Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 5

The major risks in Securities Systems should be mitigated by five key measures:

• the implementation of real delivery versus payment
• the adoption of a trade date plus one settlement cycle in a form that does not increase operational risk.
• the minimisation of funding and liquidity constraints by enabling stock lending and borrowing, broad based cross collateralisation, the use of repos and netting as appropriate
• the enforcement of scrip-less settlement
• the establishment of mandatory trade matching and settlement performance measures.

1.	Does the market use DvP settlement procedures in accordance with one of the recognised BIS models? If so, which one? If the model is not BIS model 1, are there plans to move to this model?	For OTC transaction: Yes, Model I : Trade for trade (gross) basis, with final (unconditional)transfer of securities from the seller to the buyer (delivery) occurring at the same time as final transfer of funds from the buyer to the seller (payment). For Stock Exchange transactions: Model 3
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	The settlement cycle for book entry securities is T+4. The planning to shorten the settlement cycle to be T+3 will be implemented next year on June 2002 when the shares conversion is completed.
3.	Could the market reduce the current settlement period to T+2 or below, without increasing fails rates? If so, how would this be achieved, and what plans are there to shorten the existing settlement cycle?	Not planned yet.
4.	Is matching of trade details achieved on trade date, at least for direct market participants; and by trade date plus one for indirect participants?	Yes, for the SE trades those orders are matched into trade on T+0. For OTC trades between custodian banks and brokers, prematching process normally commences on T+2, upon receipt of the instructions from clients.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	Yes, the book entry securities are being actively traded at the JSX. Scripless shares now represents approximately 81% of the total listed shares in stock exchange.
6.	Does the market allow partial settlements?	Partial settlement is not allowed for on exchange trades (i.e. between broker and broker) with the exception of dual settlement (demat and scrip) during conversion period. However, for OTC, partial settlement may be performed subject to agreement between two parties.
7.	Can the depository accommodate same day turnarounds?	Yes.

Bank of International Settlements (BIS) Settlement Models

Model 1:	Systems that settle transfer instructions for both securities and funds on a trade-by-trade (gross) basis, with final (unconditional) transfer of securities from the seller to the buyer (delivery) occurring at the same time as final transfer of funds from the buyer to the seller (payment).
Model 2:	Systems that settle securities transfer instructions on a gross basis, with final transfer of securities from the seller to the buyer (delivery) occurring throughout the processing cycle, but settle funds transfer on a net basis, with final transfer of funds from the buyer to the seller (payment) occurring at the end of the processing cycle.
Model 3:	Systems that settle transfer instructions for both securities and funds on a net basis, with final transfers of both securities and funds occurring at the end of the processing cycle.