Revenues by Operation
Year ended March 31, 2014

■ Book-Entry Transfer System for Stocks, etc.

¥13,070 million■ Book-Entry Transfer for Commercial Paper¥443 million■ Book-Entry Transfer System for Corporate Bonds¥1,238 million■ Book-Entry Transfer System for Investment Trusts¥1,117 million■ DVP Settlement System for NETDs¥645 million■ Pre-Settlement Matching System (PSMS)¥1,358 million■ Custody Services for Foreign Stock Certificates, etc.

¥128 million

Business
Overview

01

02

03

04

05

06

Book-Entry
Transfer System
for Stocks, etc.

Book-Entry
Transfer System
for Commercial
Paper andCorporate Bonds

Book-Entry
Transfer System
for Investment
TrustsDVP Settlement
System for NETDs

Pre-Settlement
Matching System(PSMS)

Custody Services
for Foreign Stock
Certificates, etc.

P29

P32

P35

P18

P22

P26

Business Overview

01

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

18
Annual Report 2014

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
JASDEC launched its Book-entry Transfer System for
Stocks, etc., under the Act on Book-Entry Transfer
of Company Bonds, Shares, etc. in January 2009.
Under this system, JASDEC or Account Management
Institutions (AMIs) such as securities companies andbanks open accounts for their clients, and each of them
manages accounts by electronic records registered intheir computer systems. The Book-entry Transfer System
has a variety of features that contribute to the security
and convenience of securities settlement systems.
• ‌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.
The dematerialization system applies not only tostocks, but also to bonds with share options, shareoptions, investment units of Real Estate Investment

Trusts (REITs), preferred equity investment ofcooperative financial institutions, Exchange Traded
Funds (ETFs), Japanese Depositary Receipts (JDRs,etc.), and other negotiable securities.
	As of March 2014, the total number of issues
handled was 3,795, including 3,548 share issues,
22 bonds with share options, 24 share options, 46
investment units, 1 preferred share issue, 118 ETFs,
and 36 JDRs. The number of companies participatingin the Book-entry Transfer System, including JASDEC
participants (direct AMIs), indirect AMIs, and fundsettlement corporations, etc., was 380, including 60
foreign financial institutions that are indirect AMIs.
19(Billion shares)
400

369.0

396.7
345.1

321.0

■S
 tock-exchangetransfers

335.7

300

200

100

0

(FY) 2009

2010

2011

2012

2013

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

JASDEC participants and indirect AMIs (as of March 31, 2014)
JASDEC participants by category
Securities financecompanies
2 (1%)

Indirect AMIs by category

Banks, etc.
17 (16%)

Total

Total

108

181

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.
147 (81%)

Securities
companies, etc.
31 (29%)Foreign indirect
AMIs
60 (56%)

Annual Report 2014

Book-entry
transfers

Ongoing enhancements
to increase user convenience

20
Annual Report 2014

JASDEC is continually developing a variety of systemenhancements to improve the usability of the Bookentry Transfer System for Stocks, etc., and to ensure
the smooth operation of the system. We also implement
programs to inform users about these improvements.
	Until recently, newly created ETFs were difficult totransfer on the date when the ETFs were recorded in an
account because the administrative procedures for the
new record required the new record to be completed
up to 15:30 on the new record date. In October 2013,
JASDEC therefore adopted a new administrative
process that requires new records to be completed bynoon, provided that the creation of ETFs meets withcertain conditions with regard to the contribution of
their trust property.
JASDEC has taken steps to encourage rights
offerings. In September 2013, we created anenvironment in which the mediation status of demands

Book-entry
transfers

Stock account balance andnumber of issues■ Transfers between
JASDEC participants■ Internal transfers
within the same
companies(Billion shares)
1,241.8

2,000

1,500

718.0

695.1

797.2

669.4

1,000
677.4

670.1

(FY) 2009

2010

2011

732.4

656.8

652.5

2012

(Billion yen)

2013

(Issues)

1,500

80
1,211.5

1,168.1

50400(FY) 2009

2010

406.8

3,640

0

(FY) 2009

2011

2012

2010

3,561

2011

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

2012

3,600
3,548
*Figures include the
Depository and Bookentry Transfer System
for Stock Certificates.

