning principal and interest processing.

Outstanding balance of corporate bonds andnumber of issues(Trillion yen)
73,298400(Issues)
71,20275,00067,78860,701

300
240.2

245.5

250.0

252.4

58,486252.7●N umber of issues(end of FY)■O utstanding balance(end of FY)

50,000200
25,000100

0(FY) 2008

2009

2010

2011

2012

0

Participants in Book-Entry Transfer System for Corporate Bonds (as of the end of March 2013)
Issuers 2,613*

Issuing/
paying agents

203

JASDECJASDEC
Participants(Direct AMIs)

86

Fund settlement corporations 142

Indirect
AMIs

435

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

23
Annual Report 2013

JASDEC’s Book-entry Transfer System for Corporate
Bonds handles various types of bonds, both throughpublic offerings and private placements. These include
bonds issued by corporate entities, municipal bonds,
bonds issued by investment firms, specified bonds
issued by special purpose companies (SPCs), bondsof special corporations, such as quasi-government andlocal government bodies, and Samurai bonds (yendenominated bonds issued in the Japanese bond market
by foreign governments or entities) and others. In fiscal
2012, based on the special purpose trust beneficiaryrights structure, we included J-Sukuk (Islamic financial
instruments similar to bonds) in the eligible bonds.
Fiscal 2012 marked the issuance of the first
corporate bonds of a mutual company under the
Insurance Business Act since the start of the system.
Also, the type of bonds issued has expanded toinclude, for instance, corporate bonds denominated in
Hong Kong dollars.
Furthermore, in the FY2013 Tax Reform, thecorporate bond income tax exemption scheme wasmade permanent, with partial exceptions. This improved
the environment for investment in Japanese corporate
bonds and other instruments by foreign investors.
The amount of new issues in fiscal 2012 wasequivalent to the amount in fiscal 2011, which wasdepressed by the effects of the Great East Japan
Earthquake and European sovereign debt crisis.

Business Overview

03

Book-Entry
Transfer System for
Investment Trusts
JASDEC is streamlining the process
for trustors, trustees and beneficiaries,
ensuring security and convenience
for a system that serves virtually all
investment trusts in Japan.

24
Annual Report 2013

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

Trustees

Fund settlement
corporations(BOJ-NET Fund
settlement
corporations)

03 Book-Entry Transfer System for Investment Trusts

A faster, safer approach toinvestment 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 abeneficiary who is an investor in the investment trust.
(Exchange Traded Funds (ETFs) and investment trustsof the non-trustor instruction type are outside the scopeof the system.) Since the system was launched on
January 4, 2007, all trustors and trustees involved ininvestment trusts have participated in the system, andthus almost all investment trusts issued in Japan havebeen dematerialized.
In the Book-entry Transfer System for Investment
Trusts, the Account Management Institutions (AMIs)

and JASDEC participants are diverse, consisting of
not only securities companies, but also entities suchas banks, insurance companies, Shinkin banks, credit
cooperatives, agricultural cooperatives, and investment
trust management companies engaged in direct
marketing. The total number of AMIs and JASDEC
participants was 852 companies as of March 31, 2013.
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.
25
Annual Report 2013

Participants in Book-Entry Transfer System for Investment Trusts (as of March 31, 2013)
Issuers 85

Trustees 10

JASDECJASDEC Participants 175

BOJ-NET Fund settlement corporations

Designated fund distributors 350

45

Indirect AMIs 677

Indirect AMIs

JASDEC ParticipantsLife and non-life
insurance companies
11 (2%)

Others1 (0%)

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

Investment
trust managementcompanies 3 (0%)

Others8 (5%)

Investment trust
management companies
19 (11%)

Total

677

Financial institutions
for small businesses
10 (6%)

Total

175

Financial institutions
for small businesses
499 (73%)Banks
37 (21%)*Others: Securities agents, securities exchanges, CCPs, call loan dealers, etc.

