Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 ASEAN+3 Bond Market Forum Sub-Forum 2 Phase 3 Report

This report is an outcome of Phase 3 discussions under the ASEAN+3 Bond Market Forum Sub-Forum 2, which have focused on making bond market infrastructures in the region more inter-operable through the harmonization of transaction flows, standardization of messaging items, and implementation of international standards. Most markets in the region will have commenced these harmonization and standardization efforts by 2020, thus taking a significant step toward the integration of ASEAN+3 bond markets.

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HARMONIZATION AND STANDARDIZATION OF BOND MARKET INFRASTRUCTURES IN ASEAN+3 ASEAN+3 BOND MARKET FORUM SUB-FORUM 2 PHASE 3 REPORT

ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines ASIAN DEVELOPMENT BANK www.adb.org PROGRESS REPORT ON ESTABLISHING A REGIONAL SETTLEMENTHARMONIZATION INTERMEDIARY AND AND NEXT STEPS STANDARDIZATION OF BOND Implementing Central Securities Depository–Real-TimeMARKET INFRASTRUCTURES Gross Settlement LinkagesIN ASEAN+3 in ASEAN+3 CROSS-BORDER SETTLEMENT INFRASTRUCTURE FORUM ASEAN+3 BOND MARKET FORUM SUB-FORUM 2 PHASE 3 REPORT May 2015

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Asian Development Bank. Harmonization and standardization of bond market infrastructures in ASEAN+3: ASEAN+3 Bond Market Forum sub-forum 2 phase 3 report Mandaluyong City, Philippines: Asian Development Bank, 2015.

1. Regional cooperation. 2. Regional integration. 3. ASEAN+3. 4. Bond market I. Asian Development Bank.

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Note: In this publication, “$” refers to US dollars. ADB recognizes “China” as the People’s Republic of China; “Hong Kong” as Hong Kong, China; “Korea” as the Republic of Korea; and “Vietnam” as Viet Nam. Contents

Tables and Figures v

Foreword vii

Statement from SF2 Chairs viii

Acknowledgments ix

Abbreviations x

Executive Summary xi

I. Introduction 1 Overview of Previous Activities 1 Follow-Up on Phase 2 Policy Recommendations 1 Expected Work Items of Phase 3 8

II. Harmonization of Message Flows 10 Concept of Harmonizing DVP Flows 10 Reference DVP Flow 10

III. Standardization of Message Items Related to DVP Settlement 13 Overview of Message Items 13 Bond Settlement Instruction 16 Matched Results 17 Bond Settlement Confirmation 17 Cash Settlement Information and Instruction 18 Cash Settlement Confirmation 18

IV. ISO 20022 Standardization 20 Adoption of ISO 20022 in ASEAN+3 20 Example of Migration to ISO 20022 (Japan) 20 Establishing an Institutional Framework for ISO 20022 23

V. International Securities Identification Number 25

VI. Collateral and Repo Services 27 Overview of Repo Transactions 27 Repo Transactions in ASEAN+3 27 iv Contents

VII. Updating the Status of Settlement Barriers 30 Barriers Related to ABMF SF2 31 Other Remaining Challenges 32

VIII. Policy Recommendations 33

IX. Roadmap Including Next Steps 35 Roadmap 35 Next Steps 36

Appendixes 37 1 Members and Experts Including Observers and the ADB Secretariat 37 2 Purpose and Governance Structure of ABMF SF2 44 3 Message Items for Cross-Currency DVP 50 4 Overview of the International Organization for Standardization 61 5 Overview of the International Securities Identification Number 68 6 Cross-Border Use of Collateral and Repo 74 7 Foreign Exchange and Cash Control 81 8 Resource Information 84 9 Information Sessions and Main Agenda Items of ABMF SF2 86

Attachment 87 Typical Flow and Possible Example of Bonds Numbering 87 Tables and Figures

TABLES

1 Schedule of ABMF SF2 9 2 ISO 20022 Messages Corresponding with Reference DVP Flow—Proposal 14 3 Message Items for Bond Settlement Instruction (sese.023) 16 4 Message Items for Matched Result Advice (sese.024) 17 5 Message Items for Bond Settlement Confirmation (sese.025) 18 6 Message Items for Cash Settlement Instruction (pacs.009) 19 7 Message Items for Cash Settlement Confirmation (camt.054) 19 8 Adoption of ISO 20022 in ASEAN+3 CSDs 21 9 Adoption of ISO 20022 in ASEAN+3 Real-Time Gross Settlement Systems 22 10 Membership in ISO 20022-Related Organizations of ASEAN+3 Economies 24 11 National Numbering Agencies and the Allocation of ISIN in ASEAN+3 Economies 26 12 Repurchase Transactions in ASEAN+3 28 A1.1 National Members and Experts 37 A1.2 International Experts 38 A1.3 Observers 39 A1.4 ADB Secretariat 43 A3.1 (a) sese.023 Securities Settlement Transaction Instruction (Bond Settlement Instruction from Participants to CSD) 52 A3.2 (b) sese.024 Securities Settlement Transaction Status Advice (Matched Results from CSD to Participants) 54 A3.3 (h) sese.025 Securities Settlement Transaction Confirmation (Bond Settlement Confirmation from CSD to Participants) 56 A3.4 (d) and (e) pacs.009 Financial Institution Credit Transfer (Cash Settlement Instruction) 58 A3.5 (f) camt.054 Bank to Customer Debit Credit Notification (Cash Settlement Confirmation) 59 A4.1 SEG-ISO 20022 Standards Evaluation Groups 67 A5.1 NNAs in ASEAN+3 71

FIGURES

1 Outline of Activities of ABMF-SF2 2 2 ASEAN+3 Government Bond Market Diagram 3 3 ASEAN+3 Corporate Bond Market Diagram 4 4 Government Bond Interest Payment Related Entities 5 5 Corporate Bond Interest Payment Related Entities 6 6 Roadmap for Phase 3 8 vi Tables and Figures

7 Proposed Reference DVP Flow 11 8 Examples of Standard ISO 20022 Messages 13 9 Conventional Messages (ISO 15022) Corresponding to ISO 20022 Messages 15 10 Migration from ISO 15022 to ISO 20022 in JASDEC 23 11 Overview of Repo Transactions in Japan 29 12 ABMF’s Focus on Settlement Barriers 30 13 Roadmap Overview 36 A2.1 Organizational Structure of the ASEAN+3 Bond Market Forum 45 A2.2 Possible Goals of Sub-Forum 2 47 A2.3 Contribution of ASEAN+3 to International Standards 48 A2.4 Phase 3 Activities of ABMF SF2 49 A3.1 Examples of Message Items and Instances to Effect Cross-Currency DVP Settlement 51 A4.1 ISO Governance Structure 61 A4.2 ISO TC68 for Financial Services 63 A4.3 Relationships and Responsibilities of RMG 64 A4.4 Registration Processes of ISO 20022 65 A4.5 Maintenance Processes of ISO 20022 65 A5.1 Sample ISIN Code Structure for a Government Bond 69 A5.2 Overview of ANNA-Related International Standards 69 A5.3 ANNA-Related Organizations 70 A5.4 Typical Flow of ISIN Allocation 72 A5.5 ANNA Service Bureau System 72 Foreword

The Asian Development Bank (ADB) is working closely with the Association of Southeast Asian Nations (ASEAN) and the People’s Republic of China (PRC), Japan, and the Republic of Korea—collectively known as ASEAN+3—to develop local currency bond markets and facilitate regional bond market integration under the Asian Bond Markets Initiative in order to strengthen the resilience of the region’s financial systems.