0

2013

(Million accounts)(Issues)
3,409

3,500

2,306

22 20

2013

3,800

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

1,400

0

3,581

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

3,400

2,563

2,791
2,339

154

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

150

111

100

93
77

50

700
0

200

126

40

133.4

404.6

3,727

2,800

499.6
16

4,000

431.0

418.6

412.9

2,100
27

500

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

60

959.7
43

0

(Issues)

450300*Figures include the
Depository and Bookentry Transfer System
for Stock Certificates.

Bond with share option account balance andnumber of issues

1,000(Billion shares)

350

500

0

for the exercise of options can be viewed on our
website so that share option holders can check theexercise status of their options. In January 2014, we
also expanded our statistical information by adding
market capitalization and the distribution of shareholder
by category to the information of account balances andaccount transfers relating to transfers of stocks, etc.
In January 2016, Japan will introduce the Social
Security and Tax Number System under the Law
Concerning the Use, etc., of Numbers to Identify
Specific Individual for Official Administrative
Procedures, which will be promulgated in May 2014.
Issuing companies will need the numbers of theirshareholders in order to process withholding tax
payments. We are currently preparing enhancements toour systems to create a scheme to allow shareholders’numbers to be supplied from AMIs to issuing
companies through JASDEC.

(FY) 2009

2010

2011

2012

2013

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

961.8

947.3

(Thousand shares)
150,000

800

127,240(Issues)
15,000129,619 127,292

125,694

127,032

8,888

8,597

8,715

120,000

12,000
9,260

8,723

600

90,000400

60,0006,000

200

30,0003,000

0(FY) 2009

2010

2011

2012

2013

*Figures are as of
day of notification toissuers.

Individual shareholder
notifications(Issues)
2,697

2,656

810

1,958

■ Number of notices● Number of issues

2010

2011

2012

2013

0

(Thousand notifications)
18,000

1,000

2,649

2,428

2,100

(FY) 2009

9,000

800

16,287

16,45916,727

17,063

17,547

9,000

448
400

401

412
700

4,500

200

(FY) 2009

2010

2011

2012

2013

0

0

(FY) 2009

Information requests(Notifications)(Notifications)
4,969

5,000

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

4,000
3,069

3,000
2,000
1,000

1,589

1,857

1,155
356

0

3,252

(FY) 2009

477
2010

375
2011

521
2012

2013

*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.

Information requests(Number of issues)(Issues)580

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

482
400

314
302

212
200

0

114

79

87

77

57

(FY) 2009

2010

2011

2012

2013

*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.

2010

2011

2012

2013

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

21
Annual Report 20140■N umber ofshareholders

13,500

720
600

1,400

*Figures are as of
day of notification toissuers.

Number of shareholders(Data for shareholder notifications)(Notifications)
2,800

0

●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 book-entry transfer
system whose daily settlement value typicallysurpasses the trading value per day at theTokyo Stock Exchange.

22
Annual Report 2014

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 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

Fund
settlement
corporation

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

Supporting seamless and secure CP
and corporate bond settlement
automates the entire process through trade matching
to settlement of securities and fund.
	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.
Upon the payments of principal and interest of corporate
bonds to bondholders, AMIs receive principal andinterest from paying agents or their upper AMIs throughthe 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. In each system,
settlement procedures—issuance, transfer (trading),
and redemption—are conducted based on the balance
electronically recorded in the transfer account books.
In addition, at all stages of issuance, transfer, andredemption of CP and corporate bonds, DVP settlement
is available by the linkage between JASDEC’s bookentry transfer system and the Bank of Japan Financial
Network System. Furthermore, interfacing the bookentry transfer system to its PSMS (Pre-Settlement
Matching System; see page 32), JASDEC has realized
Straight Through Processing (STP), which fully

