Revised in January 2006
: Securities settlement infrastructure

Figure 4-1 Current Japan Securities Settlement Infrastructure: Infrastructure partly supporting functions concerned: Message transfer

Stock
Street-side

Customer-side

Corporate Bond

Short-Term
Corporate Bond

Investment Fund

JGB

Order,
Execution,
Trade
Exchanges,
etc.
Matching

JASDEC(Pre-Settlement

JASDECJB-Net Functions(MAC Key Transfer)(Pre-Settlement Matching System)

Matching System)

Clearing

JSCC(Japan Securities Clearing
Corporation)

Settlement

Book-entry
Transfer(Securities)

JASDECDVP Clearing
Corporation

JASDEC

DVP
Settlement

Net-Net DVP

Gross-Net DVP

Book-entry
Transfer(Fund)

BOJ,SettlementBanks

BOJ

JGBCC
(Other Than Exchange Trades)

JB-Net

JSCC(Exchange Trades[TSE, OSE, and NSE] Only)

Registration
登録機関
Agencies
JB-NetJASDEC

BOJ

Gross-Gross DVP(Designated Time )Gross-Gross DVP

Gross-Gross DVP(RTGS)

BOJ

BOJ

BOJ
* ETF shares infrastructurewith Stock

6

Revised in January 2006

Figure 4-2 Major Issues Overview
Essential(Excludingthose
thoserelated
related totoshortening
shorteningof
ofsettlement
settlementcycles)
cycles)Essential Issues
Issues inin Securities
Securities Settlement
Settlement Systems
Systems Reform
Reform (ExcludingPreparation
Preparation ofof Securities
Securities Settlement
Settlement Systems,Systems, Processes,
Processes, andand Infrastructures
Infrastructures
Clearing
Matching
Settlement
Clearing
Settlement
Matching★ Pre-Settlement Matching
System in operation

Stock
Stock

Corporate
Corporate
Bond
Bond

Issues by
by Instrument
Instrument
IssuesJGB
JGB★2-1 Matching Functions Provided by
Pre-Settlement Matching
System (JASDEC-PSMS)

Conversion
Conversion toto New
New
Settlement
Settlement Systems
Systems

IssuesIssues related
related toto
Shortening
Shortening ofofSettlement
Settlement Cycles
Cycles【JASDEC Customer-side★ Street-side DVP System in operation ☆ 1-7 Increase of Securities Depository Ratio
DVP Sub-committee】★1-1 Customer-side DVP System in operation【JASDEC Existing Business Sub-committee】★1-2 JSCC Implementation(already in operation)●1-4 Preparation for the Law regarding Dematerialization of Stocks☆ 1-3 Consolidation of Derivative●1-5 Business Scheme Definition for Dematerialization of equities【JASDEC Sub-committee on Dematerialization of Equities 】
Clearing Functions(Already transfer from TSE to JSCC)●1-6 Settlement Scheme Definition for Listed Foreign Stocks【JASDEC Sub-committee on Foreign Stock Certificates 】★2-2 JGBCC Implementation(already in operation)【JASDEC Corporate Bonds
Sub-committee】★ JGB RTGS System in operation★2-4 Conversion Planning○2-3 Definition of Settlement Scheme for Account Management
Institutions under Multi-layer Holding Structure★ 3-1 DVP Scheme Definition★ 3-2 Scope Definition for Target Bonds and Participants★ 3-3 Definition of Business Flows for Primary/SecondaryMarkets Trade, Redemption, and Interest Payment★ 3-4 Definition of Settlement Scheme for Account Management
Institutions under Multi-layer Holding Structure☆ 3-6 Conversion Flow
Definition for
Outstanding Bonds☆ 3-7 Conversion Planning★3-5 Fail Rules Definition★ 4-2 Short-Term Corporate Bonds Book-Entry Transfer system Implementation (Full-scale)in common with Book-Entry Transfer system for “Corporate Bonds”

Investment
Investment
FundFund【JASDEC Investment Fund
Sub-committee】☆5-1 DVP Scheme Definition☆5-2 Definition of Settlement Business Scheme under
Dematerialization○7-2 Definition of Cut-off
Time by Instrument
and Trade Types, etc.
○7-3 Realization of Foreign
Exchange Trades
enabling T+1○7-4 Definition of Target
Schedule for
Shortening ofSettlement Cycle byInstrument★ 4-1 Short-Term Corporate Bonds Book-Entry Transfer system Implementation (already inoperation)