ADB is providing support to the ASEAN+3 Bond Market Forum (ABMF) by acting as the Secretariat. ABMF was established in 2010 with the endorsement of ASEAN+3 finance ministers and comprises more than 100 members and experts drawn from financial institutions, central banks, and market authorities in the region. It functions as a common platform to foster standardization of market practices and harmonization of regulations relating to cross-border bond transactions in the region.

This report is an outcome of the dedicated efforts of ABMF members and experts to create more efficient and sound bond market infrastructures, and to improve their inter-operability through harmonization of transaction flows, standardization of messaging items, and implementation of international standards. Bond markets should be developed in line with a common understanding of what needs to be harmonized and integrated from the early stages of market development. This report provides a roadmap toward more standardized and harmonized markets by 2020.

Thanks to the efforts of the members and experts, ABMF is becoming Asia’s primary forum for the exchange of views between the public and private sectors on the development of the region’s bond markets. ABMF tackles industry challenges and continues to function as a regional platform to propose and implement measures toward more integrated bond markets. It is an excellent example of regional cooperation and collaboration between the public and private sector for the realization of a regional good. As the Secretariat of ABMF, ADB will continue to support the development of ASEAN+3 bond markets and to coordinate among various stakeholders for regional institutional building.

Ma. Carmela D. Locsin Director General Sustainable Development and Climate Change Department Statement from SF2 Chairs

It is a common understanding that Asia—in particular the Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea (ASEAN+3)— is now leading the world economy. Payment and settlement infrastructures in the region have steadily developed in recent decades and become efficient and robust systems, which are now equivalent with or better than those of developed economies in other regions, as evidenced by the survey results of Phases 1 and 2 of the ASEAN+3 Bond Market Forum Sub- Forum 2 (ABMF SF2). However, payment and settlement infrastructures, related regulations, and market practices still differ in each economy of ASEAN+3. Therefore, ABMF SF2 members and experts have discussed how to harmonize and standardize messages and practices in the region to achieve cross-border straight-through-processing (STP) in the region.

The Chair and Vice-Chairs express their heartfelt gratitude to the members and experts of ABMF SF2 for their contributions to making cross-border STP possible in the region. The Chair and Vice-Chairs hope to have the continuous support of the members and experts, since it is still in the early stages of implementing the objectives of the Asian Bond Markets Initiative to further develop liquid and well-functioning bond markets and effectively channel the region’s abundant savings to meet its growing investment needs. The Chair and Vice- Chairs also express their heartfelt gratitude to the Asian Development Bank Secretariat Team, in particular the Asian Development Bank consultant for ABMF SF2 and his team, for drafting this report.

Jong-Hyung Lee Chair of ABMF SF2

Margaret Mutiara Tang Vice-Chair of ABMF SF2

Yuji Sato Vice-Chair of ABMF SF2 Acknowledgments

ASEAN+3 Bond Market Forum Sub-Forum 2 (ABMF SF2) members and experts kindly provided inputs by answering questionnaires and commenting on diagrams during the market visits, and through a comprehensive review of this draft report. The international experts very kindly provided input and freely shared their needs and assessments, often drawing from proprietary sources. In addition, the team thanks all interviewees who gave useful comments and responses during the Phase 3 meetings and market visits. This report should be regarded as a crystallization of a regional collaborative effort toward more harmonized and integrated ASEAN+3 bond markets.

The Asian Development Bank (ADB) consultant also appreciated the advice of a variety of stakeholders as well as the impeccable support of the ADB Sustainable Development and Climate Change Department team. This report could not have been published without such strong support and cooperation from the ABMF members and experts in the region. The team also thanks the national members and experts of Hong Kong, China for hosting the ABMF Phase 3 meetings. The smooth organization of the meetings made possible the conduct of intensive discussions through multiple sessions at each meeting.

No part of this report represents the official views of any of the institutions that participated as ABMF members or experts. The views presented are those of the ADB Consultant for ABMF SF2 who prepared this report. Abbreviations

ABMF ASEAN+3 Bond Market Forum ABMI Asian Bond Markets Initiative ADB Asian Development Bank ANNA Association of National Numbering Agencies ASEAN+3 Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea BICFI Business Identifier Code for Financial Institutions CSD central securities depository DVP delivery-versus-payment EU European Union FCAD Financial Collateral Arrangements Directive GMRA Global Master Repurchase Agreement GoE Group of Experts ISIN International Securities Identification Number JASDEC Japan Securities Depository Center, Inc. NNA national numbering agency PSEG Payment Standard Evaluation Group PSMS Pre-Settlement Matching System RTGS real-time gross settlement SFD Settlement Finality Directive SF2 Sub-Forum 2 SSEG Securities Standard Evaluation Group SSS Securities Settlement System STP straight-through-processing TC68 Technical Committee 68

Note: In this report, international standards for naming conventions—International Organization for Standardization (ISO) 3166 for country codes and ISO 4217 for currency codes—are used to reflect the discussions of the ASEAN+3 Bond Market Forum Sub-Forum 2 to promote and support implementation of international standards in financial transactions in the region. ASEAN+3 comprises the Association of Southeast Asian Nations (ASEAN) plus the People’s Republic of China, Japan, and the Republic of Korea.

The economies of ASEAN+3 as defined in ISO 3166 include Brunei Darussalam (BN; BRN); Cambodia (KH; KHM); the People’s Republic of China (CH; CHN); Hong Kong, China (HK; HKG); Indonesia (ID; IDN); Japan (JP; JPN); the Republic of Korea (KR; KOR); the Lao People’s Democratic Republic (LA; LAO); Malaysia (MY; MYS); Myanmar (MM; MMR); the Philippines (PH; PHL); Singapore (SG; SGP); Thailand (TH; THA); and Viet Nam (VN; VNM).

