Securities deposit is a process through which rights over securities are transferred, altered, and nullified by book-entry without the actual movement of physical certificates. To benefit from the securities deposit system, participants such as brokers or institutional investors have to open participant accounts at the Central Securities Depositories (CSDs) and deposit their securities at the CSDs. In Korea, the Korea Securities Depository (KSD) is the single CSD and provides securities deposit service.
Once securities are deposited with KSD, the transfer, alteration, and expiry of the rights
deriving from the securities is effected by book-entry without the actual movement of
physical certificates. The rights are exercised in the name of KSD, and KSD receives cash
(dividends or principal and/or interest) and securities (new shares issued as bonus
shares or by subscription) on a lump-sum basis and then distributes them to
participants.
Securities eligible for deposit in KSD
Listed securities
Collective investment securities
Listed bonds and non-listed bonds issued in a series of listed bonds but with different
date of sales
Commercial Paper (CP)
Bonds which registrar is KSD or BOK
Certificate of deposit (CD)
Shares and warrants issued by the rights exercise on deposited shares
How does it Work?
The securities deposit system consists of KSD as an operator, participants and their customers as users, and deposit-eligible securities as objects. Securities holdings of participants are held in custody on a fungible basis at KSD and are settled on a book-entry basis by recording debit/credit on the account book, a legal ledger kept by KSD and its participants.
What are the Benefits?
safe and Convenient Securities Transaction
When participants and their customers trade securities, they don’t have to return their securities because KSD settles transactions by book-entry without the physical movement of securities. Thanks to the securities deposit system provided by KSD, transactions of deposited securities are conducted in a safe and convenient way without the risk of loss and theft of physical securities and the burden of incidental expense.
Corporate Action Service
The participants and their customers who have deposited their securities at KSD don’t have to withdraw securities in order to exercise their rights against issuing companies. KSD provides corporate action services in relation with the deposited securities on behalf of them including dividends and principal & interest. Therefore, KSD participants and their customers can enjoy expedient and convenient corporate action services.
Comprehensive Secrities Information Service
KSD participants and their customers can benefit from the comprehensive securities information service provided by KSD. KSD collects and manages all the information related to deposit-eligible securities. Issuance information, deposit information, lost and stolen securities, and corporate action information, to name a few.