ShortShortTerm
Term
CorporateCorporate
Bond
Bond

○7-1 Preparation of T+0
Stock/Bond Lending
Repo Markets☆5-4 Conversion Flow
Definition for Outstanding
Investment Funds○7-5 Implementation ofAdvanced Collection
Rule for Personal
Investors☆5-5 Conversion Planning☆5-3 Preparation for the Law regarding Dematerialization☆5-6 Process for Dematerialization in accordance withthe discussion of stock.”

ETF【JASDEC Investment Trusts
Sub-committee 】【JASDEC Pre- Settlement Matching Sub-committee】

Other
OtherIssuesIssues☆6-1 Enhancement of Pre-Settlement● 6-5 Integration ofMatching System’s Scope and Functionality
Clearing☆6-2 Dissemination of Pre-Settlement
Organizations
Matching System☆6-3 Connectivity to Overseas
Matching Infrastructures○6-4 Network Infrastructure
Development and Format
Standardization for STP○6-6 Accounting Standards Definition for the New
Settlement Systems○6-7 Scope Definition of Services to be provided by Securities
Settlement Infrastructure and Book-keeping Institutions
under Multi-layered Account Structure●6-8 Preparation for the Law regarding Connectivity
with Overseas Securities Settlement Organizations○6-9 Consideration regarding Taxation System under
the New Settlement Systems

7★: Institutions and systems already in operation★: Institutions and systems already in operation☆: Under development☆: Under development●: Under discussion/consideration●: Under discussion/consideration○: To be discussed/considered hereafter○: To be discussed/considered hereafterFigure 5-2 (2) Securities Settlement Systems Overview at Completion of Current and Likely Infrastructure Initiatives: Securities settlement infrastructure:：当該機能を部分的にサポートしているインフラ
Infrastructure partly supporting functions concerned: Enhancement from the current state (Figure 4-1)
: Message transfer

Revised in January 2006

Stock
Street-side

Order,Execution,Trade

Customer-side

Corporate BondShort-Term
Corporate Bond

Investment Fund

JGB

Order Transfer System※ Systems provided by information services vendors, electronic trading systems (PTS), etc.

Exchanges,etc.

Matching

Matching Infrastructure※ JASDEC-PSMS enhancement, etc.

JSCCClearing(Japan Securities Clearing
Corporation)

Settlement

Book-entry
Transfer(Securities)
DVP
Settlement
Book-entry
Transfer(Fund)JGBCCJASDECDVP Clearing
Corporation(Other Than Exchange Trades)

JSCC(Exchange Trades[TSE, OSE, and NSE] Only)

JASDECBOJ※ Book-entry settlement under the multi-layer holding structure including Account Management Institutions

Net-Net DVP

Gross-Net DVP

Gross-Gross DVP

Gross-Gross DVP

Gross-Gross DVP

Gross-Gross DVP(RTGS)

BOJ / Settlement banks10• Dematerialization and DVP settlement forissuance/ redemption based on the Law
Concerning Book Entry Transfer ofCorporate Bonds, etc. will be implemented• Matching infrastructure will be implemented• Dematerialization of ETF will be progressedin accordance with the discussion of stock(ETF)Figure 6-1 Securities Settlement Systems Reform Milestones (fixed or planned)[ Figure 6-1 in the summary ]Revised in April 2007
● : Major milestone already set○ : Major milestone currently planned△ : Major milestone tentatively set by JASDEC

2002(H.14)
2002(H.14)
1～67～122003 (H.15)
1～67～127～12

2004 (H.16)
1～67～122005 (H.17)
1～67～122006 (H.18)
1～67～122007 (H.19)
1～67～122009 (H.21)
1～67～12▼The milestones were revised. (Apr., 2007)