The currencies of ASEAN+3 as defined in ISO 4217 include the Brunei dollar (BND), Cambodian riel (KHR), Chinese renminbi (CNY), Hong Kong dollar (HKD), Indonesian rupiah (IDR), Japanese yen (JPY), Korean won (KRW), Lao kip (LAK), Malaysian ringgit (MYR), Myanmar kyat (MMK), Philippine peso (PHP), Singapore dollar (SGD), Thai baht (THB), and Vietnamese dong (VND). Executive Summary

This report, Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3, is an outcome of Phase 3 discussions under the ASEAN+3 Bond Market Forum Sub- Forum 2 (ABMF SF2) and follows the ABMF SF2 Phase 2 Report, ASEAN+3 Information on Transaction Flows and Settlement Infrastructure.

Harmonization of Message Flow

An important step to achieving cross-border straight-through-processing (STP) and better interoperability in ASEAN+3 is the proposal of a harmonized message flow known as the reference delivery-versus-payment (DVP) flow based on the following basic concepts:

i. Real-time gross settlement (RTGS) is to be used for both bond settlement and cash settlement, ii. DVP is to be secured, iii. central bank money is to be used for cash settlement, iv. cash settlement for DVP should be effected by credit transfer, v. data are to be transferred from upstream infrastructure to downstream infrastructure whenever possible, and vi. the quality of data transferred and processed is to be confirmed when the data are entered by different parties.

Standardization of Message Items Related to DVP Settlement

In order to secure interoperability in ASEAN+3, essential and minimum message items to effect DVP settlement are expected to be standardized in accordance with ISO 20022. Bond settlement instruction, matched result, bond settlement confirmation, cash settlement information and instruction, and cash settlement confirmation shall be standardized based on the ISO 20022 definition taking the existing message items in ASEAN+3 into account.

Adoption of International Standards in ASEAN+3

The current status of adopting international standards for central securities depository (CSD) and RTGS systems in each economy of ASEAN+3 is presented as a preliminary result. The CSDs of all 10 economies where bond markets already exist in ASEAN+3 have adopted or decided to adopt international standards, either ISO 20022 or ISO 15022, for messages. China Central Depository and Clearing and the Japan Securities Depository Center are operating book-entry systems based on ISO 20022.1 The Hong Kong Monetary Authority, Monetary Authority of Singapore, and Thailand Securities Depository are operating book-

1 The 10 economies include the People’s Republic of China; Cambodia; Hong Kong, China; Indonesia; Japan; Malaysia; the Philippines; Singapore; Thailand; and Viet Nam. xii Executive Summary

entry system based on ISO 15022. All CSDs in ASEAN are expected to adopt ISO 20022 by 2020. Regarding the RTGS systems, the People’s Bank of China and Autoriti Monetari Brunei Darussalam are operating RTGS based on ISO 20022. The Hong Kong Monetary Authority, Monetary Authority of Singapore, and Bank of Thailand are operating their RTGS systems based on the international standard. All central banks in ASEAN are expected to adopt ISO 20022 for their RTGS systems by 2020, since ASEAN central banks have already agreed to adopt ISO 20022 as their standard for CSD and RTGS systems.

International Securities Identification Number

Adoption of international standards in ASEAN+3, in particular the International Securities Identification Number (ISIN), for cross-border transactions has been agreed by the members and experts of ABMF SF2. Also, the recommendation of the Association of National Numbering Agencies to allocate an ISIN within 24 hours following a request is expected to be met by ASEAN+3 economies. This recommendation is being implemented in the region. ISIN allocation flows in individual economies are presented in the Attachment.

Collateral and Repo

A survey was conducted to generate an overview of repo transactions in ASEAN+3 economies. Also, experiences in Europe were shared with ABMF SF2 members and experts, since the use of bonds as collateral or in similar ways to obtain local currency liquidity in other economies is an urgent issue given increasing demand for collateral in ASEAN+3 markets.

There are several types of repo transactions. In this report, repo transactions are categorized into two types. One is a repurchase agreement (sell and buy-back), which is commonly known as repo in many markets, by transferring ownership title. The other type is borrowing or lending (including pledged) that does not transfer ownership title, considering the transaction flows and interest payment processes. A repurchase agreement (sell and buy- back) is a standard repo transaction adopted globally and generally in accordance with the Global Master Repurchase Agreement. However, to introduce the standard repurchase agreement (sell and buy-back), the payment of tax on coupon payments and capital gains needs to be streamlined or waived to avoid complex transaction flows. This remains a barrier for smooth securities transactions in ASEAN+3.

Settlement Barriers

ABMF SF2 members and experts have reviewed the current status of settlement barriers related to the payment process (message standard, pre-matching, securities numbering, settlement cycle, and physical certificates). It was recognized that a lack of clear legislation in clearing and settlement, taxation, and capital and cash controls remain challenges.

Policy Recommendations

ABMF SF2 has been promoting the adoption of international standards for bond market infrastructures in the region, which has also been supported by the Asian Bond Markets Initiative Task Force 3. ABMF SF2 members and experts are grateful for the understanding and support of the region’s authorities. The following are the policy recommendations in line with the joint statement of the Asian Bond Markets Initiative objectives: Executive Summary xiii

A. Harmonization of Message Flow DVP Model 1 of the Bank for International Settlements definition shall be adopted for bond settlement in ASEAN+3 whenever the market infrastructures (CSD and RTGS systems) in each economy undergo reconstruction. A bond shall be blocked (earmarked) first; after transferring funds, which means after completing cash settlement, a blocked bond shall be released to effect (complete) DVP settlement given that bonds are less liquid than cash.

B. Adoption of International Standards International standards shall be adopted when the market infrastructures (CSD and RTGS systems) in each economy undergo reconstruction and/or total refurbishment. The following are examples of the international standards to be adopted: •• message standard: ISO 20022, •• financial institution identifier: ISO 9362 (BICFI), •• securities numbering: ISO 6166 (ISIN), •• country code: ISO 3166-1, and •• currency code: ISO 4217.

C. Standardization of Message Items Essential and minimum message items to effect DVP settlement shall be standardized based on ISO 20022. The following messages and their items are proposed as a preliminary basis for further discussions on standard message items: •• bond settlement instruction: sese.023, •• matched results: sese.024, •• bond settlement confirmation: sese.025, •• cash settlement information and instruction: pacs.009, and •• cash settlement confirmation: camt.054.

D. The region’s active participation in international standard decision-making is highly desirable. In this regard, it is advised that each economy that does not yet have an ISO 20022 Technical Committee 68 (TC68) national mirror committee establish the committee by joining TC68 as a participating member when the economy becomes ready to contribute to the decision-making processes related to ISO 20022.