Life and non-life
insurance companies
6 (3%)

Securities companies
95 (54%)

03 Book-Entry Transfer System for Investment Trusts

Strong support from users

26
Annual Report 2013

The total number of investment trusts handled by
JASDEC as of March 31, 2013 was 7,112 issues (a244-issue increase from the end of FY2011), comprising
4,336 publicly offered and 2,776 privately placed
investment trusts. The transaction volume undertaken
for both new registrations (purchases) and deletions(cancellations and redemptions) achieved record highs.
In terms of the transaction value on a principal value
basis, which subsequently remained at low levels
during the year 2012, improvement in the investment
environment early in 2013 resulted in the highest levelof new registrations and deletions in five years, withthe principal value of new registrations above that ofdeletions.
As a result, the outstanding balance at the end of fiscal
2012 had increased ¥2.8 trillion year on year to ¥115.3
trillion, comprising ¥83.3 trillion in publicly offered and ¥31.9
trillion in privately placed investment trusts.
Fund settlement systems in the Book-entry Transfer
System for Investment Trusts include DVP settlement(using the Bank of Japan Financial Network System)and non-DVP settlement (using the Japanese Bankers
Association’s financial network system for online fundsettlement between financial institutions). The use of
DVP settlement, which involves lower settlement risk,has been increasing steadily among system users. In
fiscal 2012, the proportion of settlements using DVP was
26% by transaction volume and 62% by principal value.

Book-entry transfer of investment trusts—account balance and number of issues(Trillion yen)

(Issues)

150
5,906
105.5

100

6,297
110.2

6,575

7,112

6,868

114.9

112.5

115.3

8,000

6,000

4,000
50
2,000
0

(FY) 2008

2009

2010

2011

2012

0

(Transactions)
7,634
6,906 6,710
6,293
6,064
5,417 5,685
5,127 5,118
4,769

8,000

6,000

■P
 urchases■C ancellations/
Redemptions

4,000

2,000

0

(FY) 2008

2009

2010

2011

2012

Principal values of investment trusts for purchases andcancellations/redemptions (Daily average)■P urchases■R edemptions(Billion yen)
400

300

341.5
326.7
289.6
311.0
301.9
288.5 282.5
280.0
260.3 259.3

2000

In fiscal 2012, as in fiscal 2011, we developed operating
rules regarding the system change, which will simplify
the transaction procedures for fund distributors. In
fiscal 2013, we plan to announce and implement these
operating rules. JASDEC will continue to implement
measures that enhance 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/redemption transactions(Daily average)

100

Dedicated toongoing improvement●N umber of issues(end of FY)■A ccount balance(end of FY)(FY) 2008

2009

2010

2011

2012

Business Overview

04

DVP
Settlement System
for NETDs
JASDEC has combined delivery andpayment into a single, smooth reciprocalsystem, reducing risk and raisingconvenience for participants on bothsides of the trade.
27
Annual Report 2013

Reducing Principal Risk by Using the DVP Settlement Method

Delivery of securities

Seller

Buyer

Transfer of securities and payment carried out separately
Payment of settlement amount

Use 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 Japan
Seller’s
account

Funding data

Account of JASDEC
DVP Clearing Corp.

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

Funding data

Buyer’s
account

Providing safe,
secure securities transactions

28
Annual Report 2013

The Non-Exchange Transaction Deliveries (NETDs)
refer to Book-entry Transfers for Stocks, etc., carriedout by JASDEC for non-exchange transactions, andthe majority of them consist of such trades of domestic
and overseas institutional investors buying and sellingJapanese 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(principal risk) that settlement payments may not bemade even though the securities have been delivered.
The use of the DVP settlement system for NETDs links
the delivery of the securities and the payment of thesettlement amounts through the system, diminishing
the risk and making it possible for securities settlements
to be conducted safely and reliably. To further support
reliability, the entire administrative process is handled
automatically and electronically using Straight ThroughProcessing (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 othersuch factors before receiving authorization from JDCC.