This Report is created.
(Oct., 2002)●Law Concerning Book
●Law Concerning●Legal proposals on dematerialization of stocks (Sep., 2003)
Entry Transfer ofTransfer Settlement
CorporateBonds,etc.
intoof Short-Term●Promulgation of Law Regarding Dematerialization of Stocks (June, 2004) *2
Corporate Bonds into effect (Jan., 2003)
effect(Apr., 2002)●Law revising the Law of Securities Transactions into effect(Legislation regarding clearing organizations) (Jan., 2003)

Legislation
Legislation

2008 (H.20)
1～67～12●Abolishment of theBond Registration
Law (By Jan., 2008)●Launch of Securities Settlement System Reform Center (Apr., 2002)

CommonCommon acrossacrossAll
All Products
Products

Stock
Stock
JGB
JGB
By
Corporate
By
Corporate
ProductBond
Product Bond
Short-Term
Short-Term
Corporate
Corporate
Bond
Bond

●Commencement of operations of JASDEC, Inc. (June, 2002)●Commencement of clearing operations for TSE derivatives by JSCC (Feb., 2004)●Commencement of operations of JSCC (Jan., 2003)●JASDEC-PSMS 1st stage/2nd phase●JASDEC-PSMS 1st stage/ 3rd(Feb., 2002)
phase (May, 2003) (JGB,(convertible bonds, non-resident trades) futures/ options, investmenttrusts)●JASDEC-PSMS 2nd stage (May, 2004) (Connection withthe Customer-side DVP System)●JASDEC-PSMS(Feb.,2005)(for JGBCC)●DVP book-entry settlement for customer-side
transactions of stocks (May, 2004)●Outline of Dematerialization of Stock
Certificate System (March, 2006)●Implementation ofdematerialization(By June, 2009)○Target date for
implementation of●Commencement of operations of JGBCC (May, 2005)●Reporting of the JGB Clearing Organization Establishment Working Groupdematerialization of(Matching Function Provided Matching System (JASDEC-PSMS))(Oct., 2002)
stockcertificates●Compilation of the proposed business outline of JGBCC (The Preparatory Committee for the Establishment of JGBCC: June, 2003)(New book-entry●Commencement of New JGB Book-entry Settlement System (Jan., 2003)
system) (Jan., 2009)●Book-Entry Transfer System
for “Corporate Bonds” (Jan., 2006)●Outline for Book-Entry Transfer System●Completion of transition●Start of transition of outstanding to book-entry bonds
for“Corporate Bonds” (June, 2003)
bonds to book-entry bonds (Apr., (Jan., 2008) *12006)●Short-Term Corporate Bonds Book-Entry Transfer
System Phase Ⅱ(Jan., 2006)●Short-Term Corporate Bonds Book-Entry Transfer System(March, 2003)

Investment
Investment
FundFund●Outline of Book-Entry Transfer System
for Investment Funds (Sept., 2004)●Implementation of Book-Entry Transfer
System for Investment Funds (Jan., 2007)●Deadline for dematerializationof ETF (Jan., 2008)●SIA (U.S.) postponed a decision about
T+1*3OthersOthers*1 The target for completion of conversion to Book-Entry Transfer system for “Corporate Bond” is January,
2008 due to taxation of outstanding corporate bonds at abolishment of the Bond Registration Law.

*2 Stocks of listed companies will be uniformly transferred to the dematerialization of stock certificates system on the day set by the government
within 5 years after promulgation of a new law.
13 *3 ordinance
SIA (U.S.) published that they postponed a decision about T+1 in June 2004

Figure 6-2 Master Schedule for Securities Settlement Systems Reform (under current assumptions)2002 (H.14)
10～12
Commencement ofJSCC operation(Jan., 2003)
Commencement of
New JGB Bookentry Settlement
System (Jan.,2003)

Major
Major Milestones
Milestones

1～32003 (H.15)
4～67～910～12

1～32004 (H.16)
4～67～9

Short-Term Corporate
DVP book-entry
Bonds Book-Entry
settlement ofTransfer System
stocks (May,(March, 2003)
2004)
JASDEC-PSMS 1st stage/3rd phase (May, 2003)

10～122005 (H.17)
1～67～122006 (H.18)
1～67～122008 (H.20)
1～67～12

Timing at which Figure 5-2 is to be realized*2: Milestone (already fixed)

A-1 JASDEC-PSMS Enhancement (1st Stage/3rd Phase): Milestone (assumption) *1

A-2 Connectivity with Customer-side DVP System: Milestone (tentatively set by JASDEC) *1: Task schedule (already fixed)

A-4 Study and Implementation of Connectivity with Order Transfer Systems
A-5 Study and Implementation of Connectivity with Overseas Matching Infrastructures: Task schedule (assumption)*1

A-6 Dissemination of Matching Infrastructure, etc.