E. Establisment of National Numbering Agency ABMF SF2 has been promoting ISIN as the standard securities numbering in ASEAN+3 for cross-border STP. Therefore, it is advised that each economy that does not yet have a national numbering agency establish it when the economy reaches the stage of issuing a significant amount of bonds.

F. Repo ABMF SF2 recommends adopting a repurchase agreement (sell and buy-back), which is a standard repo transaction in line with the Global Master Repurchase Agreement. It is also recommended that transaction flows related to collateral and repo services be surveyed. xiv Executive Summary

Roadmap and Next Steps

The current roadmap for ABMF SF2 includes the following Phases:

A. 2015–2016: Standardization phase i. Agree on a reference model of DVP flow and essential and minimum items ii. Prompt ISIN and Bank Identifier Codes iii. Promote awareness of international standards and support establishment of standard evaluation groups (SEGs) in the region such as a Securities Standard Evaluation Group and Payment Standard Evaluation Group to promote ISO standards iv. Conduct study on collateral and repo services, including interest payment flows v. Support the Cross-Border Settlement Infrastructure Forum

B. 2017–2018: Implementation Phase i. Support establishment of SEGs in the region and ISO TC68 national mirror committees in each economy to support financial services standardization ii. Implement standards in the economies that are ready for adoption of and migration to international standards iii. Review the reference model and standard message items (group members and experts) iv. Coordinate regional activities of harmonization and standardization in economies that are ready to contribute to such activities

C. 2019–onward: Fully Operational Phase i. Participate in international standardization through SEGs and ISO TC68 activities ii. Implement international standards iii. Review the reference model and standard message items iv. Confirm operationalization of the regional activities of harmonization and standardization in ASEAN+3 v. Promote further harmonization and standardization in the region

Next steps include (i) a draft reference DVP flow agreed upon by ABMF SF2 members; (ii) draft message items based on ISO 20022 agreed upon by ABMF SF2 members; (iii) ISIN adopted as the common standard of securities numbering in ASEAN+3 and allocated in each economy in line with the Association of National Numbering Agencies’ recommendation (within 24 hours); (iv) further study of the harmonization of market practices in ASEAN+3 economies, including collateral and repo practices; and (v) support from other ASEAN+3 economies and the Asian Development Bank for Brunei Darussalam, Cambodia, the Lao People’s Democratic Republic, and Myanmar, which are still developing their bond market infrastructures. I

Introduction

Overview of Previous Activities

This report is an outcome of the Phase 3 discussion of the ASEAN+3 Bond Market Forum Sub-Forum 2 (ABMF SF2).1 ABMF SF2 was launched in 2010 with the goal of implementing cross-border straight-through-processing (STP). ABMF SF2 is under the framework of the ASEAN+3 Finance Ministers and Central Bank Governors’ Meeting. ABMF SF2 members and experts are listed in the Appendix 1. An outline of ABMF SF2, including its purpose and governance structure, is also included in the Appendix 2.

During Phases 1 and 2, ABMF SF2 conducted surveys of bond market infrastructures and practices in ASEAN+3 (Figure 1).2 The results revealed that robust and sound bond market infrastructures, such as central securities depository (CSD) and real-time gross settlement (RTGS) systems, are already in place in the 10 surveyed economies. Figures 2 and 3 present the market infrastructure for the government bond market and corporate bond market, respectively, in each ASEAN+3 economy.

Figures 4 and 5 present interest-payment-related entities in the government bond market and corporate bond market, respectively, in each ASEAN+3 economy.

Follow-Up on Phase 2 Policy Recommendations

Based on the survey results, the Phase 2 Report identified a total of 19 policy recommendations in six categories. These six categories include (i) bond market infrastructures; (ii) delivery-versus-payment (DVP) flows; (iii) interest payment flows; (iv) message standards, including numbering and coding; (v) market practices and other issues; and (vi) cross-border STP and local currency liquidity.

Bond Market Infrastructures

1. Pre-settlement matching system (PSMS). In accordance with the policy recommendation of the Phase 2 Report, PSMS is included as a part of the reference DVP flow.

1 ASEAN+3 comprises the 10 members of the Association of Southeast Asian Nations (ASEAN) plus the People’s Republic of China, Japan, and the Republic of Korea. 2 The following documents cover in more detail the activities of ABMF SF2 during Phases 1 and 2: ASEAN+3 Bond Market Guide (ABMF Phase 1 Report). http://www.adb.org/publications/asean3 -bond-market-guide; ASEAN+3: Information on Transaction Flows and Settlement Infrastructures (ABMF SF2 Phase 2 Report). http://asianbondsonline.adb.org/features/abmf_phase_2_report/subforum2 _asean+3_information_transaction_flows_settlement_infrastructures.pdf#search=’ASEAN3%3A+Inf ormation+on+Transaction+Flows+and+Settlement+Infrastructures 2 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Figure 1: Outline of Activities of ABMF-SF2

Implementation of Cross-Border STP in ASEAN

Phase . Survey on bond market infrastructures in ASEAN . Survey on DVP ﬂows from trade to settlement of government bonds

Phase . Survey on government and corporate bonds . Add interest payments and redemption flows in addition to DVP flows . Conduct fit and gap analyses in line with international standards . Propose policy recommendations and roadmap

Phase . Harmonize and standardize bond trade and settlement ﬂows and message items in ASEAN . Survey on cross-border DVP, collateral, and repo

ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; DVP = delivery-versus-payment; STP = straight-through-processing. Source: ABMF SF2.

2. Central counterparty (CCP). Since the Phase 2 Report pointed out that developing CCP is currently not an urgent priority for straight bond trade and settlement, CCP remains out of the scope of ABMF SF2. 3. Central and local matching. Though both central and local matching models are regarded as standards for ASEAN+3, central matching seems to be the de facto standard in ASEAN+3. 4. Bond settlement using central bank money. In accordance with the policy recommendation of Phase 2 Report, government bonds are to be settled with central bank money in ASEAN+3. 5. Price discovery and transparency. Strengthening price discovery and transparency was one of the recommendations of the Phase 2 Report, but continues to be a challenge—survey methodology appropriate for ASEAN+3 markets has not yet been developed—and may be further discussed with regard to the Information Platform.

