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
|Category||Market||Central Counterparty (CCP)||Settlement Institution||Regulations|
||Korea Exchange (CCP)||KSD||
||Korea Exchange (CCP)||KSD|
|OTC||Institutional settlement of stock||KSD(CCP)||KSD|
|Institutional settlement of bonds||KSD|
Principles for Financial Market Infrastructures(PFMI) Disclosure
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.
|Securities and funds are settled simultaneously on a gross basis (trade-by-trade).
||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.
||Securities and funds are netted multilaterally and the final positions are settled simultaneously.
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).
|Category||Settlement in stock market||Government bond market settlement||Retail bond settlement||RP Settlement|
|Clearing||Korea Exchange (KRX)|
|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 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