DVP settlement for NETD transactions(Daily average)■ Non-DVP
transactions■ DVP transactions(Transactions)
200,000

100,41159,374150,000

100,000

96,301

56,186

48,53745,57084,883

83,29982,52280,235

2009

2010

2011

2012

50,0000(FY) 2008

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

In order to 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 each participant, and sets an upper limit
to the value of the liabilities payable (the net debit cap)
in proportion to the trading status of each participant.
Settlement within the DVP settlement system for
NETDs is conducted in accordance with the so-called“Gross - Net DVP model” system by which securities
pass through the JDCC account within JASDEC andthe transfer of the securities from the seller’s into thebuyer’s account is conducted separately for eachtransaction (gross). Meanwhile, the settlement amounts
pass through the JDCC’s account within the BOJ-NET
funds transfer system, and settlement is concluded by
the appropriate net calculated amount of funds being
paid on each settlement date (net).

04 DVP Settlement System for NETDs

Establishing key settlement procedureson the customer side
The DVP settlement system for NETDs mainly deals withsecurities handled by JASDEC through its Book-entry
Transfer System for Stocks, etc., such as shares andbonds with share options, etc.
As of the end of March 2013, 52 companies(comprising 12 banks and 40 securities companies) wereparticipants in the DVP settlement system for NETDs.
Excluding internal transfers within the same company,
DVP transactions accounted for more than 60% of
NETD transactions—evidence that use of the system has

become firmly established as an important customerside settlement method.
JDCC’s basic policy is to provide cost-effective
services to users, and in April 2012, we lowered the DVP
settlement fee per transaction by ¥3 to ¥17. Also, in
consideration of steady growth in the use of the system,
we refunded ¥8 of the ¥17 DVP settlement fee pertransaction for the period from April 2012 to February
2013 in accordance with the participant’s usage level.

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

(%)

1,500

15

1,294.7

12.2

1,000

948.5

963.7

11.9

844.2

12.7

876.2

500

5
166.3

0

10

(FY) 2008

116.6
2009

118.0
2010

100.1
2011

111.3
2012

0

Securities covered: Stocks, bonds with share options(convertible bonds), ETFs, REITs, share options (sharesubscription 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 amountused for account settlement on a net transaction basis.

Reducing settlement risks forstock lending transactions
The Financial Services Agency identified a number ofurgent measures needed to strengthen the clearing
and settlement system for stock lending transactionsin “Development of Institutional Frameworks Pertaining
to Financial and Capital Markets,” published in
January 2010.

Based on this information, we are currently
preparing for the introduction of DVP settlements inJanuary 2014 with the aim of reducing settlement risks
for stock lending transactions.

29
Annual Report 2013

12.3

12.8

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

Business Overview

05

Pre-Settlement
Matching System(PSMS)
Amid steady growth, JASDEC isreadying the next-generation systemwith features for global settlement
support, including IS0 20022 standard
and addition of SWIFTNet.

30
Annual Report 2013

Stock exchanges
Figure 1. PSMS for Domestic Transactions (Centralized Matching for Tri-Parties)

Notice of execution

Order

Order

Investment trust
management/
advisory
companies

Notice of execution
Allocation

Pre-settlement
matching system
Investment instruction
Notice of matching status

Trade report

Trade matching*1
Notice of matching status

Investment instruction andtrade report
Trade report affirmation

Affirmation/
Disaffirmation

Notice of trade reportaffirmation status

Securities
companies

SSI

Trust banks

Notice of matching status

Settlement
matching

Notice of matching status

Request for DVP transfer

Linkage with book-entry transfer systems for stocks, etc., and CBs, corporate bonds and CP(excluding Japanese government bonds)*2*1 In 2014, DVP settlement for stock lending and borrowing transactions will be available.
*2 ‌In 2014, JASDEC will support trade matching function for tri-parties in lending and borrowing trades and “gensaki” trades of Japanese government bonds.

05 Pre-Settlement Matching System (PSMS)

Pre-Settlement Matching System (PSMS) is aimed to provide smoothand safe matching infrastructure in Japanese securities market.
March 2013 was 684, seven fewer than the number in theprevious year. In fiscal 2012, the number of input/output
transactions on a daily average was 1,353,350, which isabout the same amount of transactions of the previous year.