DVP Flows

1. Enhancing STP in CSD-related data flows. Enhancing STP was recommended in the Phase 2 Report. The reference DVP flow will contribute to implementing STP in the region. 2. Developing a reference model for DVP flows. Developing a reference DVP flow was one of the most important recommendations of the Phase 2 Report. A reference DVP flow was proposed and accepted by members and experts as a result Introduction 3 s C SE SE mm . and SSE SZ and SSE SZ Bank Co CSDC rket C S C CN HVPS OT PBO CCD C Interbank CFET Bond Ma

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ent

change Ex KH BN Governm Central Bank lopment Bond under market ve : de TE g . .

e e MM LA tch. NO ad ad Bond Cash Tr Tr settle Settle Settle. Ma match. Clearin ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BAHTNET =Bank of Thailand Automated High-value Transfer Network; BI = Bank Indonesia; BIDV = Bank for Investment Investment = Bank for BIDV BI = Bank Indonesia; Network; Transfer High-value Thailand Automated BAHTNET =Bank of Korea; of and the Republic China, Japan, of Republic plus the People’s Southeast Asian Nations of ASEAN+3 = Association Korea = The Bank of BOK Wire+ Korea; BOK = The Bank of System; Network Financial Japan = Bank of BOJ-NET Japan; = Bank of BOJ Malaysia; BNM = Bank Negara BN = Brunei Darussalam; Malaysia; BMS = Bursa Vietnam; of and Development Automated = Clearing House CHATS System; Trade Exchange =China Foreign & Clearing; CFETS Depository = China Central CCDC the Treasury; of = Bureau ng Pilipinas; BTr Sentral Thailand; BSP = Bangko = Bank of BOT Network; Wire Financial Kong China; HKMA = Hong Kong, HK = Hong delivery-versus-payment; eDvP = electronic and Clearing Corporation; = China Securities Depository China; CSDCC of Republic CN = People’s Unit; Moneymarkets = Central CMU System; Transfer JP = Japan; Center; Securities Depository = Japan JASDEC System; Transfer Funds = Interbank IFTS Exchange; Stock = Indonesia IDX ID = Indonesia; System; Payment HVPS = High-Value Exchange; Stock HNX = Hanoi Authority; Monetary LA = Lao Securities Depository; = Korea KSD Exchange; KRX = Korea Korea; of KR = Republic Indonesia); (Securities Clearing Underwriting Indonesia Efek KH = Cambodia; KPEI Kliring Penjaminan Securities Clearing Corporation; = Japan JSCC & Exchange China; PDEx = Philippine Dealing Bank of PBOC = People’s = over-the-counter; OTC = Malaysia; MY MM = Myanmar; System; Payment MEPS+ = MAS Electronic Singapore; of Authority MAS = Monetary Republic; Democratic People’s Funds of Transfer Electronic = Real-time RENTAS Integration; Trade PTI = Post system; matching PSMS = pre-settlement System; and Settlements = Philippine Payments PH = Philippines; PhilPass Corp.; & Trust = Philippine Depository PDTC Corp.; = Scripless SSTS System; Securities Settlement SSSS = Scripless Exchange; Securities; SSE = Shanghai Stock Government SGS = Singapore SG = Singapore; settlement; gross = real-time Securities; RTGS Scripless of = Registry RoSS and Securities System; Securities Depository. = Vietnam and VSD Nam; VN = Viet = Thailand Securities Depository; TH = Thailand; TSD Exchange; SZSE = Shenzhen Stock = straight-through-processing; STP System; Securities Trading not included in this diagram. are bond markets Retail transactions. in major types of involved entities shows This diagram Notes: ABMF SF2. Source: 4 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report) al C s SE SE and and SS E SS E SZ SZ Bank mm erci CSDC Co rket CN

S C CCDC OT HVPS Interbank PBOC CFET Bond Ma SHCH

S C U U CM CM OT CHAT HK HKMA HKMA HKMA custodians. l X agent ia ID

rc s KPEI BES T C KSEI ID C- Bank mme OT to CSD by Co T S EC J NE S EC EC C PSM System J- are entered BO JASD BO PSM OT JP Book Entry JASD JASD Transfer jor types of transactions. m. al ma s in X instructions) Bank X mm erci X KR Co KR KR KS D + K C K- involved re KR BO Wi BO OT settlement S P included in this diagra

- ET BM (bond M AS AS S C M ST IFTS BN OT -S BN are not RENT data entities that are RENT MY s ets rk show connection s ma PDEx m as m C ilP eDvP PDTC BS P PDEx PDEx PH Ph OT intersyste This diagra Retail bond ct GS S S C RT Indirect connection; trade Dire DCSS PSM CDP CD P OT MA SG Bank MEPS+ H mm ercial D Figure 3: ASEAN+3 Corporate Bond Market Diagram Bond Market Corporate 3: ASEAN+3 Figure BEX BE X Co TS TC ET T TN C I BO D d I BAH PT D TS OT PT d TS TH relate nt relate d relate me / C change Ex Central Bank Govern VSD OT HNX BIDV HOSE VN

et ent

Mark lopment KH BN Bond under market ve Governm Central Bank change de Ex : . .

e e TE MM LA tch. ad ad Tr Bond Cash Tr settle Settle Settle. match. Ma NO Clearing AMA = Account Management Agent; ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BAHTNET = Bank of Thailand Automated High-value Transfer Network; BI = Bank Network; Transfer High-value Thailand Automated BAHTNET = Bank of Korea; of and the Republic China, Japan, of Republic plus the People’s Southeast Asian Nations of ASEAN+3 = Association Agent; Management AMA = Account BOK = The Bank of System; Network Financial Japan = Bank of BOJ-NET Japan; = Bank of BOJ Malaysia; BNM = Bank Negara BN = Brunei Darussalam; Malaysia; BMS = Bursa Vietnam; of and Development Investment = Bank for BIDV Indonesia; Limited; Private Depository & Clearing; CDP = Central Depository = China Central CCDC the Treasury; of = Bureau ng Pilipinas; BTr Sentral Thailand; BSP = Bangko = Bank of BOT Network; Wire Financial Korea = The Bank of BOK Wire+ Korea; and Clearing Corporation; = China Securities Depository China; CSDCC of Republic CN = People’s Unit; Moneymarkets = Central CMU System; Transfer Automated = Clearing House CHATS System; Trade Exchange =China Foreign CFETS ID = Indonesia; System; Payment HVPS = High-Value Exchange; Chi Minh City Stock = Ho HOSE Exchange; Stock HNX = Hanoi Authority; Monetary Kong China; HKMA = Hong Kong, HK = Hong delivery-versus-payment; eDvP = electronic (Securities Indonesia Efek KH = Cambodia; KPEI Kliring Penjaminan Securities Clearing Corporation; = Japan JSCC JP = Japan; Center; Securities Depository = Japan JASDEC System; Transfer Funds = Interbank IFTS Exchange; Stock = Indonesia IDX System; Payment MEPS+ = MAS Electronic Singapore; of Authority MAS = Monetary Republic; Democratic LA = Lao People’s Securities Depository; = Korea KSD Exchange; KRX = Korea Korea; of KR = Republic Indonesia); Clearing Underwriting = Philippine Payments PH = Philippines; PhilPass Corp.; & Trust = Philippine Depository PDTC Corp.; & Exchange China; PDEx = Philippine Dealing Bank of PBOC = People’s Agent; = Paying PA = over-the-counter; OTC = Malaysia; MY MM = Myanmar; settlement; gross = real-time Securities; RTGS Scripless of = Registry RoSS and Securities System; Funds of Transfer Electronic = Real-time RENTAS Integration; Trade PTI = Post system; matching PSMS = pre-settlement System; and Settlements = straight-through-processing; STP System; Securities Trading = Scripless SSTS System; Securities Settlement SSSS = Scripless Exchange; SSE = Shanghai Stock Securities; SHCH = Shanghai Clearing House; Government SGS = Singapore SG = Singapore; Securities Depository. = Vietnam and VSD Nam; VN = Viet = Thailand Securities Depository; TH = Thailand; TSD Exchange; SZSE = Shenzhen Stock not included in this diagram. are bond markets Retail transactions. in major types of involved are that entities shows This diagram Notes: ABMF SF2. Source: Introduction 5 F C Bank Bank Cash MO Bond PBO Holder CCDC Settlement Settlement t CN