Annual Report 2014

Participants in Book-entry Transfer System for CP (as of the end of March 2014)
Issuers 496

Issuing/
paying agents

18

JASDECJASDEC
Participants(Direct AMIs)

65

Fund settlement corporations 139

23

Indirect
AMIs

45

CP holders

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
book-entry transfer system for dematerialized CP waslaunched in 2003. More than ten years after the launch,almost all CP issued in Japan is handled by this system.
The outstanding issue of financial institutions andother financial companies’ CP increased in fiscal
2013 (to March 31, 2014), but the outstanding issueof business companies (excluding other financial
companies) and SPCs’ CP remained low due tostagnating demand for funds. As a result, the total
account balance held at around the ¥15 trillion level
throughout the year but fell dramatically to ¥12.6 trillion
as of March 31, 2014 (a ¥1.1 trillion decrease fromthe end of FY2012), in part because of special factors
relating to the end of the financial year. The number ofissues stood at 3,552 issues (a 374 issues decrease
from the end of FY2012).

24
Annual Report 2014

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

4,730

(Issues)
4,392

15

5,000

4,447
3,926

20
14.1

14.0

13.6

13.7

3,552
12.6

2,000
1,000

2010

2011

2012

2013

0

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

■R
 edemptions■T ransfers■ Issuance(Trillion yen)
6.0
0.4
4.2

4.0

3,000

5

(FY) 2009● Number of issues(end of FY)■ Account balance(end of FY)

4,000

10

0

Issuance, transfer andredemption of CP (daily average)

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

0

0.4
(FY) 2009

0.4
2010

2011

Continually adapting to
CP market needs
The total settlement amount of issuance, transfer,and redemption of CP handled by JASDEC’s bookentry transfer system averages ¥5 trillion per day. In
combination with month-end settlements of more than
¥10 trillion, the settlement value of CP at JASDEC
surpassed the daily trading value at the Tokyo Stock
Exchange. In fiscal 2013, the annual aggregate settlement
amount of transfer surpassed ¥1,000 trillion, marking
active trading at the highest level as good as fiscal 2012.

This huge settlement amount reflects theimportance of CP in the Japanese financial market.
JASDEC is willing to continue maintaining a high levelof safety in the Book-entry transfer system for CP, amatter of critical importance for securities settlement
infrastructure, while rapidly reflecting market needs inthe system.

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

The Book-entry Transfer System for Corporate Bonds
operates with security and reliability.
In January 2014, JASDEC began to provide
dematerialized balance certificates, etc. for theBook-entry Transfer System for Corporate Bonds,
Commercial Paper and Investment Trusts. Throughthis service, AMIs can request and receive theirtransfer account book registration certificates, etc.,
via the JASDEC “Target” website which reduces theprocessing time and enhances user convenience.
In January 2016 the Japanese government will
introduce integrated taxation of financial income andgains. JASDEC is making preparations to ensure asmooth transition to the new taxation rules, including
the publication of system requirements.

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 business companies, 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), J-Sukuk (Islamic
financial instruments similar to bonds) and others.
In fiscal 2013, based on the continuously excellent
issuing conditions such as extremely low interest
rates, the level of new issuance was in the same rangeof fiscal 2012. At the same time, in part because of
the slow pace of redemptions, the account balancereached ¥256.8 trillion on December 19, 2013—thehighest since the launch of the system. As of March
31, 2014, the number of bonds eligible in the system
was 55,595 issues (a 2,891-issue decline from the endof FY2012), and the nominal account balance stood at¥253.2 trillion (a ¥0.4 trillion increase from the end of
FY2012). There was also a significant increase in newissues of U.S. dollar-denominated bonds, reflecting
growth in recent demand for foreign currency finance.
In face value terms, the account balance as of March
31, 2014 was $3.4 billion (a $1.8 billion increase fromthe end of FY2012).