Total number of PSMS input/output instructions
using the PSMS system (Daily average)(Thousand)
1,600

1,503
1,327

1,315

1,360

1,353

1,200

800

31
400

0

(FY) 2008

2009

2010

2011

2012

Complying with international standards, reducing settlement risk,
and enhancing user efficiency; committing with these goals,
PSMS is moving forward.
In 2014, PSMS will take a new step. JASDEC will
implement new functions and introduce new features,
including adoption of the new international standards, inthe new PSMS scheduled for launch in January 2014.
Currently, JASDEC uses ISO 15022, messaging
standard defined by the International Organizationfor Standardization (ISO). Though it is based on
the standard, the message consists of several
customizations, in order to meet unique requirementsin the Japanese market community. To achieve
the greatest possible degree of harmonization withinternational standards and the connectivity withoverseas systems, we decided to bring the new system
into full compliance with the latest international standard.
As one of the first major adoptions in the world, JASDEC

will leverage ISO 20022, the new international standard
for financial messaging, in the new system.
Not only to precede the implementation of ISO 20022,
JASDEC is participating as a member in consultation of
ISO and striving to ensure the compatibility of Japanesemarket practices and international standards. Regarding
the existing message formats, JASDEC will deliver a coexistence period until the end of 2018, providing users
with greater choice of system migration based on their IT
investment plans.
In addition, JASDEC will bring in SWIFTNet, usedwidely around the world, which will realize greater choiceand smooth overseas connectivity, further increasinguser convenience and the number of participants.
Another key project JASDEC is engaging is theAnnual Report 2013

Matching process for institutional investors in securities
trade is a complex undertaking, due to the wide range oforganizations involved—including investment managers,
securities companies, trust banks, and custody banks—
and the huge amount of transaction data exchanged
between them. In the past, it was done manually by fax ortelephone. Now, the process has been modernized andautomated, with JASDEC providing centralized matching
services using sophisticated computer systems.
PSMS is aimed to provide smooth and safe
matching infrastructure in Japanese securities market,
contributing to further growth of Straight ThroughProcessing (STP) transactions.
Since launching the initial system in September 2001,
we have been increasing the range of asset classes andservices covered by the system.
Due to mergers among financial institutions and otherfactors, the number of registered users as of the end of

05 Pre-Settlement Matching System (PSMS)

32
Annual Report 2013

reduction of settlement risk. Since 2008’s financial
crisis, there has been growing discussion about further
mitigation of settlement risk. Along with these efforts,
JASDEC will introduce DVP settlement for stock lending
and borrowing transactions leveraging existing DVP
system for equity cash transactions (see Figure 1).
JASDEC has been continuously improving its user
efficiency by bringing significant enhancements to thematching process. In non-residents’ transactions, JASDEC
will introduce “Tolerance Matching” function, which has
already prevailed among major overseas markets, boostingsmooth settlement practices among foreign investors,
domestic and foreign custody banks, and securities
companies. With this function, when there is a slight
discrepancy in settlement amounts, which is within thetolerance amount limit (¥100, without exception), PSMS willassume the instructions to be “Matched” and proceed tofollowing process (see Figure 2).
In domestic transactions, JASDEC will support thetrade matching function for tri-parties (institutional
investors, trust banks, and securities companies) in
lending and borrowing trades and “gensaki” trades ofJapanese government bonds (see Figure 1), which follows
the recent discussion of shortening settlement cycle of
JGBs among market related parties.
This fiscal year, we have made progress on preparation
for the new system. Considering the globalization ofsystem development process among financial institutions,
we have translated relevant PSMS specification
documents into English. In addition, as the financial
industry around the world becomes more interested
in market practices for cross-border trades, we havemade the message format specifications of PSMS nonresidents’ transactions public on “MyStandards,” SWIFT’s
web-based platform service.
In order to put the new function and features into
practice and to promote better understanding of themamong the market participants, we also updated market
rules regarding PSMS.
JASDEC is continually building conformity withinternational standards, contributing to greater
efficiency, and reducing settlement risk in the Japanese
securities market.