C F C Bank Cash Bank MO CSDC Bond PBO Holder CCDC Settlemen Commercial

. er er U U mb mb KMA CM CM easury Dept HK me me Bond HKMA Holder Tr b

’s F I stem BI Registry BI ID Sy MO b- Bond Registry Holder Participant/ Su Participant/Su nt nt n n t t

F J JH JB stitutio stitutio BO BO JP nage me BO nage me MO Accoun Accoun Bond In In Holder Ma Ma n n K K SF BO BO KR MO Bond Holder KSD’s Custodia Custodia Account s n

ed ed F M M stitutio MO BN stitution’ BN Bond MY In Holder Depository Authoriz Depository Authoriz In / t r r BT Bank BT ROSS BS P ROSS PH Bond Holder Participan Settlement Participants n n

S F S MO MA MA SG Bond Holder Custodia Custodia nt nt n n t t F T T Figure 4: Government Bond Interest Payment Related Entities Related Payment Bond Interest 4: Government Figure stitutio stitutio MO BO nage me nage me BO TH Accoun Accoun Bond In In Holder Ma Ma n F mber VSD MO VSD BIDV VN Bond Holder Custodia Me

lop ve ment Bond under market KH BN de ’s ) ’s s MM LA ent s ider A’ A) stor stem PA’ (P Bank Bank AM ve Issuer’s (AMA Account Account Account Account Sy Investor’s Issuer Prov Pa ym In AMA = Account Management Agent (generally a custodian); BI = Bank Indonesia; BMS = Bursa Malaysia; BN = Brunei Darussalam; BOJ = Bank of Japan; BOK = The Bank of Korea; BOT = Bank of Thailand; BSP = Bangko Sentral ng Pilipinas; Sentral Thailand; BSP = Bangko = Bank of BOT Korea; BOK = The Bank of Japan; = Bank of BOJ BN = Brunei Darussalam; (generally Agent Malaysia; Management BMS = Bursa BI = Bank Indonesia; AMA = Account a custodian); JP = Japan; ID = Indonesia; Authority; Monetary Kong China; HKMA = Hong Kong, China; HK = Hong of Republic CN = People’s Unit; Moneymarkets = Central & Clearing; CMU Depository = China Central CCDC the Treasury; of = Bureau BTr China; Bank of PBOC = People’s Agent; = Paying PA = Malaysia; MY MM = Myanmar; Singapore; of Authority MAS = Monetary Republic; Democratic LA = Lao People’s Securities Depository; = Korea KSD Korea; of KH = Cambodia; KR Republic Securities Depository. = Vietnam and VSD Nam; TH = Thailand; VN Viet Securities; SG = Singapore; Scripless of = Registry PH = Philippines; RoSS ABMF SF2. Source: 6 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report) t

C Bank Bank Cash Bank Bond SHCH PBO Holder Issuer CCDC/ Settlement Settlemen Issuer’s Designated CN

Bank Cash Bank Bond Holder Issuer Settlement Issuer’s CSDCC Designated

t t er er U U ng ng mb mb yi yi CM CM HK me me Agen Agen Bond HKMA Holder Pa Issuer Pa n n

s en t ID ym KSEI Bond Bank Holder KSEI’s Issuer Custodia Custodia Pa nt nt n n t t t t J ng ng yi yi stitutio stitutio BO JP nage me nage me Accoun Accoun Agen Bond Agen In Holder In Pa Issuer Pa Ma Ma n n

s s ent K en t ym Bank ym BO Bank Bank KR Bond KSD’ Holder Issuer KSD’ Custodia Custodia Pa Pa Account s n

t t ed ed M ng ng yi yi stitutio BN stitution’ Agen Agen Bond MY In Holder Pa Issuer Depository Authoriz Depository Authoriz Pa In t / TC Bank Bank PDTC PDTC PDTC BS P (CSA) Bank PH PD Issuer Settlement Settlemen Participants Issuer’s Participant/ Participant/ (RDDA) Bond Holder n n S ng ng yi yi MA SG Agent Agent Bond Holder Pa Issuer Custodia Custodia CDP’s Pa Accoun t nt nt n n t t

t T Figure 5: Corporate Bond Interest Payment Related Entities Related Payment Bond Interest 5: Corporate Figure ng ng yi yi stitutio stitutio BO nage me nage me TH Accoun Accoun Agen Agent Bond In Holder In Pa Issuer Pa Ma Ma n

er mb VS D VS D BIDV VN Me Bond Holder Issuer Custodia

lop ve KH BN ment Bond under market de ’s ) MM LA s ’s s ent A’ ider A) stor PA’ stem AM (P Issuer’s Bank Bank Account Account Account Account ve (AMA Investor’s Sy Issuer Prov Pa ym In AMA = Account Management Agent (generally a custodian); BIDV = Bank for Investment and Development of Vietnam; BMS = Bursa Malaysia; BN = Brunei Darussalam; BOJ = Bank of Japan; BOK = The Bank of Korea; BOT = Bank of Thailand; = Bank of BOT Korea; BOK = The Bank of Japan; = Bank of BOJ BN = Brunei Darussalam; Malaysia; BMS = Bursa Vietnam; of and Development (generallyInvestment Agent Management = Bank for BIDV AMA = Account a custodian); and Clearing = China Securities Depository China; CSDCC of Republic CN = People’s Unit; Moneymarkets = Central CMU Limited; Private Depository & Clearing; CDP = Central Depository = China Central ng Pilipinas; CCDC Sentral BSP = Bangko Central (Indonesian Indonesia Efek Sentral = Kustodian KSEI Securities Depository; = Korea KSD Korea; of KH = Cambodia; KR Republic JP = Japan; ID = Indonesia; Authority; Monetary Kong China; HKMA = Hong Kong, HK = Hong Corporation; PH = Philippines; Corp.; & Trust = Philippine Depository China; PDTC Bank of PBOC = People’s Agent; = Paying PA = Malaysia; MY MM = Myanmar; Singapore; of Authority MAS = Monetary Republic; Democratic Securities); LA = Lao People’s Securities Depository. = Vietnam and VSD Nam; TH = Thailand; VN Viet Securities; SG = Singapore; Scripless of = Registry RoSS ABMF SF2. Source: Introduction 7

of Phase 3 activities. The reference DVP flow is supposed to be implemented when each market infrastructure is in the process of being reconstructed. Harmonization of the DVP flow in the region will be accomplished gradually.

