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Clearing and Settlement Service

Clearing is the process of confirming the securities the seller should deliver and the money the buyer should pay on the settlement date, that is, the confirmation of credit/debit obligations between transaction parties.

Settlement is the completion of the transaction through the final transfer of securities and payment between the seller and buyer after the clearing process.

Clearing and settlement entities and DVP models

Types of securities deposit

Types of securities deposit : Category, Market, Central Counterparty (CCP), Settlement Institution, Regulations
Category Market Central Counterparty (CCP) Settlement Institution Regulations
Market Stock market
  • KOSPI market
  • KOSDAQ market/ KONEX market
Korea Exchange (CCP) KSD
  • Capital Markets Act
  • Regulations on Financial Investment Business
  • Regulation on Settlement Service for Securities
  • Regulation on Clearing Services
Bond market
  • Korean treasury bonds market (KTS)
  • Retail bond market
Korea Exchange (CCP) KSD
OTC Institutional settlement of stock KSD(CCP) KSD
K-OTC KSD
Institutional settlement of bonds KSD

Principles for Financial Market Infrastructures(PFMI) Disclosure

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Most settlement service providers transfer securities and funds simultaneously using delivery versus payment (DVP), which is divided into three models depending on the netting process.

Principles for Financial Market Infrastructures(PFMI) Disclosure : DVP1(gross-gross), DVP2(gross-net), DVP3(net-net)
DVP1(gross-gross) DVP2(gross-net) DVP3(net-net)
Securities and funds are settled simultaneously on a gross basis (trade-by-trade).
  • Market settlement of government bonds
  • Institutional settlement of bonds
Securities are settled on a gross basis (trade-by-trade), while funds are netted into a single position and settled at the end of the settlement cycle.
  • Institutional settlement of stocks
Securities and funds are netted multilaterally and the final positions are settled simultaneously.
  • Stock market settlement
  • Bond market settlement
  • K- OTC

Market settlement

This service provides settlement of securities traded between members of exchanges such as securities companies in the market opened by KRX. The service is separated into two parts; settlement in stock market (KOSPI, KOSDAQ, and KONEX) and settlement in bond market (KRX Trading System for government securities (KTS), retail bond market, and Repo market).

Market settlement : Category, Settlement in stock market, Government bond market settlement, Retail bond settlement, RP Settlement
Category Settlement in stock market Government bond market settlement Retail bond settlement RP Settlement
Clearing Korea Exchange (KRX)
Settlement KSD
Participant Securities companies as members in stock exchange Banks and securities companies, etc. in bond market
Settlement bank The Bank of Korea The Bank of Korea Commercial banks(Shin-han, Woo-ri) The Bank of Korea
Settlement cycle T+2 T+1 T T
Settlement opening time 9:00 a.m. on settlement date 9:00 a.m. on settlement date 3:00 p.m. on settlement date 3:00 p.m. on settlement date
Settlement closing time 4:00 p.m. on settlement date 4:00 p.m. on settlement date 4:00 p.m. on settlement date 4:00 p.m. on settlement date
Substitute certificate for settlement Unavailable (application of Continuous Net Settlement (CNS) Available Available Available

Clearing & settlement service in over-the-counter(OTC) market

  • Institutional settlement for stock

    KSD gets the details of consignment transaction and confirms securities and funds for the settlement when an institutional investor who can’t participate directly in Korea Exchange market carried out consignment transaction through a securities company. Thereafter, securities are settled gross throughout the day and cash on a net basis.

  • Institutional settlement for bond

    Once KSD receives transaction details of bonds including CD and CP made between securities companies (broker in OTC market) and institutional investors, it confirms the securities and funds for the settlement. KSD uses real time gross settlement (RTGS) method for each transaction.

    Institutional settlement for bond : Category, Institutional settlement for stock, Institutional settlement for bond
    Category Institutional settlement for stock Institutional settlement for bond
    Clearing KSD
    Settlement KSD
    Participant securities companies, institutions, foreign custodians Securities companies, banks, etc.
    Settlement bank The Bank of Korea The Bank of Korea
    Settlement cycle T+2 T+1 ~ T+30
    Settlement opening time 9:00 a.m. on settlement date 9:00 a.m. on settlement date
    Settlement closing time Securities (closing time of book-entries): 4:10p.m. on settlement date
    Funds : 4:50 p.m. on settlement date
    DVP: 5:30p.m. on settlement date
    Free of payment: 6:30p.m. on settlement date