25(Trillion yen)
400

(Issues)

71,20275,00067,78860,701

300
245.5

250.0

58,486

252.4

252.7

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

55,595253.2

50,000200
25,000100

0(FY) 2009

2010

2011

2012

2013

0

Participants in Book-entry Transfer System for Corporate Bonds (as of the end of March 2014)
Issuers 2,637*

Issuing/
paying agents

197

JASDECJASDEC
Participants(Direct AMIs)

85

Fund settlement corporations 139

Indirect
AMIs

433

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

Annual Report 2014

Corporate Bonds account balance andnumber of issues

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 asystem that serves virtually all investment
trusts in Japan.

26
Annual Report 2014

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 thescope of 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, participants are diverse, consisting of not

only securities companies, but also entities such as
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 840 companies as of March 31, 2014.
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 the electronic management of the accounts ofinvestment trust beneficiaries.

27
Annual Report 2014

Participants in Book-entry Transfer System for Investment Trusts (as of the end of March, 2014)
Issuers 84

Trustees 10

JASDECJASDEC Participants 173

BOJ-NET Fund settlement corporations

Designated fund distributors 348

43

Indirect AMIs 667

Indirect AMIs

JASDEC ParticipantsLife and non-life
insurance companies
10 (2%)

Others1 (0%)

Securities companies
70 (10%)Banks
95 (14%)

Investment
trust managementcompanies 3 (0%)

Others7 (4%)

Investment trust
management companies
21 (12%)

Total

667

Financial institutions
for small businesses
10 (6%)

Total

173

Financial institutions
for small businesses
488 (73%)Banks
36 (21%)*Others: Securities agents, securities exchanges, CCPs, call loan dealers, etc.

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

Securities companies
94 (54%)

03 Book-Entry Transfer System for Investment Trusts

Strong support from users

28
Annual Report 2014

The total number of investment trusts handled by
JASDEC as of March 31, 2014 was 7,940 issues (a828-issue increase from March 31, 2013), comprising
4,962 publicly offered and 2,978 privately placed
investment trusts. The number and balance of new
trusts registered (purchases) remained high, reflecting
a favorable investment environment. Throughout theentire business year, the account balance increased
consistently. As a result, the outstanding balance asof March 31, 2014 had increased ¥9.1 trillion year
on year to ¥124.5 trillion, comprising ¥89.3 trillion in
publicly offered and ¥35.1 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). In fiscal 2013,
the proportion of settlements using DVP was 25% bytransaction volume and 62% by principal value.

Investment trusts account balance andnumber of issues(Trillion yen)

7,940

150
6,575

6,297
110.2

100

114.9

7,112

6,868
112.5

115.3

(Issues)
8,000

124.5

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

6,000

4,000
50
2,000
0

(FY) 2009

2010

2011

2012

2013

0

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

Purchase and cancellation transactions(Daily average)(Transactions)
9,000
7,634
6,906 6,710
6,293
6,064
5,417 5,685
5,118

6,000

8,619
8,119

■P
 urchases■C ancellations

3,000

0

(FY) 2009

2010

2011

2012

2013

Principal values of investment trusts for purchases andcancellations (Daily average)■P urchases■C ancellations(Billion yen)
479.2

400

Dedicated to ongoing improvement

439.1
300
301.9

289.6
311.0
288.5 282.5
280.0

341.5 326.7

200

In January 2014, we added transfer (change of fund
distributors) and notification functions to the Book-entry
Transfer System for Investment Trusts. Advantages
for users of this function include the elimination of
documentary procedures between distributors andissuers for transfers between distributors.
JASDEC will continue to implement measures thatenhance the user-friendly Book-entry Transfer System
for Investment Trusts, while maintaining the high levelof safety required for settlement infrastructure.