Interest Payment Flows

1. Survey on the roles of the paying agent, account management agent, and tax withholding agent across economies. According to the recommendation of the Phase 2 Report, the roles and functions of the paying agent, account management agent, and tax withholding agent were supposed to be clarified during Phase 3, but instead will be proposed as a part of next steps in relation to repo transactions. 2. Harmonization of interest payment flows. The harmonization of interest payment flows was identified as an important issue by the Phase 2 Report, but it remains a challenge due to differences in tax regimes across the region; for example, the rules for a tax withholding agent differ from economy to economy. It will be one of the most important issues for cross-currency repo and cross-border STP.

Message Standard Including Numbering and Coding

1. Migration to ISO 20022. Migration to ISO 20022 was proposed as one of the most important recommendations for Phase 3 activities and has been progressing significantly. All CSD and RTGS systems in ASEAN+3 are to adopt international standards (ISO 20022) by 2020. 2. Standardization of message items. Message items to effect DVP settlement were supposed to be standardized. Essential and minimum message items to be standardized have been proposed as a result of Phase 3 discussions. 3. International Securities Identification Number (ISIN). Based on the recommendations of the Phase 2 Report, allocation of ISIN as a unique identification number in accordance with the Association of National Numbering Agencies’ (ANNA) recommendation (within 24 hours) is expected to be followed by CSDs in the region by 2020. Brunei Darussalam, Cambodia, the Lao People’s Democratic Republic, and Myanmar do not yet have a national numbering agency (NNA); they will be supported by Asian Development Bank and ANNA efforts to establish one in each ASEAN+3 economy. 4. Business Identifier Code (BIC). The Phase 2 Report recommended using BIC as the financial institution identification code. This recommendation was accepted and will be followed by all CSD and RTGS systems in the region by 2020.

Market Practices and Other Issues

1. Harmonization of market practices. The harmonization of market practices, which was recommended by the Phase 2 Report, will be a subject of discussion during the next phase, with a particular focus on cross-border collateral and cross-currency repo. 2. Investor identification. The harmonization of investor identification was recommended by the Phase 2 Report. This is also a subject for discussion during the next phase along with further development of the Global Legal Entity Identifier. 3. Account structure. The harmonization of account structures was recommended in the Phase 2 Report. This remains a challenge due to differences in taxation and regulations that may reflect different policy stances among authorities in the region and different circumstances in each economy. Also, there is an emerging trend in the region to adopt a segregated account rather than an omnibus account. 8 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

4. Language for bond settlement instruction. The standardization of language was also recommended in the Phase 2 Report. This remains a very difficult issue because there are many local languages and scripts in the region. English is becoming a de facto standard; for example, ISIN is to be published in English and payment system communication is conducted in English in many economies in the region. Hopefully, the advancement of technology will overcome language barriers.

Cross-Border STP and Local Currency Liquidity

1. Cross-border collateral and repo services. The promotion of cross-border collateral and repo services was recommended in the Phase 2 Report. This remains an issue for the next phase and also will be discussed by ABMF Sub-Forum 1 and the Cross-Border Settlement Infrastructure Forum. 2. Capital and cash controls. Capital and cash controls were recommended to be removed gradually while keeping in step with developments in the markets.

Expected Work Items of Phase 3

Among the policy recommendations, work items chosen for Phase 3 were (i) harmonizing message flows, (ii) standardizing message items for ISO 20022 migrations, (iii) adopting common rules on ISIN, and (iv) studying cross-border collateral and repo services. The Phase 3 roadmap to implement the aforementioned working items is shown in Figure 6.

Figure 6: Roadmap for Phase 3

Harmonize Discuss Propose Agree on message reference reference reference ﬂows model model model

Standardize Propose Propose basic Discuss Standardize message messages to be requirements message items message items items standardized of G/W

Discuss how Common Discussion Develop to disseminate rule on ISIN with ANNA roadmap ANNA rule

Study cross- Discuss barriers border Survey current Identify Propose policy from cross-border collateral services barriers recommendations STP perspective and repo

Compile Draft interim Complete Phase Draft report report report report

ANNA = Association of National Numbering Agencies, G/W = gateway, STP = straight-through-processing. Source: ABMF SF2. Introduction 9

The schedule and meetings of ABMF SF2 from the start of Phase 3 through August 2015 is shown in Table 1.

Table 1: Schedule of ABMF SF2

Meeting Schedule Tasks Jan Preparation of questionnaire items Feb Mar 15th ABMF SF2 in Manila, Philippines Reply to questionnaire from each Apr economy May Jun Economy Visits 2014 Jul Survey on message items (Philippines, Malaysia, Indonesia) Aug Sep 16th ABMF SF2 in Hong Kong, China Economy Visits (Hong Kong, China) Drafting the report and supplemental Oct surveys Nov Dec Jan 17th ABMF SF2 in Manila, Philippines Interim report Feb Mar Apr 18th ABMF SF2 in Manila, Philippines 2015 May Jun Phase 3 report Jul Aug 19th ABMF SF2 in Manila, Philippines

ABMF SF2 = ASEAN+3 Bond Market Forum Sub-Forum 2. Source: ABMF SF2. II

Harmonization of Message Flows

ABMF SF2 members and experts have regularly discussed the harmonization of message flows in ASEAN+3 given that it is one of the most important issues. The Asian Development Bank (ADB) Consultant for ABMF SF2 proposed a few candidates as reference DVP flows for discussion based on the Phase 2 survey results. During Phase 3, the members and experts concluded that the DVP flow detailed below is to be proposed as the reference model DVP flow for ASEAN+3. Market infrastructure operators in each economy shall honor the reference model when they reconstruct their market infrastructures, including CSD and RTGS systems. The trade and settlement of bonds involves market infrastructures such as a trading system, post-trade matching system, CCP, PSMS, CSD, and RTGS. As a first step, the harmonization of flows from PSMS to settlement (both bond and cash settlement) was discussed, since harmonization of trade-related infrastructures are still a challenge in ASEAN+3.