: Task schedule (indicated with some latitude
since the schedule is to be adjusted/finalizedhereafter) *1

A-7 Standardization of Network Infrastructures and Formats
B-1 Preparation for Customer-side DVP System Implementation (Systems, Business Processes, etc.)

B.
B. StockStock2007 (H.19)
1～6
7～12

Commencement of operation of JGB clearing organization (May, 2005)
Book-Entry Transfer System for “Corporate Bonds” (Jan. 2006)
JASDEC-PSMS 2nd stage (May, 2004)
Short-Term Corporate Bonds Book-Entry Transfer System (Jan, 2006)(Full-scale enhancement)
Book-Entry Transfer System for Investment
Funds (Jan, 2007)

A-3 Enhancement of Products Coverage and Functionality

A.
A. Matching
Matching Infrastructure
Infrastructure

Revised in January 2006

: Task schedule (not yet fixed since the contentsof the task may be considerably changed as theresult of further discussions hereafter) *1

B-2 Preparation for Commencement of JASDEC Clearing Subsidiary(JASDEC DVP Clearing Corporation)’s Operation
B-3 Preparation for Commencement of JSCC’s Operation
B-4 Study for Dematerialization of Stocks

C.
C. JGBJGB
Securities
Securities
Settlement
Settlement
Infrastructure
Infrastructure
byby ProductProduct

C-2 Study of JGB Clearing Org. Outline
C-3 Continuous Studies of Other Issues

D.
Corporate
D. Corporate
Bond
Bond

E.
E. Short-Term
Short-Term
Corporate
Corporate
Bond
Bond

F.
F. Investment
Investment
FundFund

C-4 Preparation for Commencement of JGB Clearing Organization’s Operation(Establishment of Entity, System Development, Business Process Definition, etc.)

D-1 Study of outline of Book-Entry Transfer System for “Corporate Bonds” D-3 Preparation for Book-Entry Transfer System
for “Corporate Bonds” (Systems, Business
D-2 Continuous Studies of Other Issues
D-4 Conversion of Outstanding Bonds
Processes, etc.)
E-2 Continuous Studies and Preparation for ShortTerm Corporate Bonds Book-entry Settlement(Full-scale Enhancement)

E-1 Preparation for ShortTerm Corporate Bonds
Book-entry Settlement
F-1 Study of Investment Fund Book-entry Outline
F-2 Continuous Studies of Other Issues

F-5 Basic plan for dematerialization of ETF (inaccordance with the dematerialization of stock)

ETF

G.
G. Others
Others (Overall(Overallmanagement,management,

G-1 Management of Progress and Issues for Overall Securities Settlement Systems Reform

cross-productcross-productconsiderations,considerations,etc.)
etc.)

G-2 Study of Cross-products Issues, etc.

H.
H. Shortening
Shortening ofofSettlement
Settlement Cycles
CyclesB-5 Systems/Business Processes Development for
Dematerialization of equities

C-1 Preparation for Conversion to New JGB Book-entry Settlement System

F-3 Preparation for Investment Fund Book-entrySettlement (System Development, BusinessProcesses, etc.)

F-4 Conversion of Outstanding
Investment Funds

H-2 Implementation of Settlement Cycle Shortening (JGB)

H-1 Study for Shortening of Settlement Cycle (JGB)
H-3 Study for Shortening of Settlement Cycle (Short-term Bond)

H-4 Implementation of Settlement Cycle Shortening (Short-term Bond)

H-5 Study for Shortening of Settlement Cycles (Other Products)*1 Infrastructure detailed task schedules should be led by organization(s) that would provide eventual infrastructure,
based on users requirements, legislation, and system approaches.

*2 Refer to the revised version of “(2) Securities Settlement Systems Overview at Completion of Current and Likely Infrastructure Initiatives”.

14