1000(FY) 2009

2010

2011

2012

2013

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 both sidesof the trade.
29
Annual Report 2014

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

30
Annual Report 2014

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 termsof financial condition, organizational structure andother such factors before receiving authorization from
JDCC. In order to ensure stringent risk managementof 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).
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. As of the end of
March 2014, 53 companies (comprising 12 banks
and 41 securities companies) were participants in the
DVP settlement system for NETDs. Excluding internaltransfers 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 customer-side settlement
method. In fiscal 2013, in consideration of steady
growth in the use of the system, we refunded ¥7 of the¥17 DVP settlement fee per transaction for the period
from April 2013 to February 2014 in accordance withthe participant’s usage level.

DVP settlement for NETD transactions(Daily average)(Transactions)
160,000

59,37456,18652,591
48,537■N on-DVP
transactions■D VP transactions

45,570120,000

80,00098,68984,883

83,29982,52280,23540,0000(FY) 2009

2010

2011

2012

2013

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

04 DVP Settlement System for NETDs

Reducing settlement risks
for stock 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 introduced DVP
settlements for stock lending transactions in January
2014 with the aim of reducing settlement risks for stock
lending transactions.

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

(%)

2,000

15
12.3

12.2

948.5

963.7

11.9

1,500

1,000

12.7

12.2

1,498.5

844.2

10

876.2
5

500
116.6
0

(FY) 2009

118.0
2010

100.1
2011

111.3
2012

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

183.5
2013

0

31
Annual Report 2014

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.

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.

32
Annual Report 2014

Figure 1. 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, on, “Tolerance Matching” function is available.

Notice ofexecution

Order

Securities
companies
Notice ofexecution

Order

Stock
exchanges

05 Pre-Settlement Matching System (PSMS)

Pre-Settlement Matching System (PSMS)—
for smooth and secure matching infrastructure in Japanese securities market
Followed by the booming stock market in Japan, in
fiscal 2013, the number of input/output transactions of
PSMS significantly increased to 1,731 thousands on adaily average. Furthermore, 676 users are utilizing PSMS
as a primary matching infrastructure in Japanese market.

Total number of PSMS input/output instructions
using the PSMS system (Daily average)(Thousand)
2,000
1,731
1,500

1,327

1,315

1,360

1,353

1,000

500

0

33
(FY) 2009

2010

2011

2012

2013

Brand-new services launched in January 2014
A number of new and useful services have been
implemented in PSMS, along with the replacement of
our information systems in January 2014. Among all,three items below are primarily important.
1) Tolerance matching (see Figure 1.)
PSMS has introduced ‘Tolerance Matching’ function
into non-residents’ transactions. With this function,
when there is a slight discrepancy in settlement amountbetween settlement parties, which is under JPY 100,
PSMS will assume the amounts to be ‘matched’ without
any exception, and the transaction will be settled withthe amount of the securities’ deliverer.
Previously, settlement amounts sometimes
became ‘unmatched,’ mainly due to various calculation
approaches to the amount (rounding up/down, etc.).
Tolerance matching has decreased the number of‘unmatched’ transactions by more than 90 percent, andcontributes to more and more rapid post-trade processes.

2) DVP‌
settlement for Stock Lending and Borrowing(SLB) transactions (see Figure 2.)
Since 2008’s financial crisis, more and more people
have been discussing further mitigation of settlement
risk. JASDEC has added SLB transactions into the lineof DVP-eligible products by providing automatic data
linkage from PSMS to BETS for Stocks, etc. (see also
Chapter 04.).
Since January 2014, 21 major players in Japanese
SLB market have made use of this service.
3) More‌
standardized communication—
ISO 20022 and SWIFT Network
Now that more than a half of stock transactions are
conducted by non-residents, this move is expected
to improve accessibility to the Japanese market. To
achieve easier access in terms of system connectivity,
JASDEC has leveraged the ISO 20022-based message
format as one of the pioneers in the global securities