Figure 2. PSMS for Non-Residents’ Transactions
Overseas

GlobalcustodiansJapan

Settlement
instruction

Investment
managers

Order
Notice of execution
Allocation, matching

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., and CBs, corporate bonds and CP(excluding Japanese government bonds)* In 2014, “Tolerance Matching” function will be available.

Securities
companies

Notice ofexecution

Order

Securities
companies
Notice ofexecution

Order

Stock
exchanges

Business Overview

06

Custody Services
for Foreign Stock
Certificates, etc.
Making it easier for Japanese investors
to invest in foreign companies byhandling the complicated procedures
involved in transfers, dividend
payments and taxation.
33

Share-handling service agents (trust banks)

Notice ofbeneficial
shareholders

Dividend
information

Custodian banks

Stockexchange
DVP

Shareholder notice host

Beneficial
shareholder
reportJapan Securities Clearing Corporation

Dividend
information(handling of information concerning beneficial
shareholders, dividends, etc.)

Collateralmatching

Overseas CSDs

Notice ofbalance

Account transfer host(settlement)

Non-DVP
transferfor NETD

DVP transfer
for NETD

AMIs (Securities companies and banks)

Beneficial shareholders of foreign stock certificates, etc.

Local
custody/transfer

Communication
server with foreign
CSDs/banks

Annual Report 2013

Overview of the System Relating to Foreign Stocks

Safe and secure settlement infrastructureand services for foreign stocks

34
Annual Report 2013

In April 2006, JASDEC inaugurated 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. Information on beneficial
shareholders at the dividend record date is transferred tothe share-handling service organizations by the JASDEC
participants 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.—number of issues/balancein accounts (excluding foreign covered warrants)(Thousand shares)(Issues)

150,000
130,6924250
41

120,000
90,00079,53189,90538

37

40

88,93086,57730■ Balance in accounts● Number of issues

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

Number of sharesdeposited/withdrawn■N umber of sharesdeposited■N umber of shares
withdrawn(Thousand shares)
480,306

500,000

300,000
246,465
200,000

25
60,00020

30,000

10

115,478 118,585
100,000

131,801
71,16759,727

15,6500(FY) 2008

2009

2010

2011

2012

0

0

(FY)

2009

2010

2011

2012

06 Custody Services for Foreign Stock Certificates, etc.

Service improvements for beneficial
shareholders and participantsBook-entry
transfers■ Non-exchangetransaction deliveries■ Exchangetransaction transfers(Thousand shares)
469,524500,000

300,000

274,119

200,000

302,746
258,701

236,159

158,573

133,511

115,001

100,000

0

(FY)

2009

2010

2011

2012

shareholders are not treated disadvantageously withrespect to foreign tax and that participants are notsubject to excessive administrative workload.
In addition, JASDEC has worked to improve services
offered to beneficial shareholders and JASDEC
participants, such as considering handling products
listed in various foreign countries with prospects forlisting on Japanese stock exchanges.
At present, foreign securities under the custodyof the Depository and Book-entry Transfer System
for Foreign Stock Certificates, etc., include three
categories: foreign stocks (including ADRs), overseas
ETFs (including ETCs), and country funds. At the endof March 2013, the total number of issues handled by
JASDEC in the three categories stood at 37.

35
Annual Report 2013

With regard to the handling of issues before their listing
dates, under the previous Depository and Book-entry
Transfer System for Foreign Stock Certificates, etc.,(“the system”), only deposit and transfer are permitted
for the purpose of preparing for listing to ensuresmooth trading from the first day of listing. In fiscal
2012, however, JASDEC amended the system in orderto make all services including processing corporate
action, available from the listing approval date, so thatrights such as dividend can be processed under thesystem even if the record date (of corporate action) is
set before the listing date arrives.
Systems to prevent tax avoidance have been
introduced in a number of foreign countries in recent
years, and JASDEC is responding appropriately on thebasis of cooperation with the competent authorities
and involved organizations to ensure that beneficial