Annual Report 2014

It is crucial for financial institutions to smoothly andsecurely complete the settlement process of huge numberof transactions. While our Book-Entry Transfer Systems(BETS) realize secure settlement, PSMS, on top of that,helps, additionally, to make settlement go smoothly.
Since the launch of PSMS in September 2001,
JASDEC has promoted Straight Through Processing (STP)in Japanese securities market, by providing matching
function of trade and settlement information to institutional
investors and others. PSMS has three basic concepts
below, as a bridge between trades and settlements.
1) Rapid post-trade process2) ‌Automatic data linkage to Central Clearing Party(CCP) and BETS for Delivery Versus Payment (DVP)
settlement3) Globally standardized protocol suitable both todomestic and non-residents’ transactions

05 Pre-Settlement Matching System (PSMS)

Group (SMPG).
JASDEC participants are required to migrate fromthe ISO 15022-based message format to ISO 20022
by the end of 2018. It already has a good start; as ofJanuary 2014, about 40 percent of relevant data was
exchanged via the ISO 20022-based format.

market, and has enabled the connection via SWIFT
network as well.
Furthermore, ISO 20022 will bring compatibilityof Japanese market practices with the global ones.
JASDEC is actively participating and offering comments
in consultations of International Organization forStandardization (ISO) and Securities Market Practice

Further actions for ongoing progress

34
Annual Report 2014

JASDEC has already kicked off some projects forcontribution of making the Japanese securities market
much more efficient.
During the autumn of 2015 and the beginning of
2016, the Japanese Securities Dealers Association(JSDA) is supposed to begin disclosing transaction
information of specific corporate bonds, in orderto stimulate the Japanese bond market. JASDEC

will cooperate closely with JSDA to realize smooth
operation of JSDA’s system, leveraging transaction
data of corporate bonds reported to PSMS.
	Along with this, JASDEC is participating in
consultation among market players, regarding
settlement cycle shortening of Japanese Government
Bonds (JGB) to ‘T+1’ (one business day after a trade is
executed) for outright transactions.

Figure 2. 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*1

Linkage with book-entry transfer systems for stocks, etc., corporate bonds and CP(excluding Japanese government bonds)*1 From January 2014 on, DVP settlement for Stock Lending and Borrowing (SLB) transactions is available.

Securities
companies

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.
35

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 2014

Overview of the system relating to foreign stocks

Safe and secure settlement infrastructure andservices for foreign stocks

36
Annual Report 2014

In May 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 thesame countries as the issuing companies, settlementsof transactions at Japanese stock exchanges are
conducted through book-entry transfers in JASDEC.
JASDEC entrusts dividend payments to relevant
share-handling service agents. Information on beneficial
shareholders at the dividend record date is transferredto the share-handling service organizations by the
JASDEC participants through JASDEC.
Based on this information, the share-handlingservice agents calculate the amount of dividends, which
are then paid directly to the beneficial shareholders
from the dividend-paying banks.

Foreign stocks, etc. account balance andnumber of issues (excluding foreign covered warrants)(Thousand shares)
150,000

42(Issues)50
41

120,000
90,00079,53189,90538
88,93037
86,57739
92,42240■ 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)
500,000

480,306

300,000
246,46530
200,000

118,585 131,801
115,478

20

60,00030,00010

100,000

71,16759,727
22,628 16,863

15,6500(FY) 2009

2010

2011

2012

2013

0

0

(FY) 2009

2010

2011

2012

2013

06 Custody Services for Foreign Stock Certificates, etc.

Service improvements for beneficial
shareholders and participantsBook-entry
transfers(Thousand shares)
500,000

300,000

469,524

274,119

200,000

365,437
302,746
258,701

236,159

158,573

163,944
133,511

100,0000(FY) 2009

2010

2011

115,001

2012

2013

■ Non-exchangetransaction deliveries■ Exchangetransaction transfers

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 2014, the total number of issues handled by
JASDEC in the three categories stood at 39.

37
Annual Report 2014

In January 2014, we introduced Straight ThroughProcessing (STP) for the cancellation of deposit anddelivery requests to foreign depositories, for which
paper documents were previously required. We also
introduced a system to allow JASDEC participants tobe notified of schedules for corporate actions by meansof file transmissions, in addition to the existing system
of notices on the website.
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
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