Trade and post-trade matching systems are important for STP of bond trade and settlement. Also, direct transfer from an upstream system (e.g., trading, post-trade matching, and exchange) to a downstream system (e.g., PSMS and CSD) is very important. The connection between post-trade and trading systems remains a challenge because standardization is very difficult given the variety of players involved in trades.

Concept of Harmonizing DVP Flows

As an important step to achieving cross-border STP and better interoperability in ASEAN+3, a harmonized message flow known as the reference DVP flow has been proposed. The reference DVP flow is based on the following basic concepts:

1. RTGS is to be used for both bond settlement and cash settlement, 2. DVP is to be secured, 3. central bank money is to be used for cash settlement, 4. cash settlement for DVP should be effected by credit transfer, 5. data are to be transferred from upstream infrastructure to downstream infrastructure whenever possible, and 6. the quality of data transferred and processed is to be confirmed when the data are entered by different parties.

Reference DVP Flow

The proposed reference DVP flow is listed below and shown in Figure 8 as the basis for further discussion: Harmonization of Message Flows 11

Figure 7: Proposed Reference DVP Flow

System Infrastructures Sell Side Buy Side

Custodian Custodian PSMS a. Bond settlement b. Bond settlement instruction instruction . Pre-settlement matching a. Matched result b. Matched result

. Matched result

CSD System . Block seller’s bond

a. Bond Settlement . Bond settlement b. Bond settlement conﬁrmation conﬁrmation

. Cash settlement status report . Cash settlement information

Correspondent RTGS System Correspondent Bank . Cash settlement information Bank

. Cash settlement . Cash settlement instruction a. Cash settlement b. Cash settlement conﬁrmation conﬁrmation

CSD = central securities depository, DVP = delivery-versus-payment, PSMS = pre-settlement matching system, RTGS = real-time gross settlement. Source: ABMF SF2.

1. Custodians (both sell and buy sides) enter the term “Securities Settlement Transaction Instructions” into a PSMS (or a CSD if PSMS functions are provided by the CSD).3 2. Pre-settlement matching needs to be completed 1 day before the settlement date (S-1). 3. Matched results (Securities Settlement Transaction Status Advice) are sent back to the sell side and buy side. 4. Matched results are transferred from a PSMS to a CSD, if the PSMS and CSD are operated in different platforms. 5. The CSD blocks (earmarks) the sell-side bond. 6. The CSD transfers cash settlement information to the RTGS to effect cash settlement for the DVP settlement. 7. The RTGS forwards the cash settlement information to the correspondent bank of the buy side. Although a forwarding message and the subsequent step, cash settlement instruction, is omitted in some markets, it is recommended that credit transfer instructions from the buy side be effected for high-value payments like bond DVP settlement, in particular for cross-border transactions. When omitting steps 7 and 8, a pre-arrangement, such as earmarking the exact amount for the settlement, needs to be secured beforehand. 8. The buy-side correspondent bank sends cash settlement instruction to the RTGS to effect credit transfer for DVP settlement. 9. Cash settlement is effected by transferring funds from the buy-side current account to the sell-side current account in the RTGS.

3 The term “Securities Settlement Transaction Instructions” is an official term, although Figure 8 uses the term “Bond settlement instruction” since ABMF SF2 discussions cover bond transaction flows. 12 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

10. When cash settlement is successfully completed, cash settlement confirmations are sent to both the sell and buy sides. 11. Also, a cash settlement status report is sent from the RTGS to the CSD. 12. The blocked bond is released to the buy-side account in the CSD. 13. Bond settlement confirmations are sent from the CSD to both the sell and buy sides. III Standardization of Message Items Related to DVP Settlement

Overview of Message Items

ABMF SF2 proposes to standardize the essential (minimum) message items to effect DVP settlement in ASEAN+3. Examples of messages are shown in Figure 9.

Table 1 presents a proposal for further discussion of how ISO 20022 messages might correspond to the reference DVP flow.

Figure 8: Examples of Standard ISO 20022 Messages

Securities Depository PSMS/CSD Sell Side Buy Side CSD Account Servicer (a) sese. Executing Party (a) sese.

Safekeeping a/c Safekeeping a/c Deliverer (b) sese. (b) sese. Receiver Account Owner Account Owner bonds Instructing Party Instructing Party (h) sese. ISIN:JXXXXXXX (h) sese. Settlement amount x,xxx,xxx,xxx

(g)Cash Settlement (c) Cash Settlement Status Report DVP Information

Cash Settlement RTGS (d) pacs. RTGS Account Servicer Debtor Agent Creditor Agent Executing Party (e) pacs. Account Owner Account Owner Instructing Party Instructing Party Cash a/c Cash a/c

(f) camt. Settlement amount X,XXX,XXX,XXX (f) camt.

a/c = account, camt. = cash management, CSD = central securities depository, DVP = delivery-versus-payment, pacs. = payments clearing and settlement, PSMS = pre-settlement matching system, RTGS = real-time gross settlement, sese. = securities settlement. Source: ABMF SF2. 14 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Table 2: ISO 20022 Messages Corresponding with Reference DVP Flow—Proposal

ISO 20022 Messages Messages Correspond to Reference DVP Flow sese.023 Securities Settlement Transaction (a) Bond settlement instruction Instruction sese.024 Securities Settlement Transaction (b) Matched results Status Advice sese.025 Securities Settlement Transaction (h) Bond settlement confirmation Confirmation pacs.009 Financial Institution Credit Transfer (d), (e) Cash settlement information/instruction camt.054 Bank to Customer Debit Credit (f) Cash settlement confirmation Notification DVP = delivery-versus-payment, ISO = International Organization for Standardization. Note: For messages between the central securities depository and real-time gross settlement, (c) and (g), please refer to Progress Report on Establishing Regional Settlement Intermediary and Next Steps, published in May 2015. Source: ABMF SF2.

The definitions of each message based on ISO 20022 as shown in Table 1 are given below:

sese.023. An account owner sends a Securities Settlement Transaction Instruction (sese.023) to an account servicer to instruct the receipt or delivery of financial instruments with payment by book-entry. The account owner is a CSD participant and the account servicer is the CSD.

sese.024. An account servicer sends Securities Settlement Transaction Status Advice (sese.024) to an account owner to advise on the status of a Securities Settlement Transaction Instruction previously sent by the account owner, or the status of a settlement transaction existing in the books of the servicer for the account of the owner. The status may be either processing, pending processing, internal matching, matching, or settlement. The status advice may or may not be sent in response to the request of the account owner.

sese.025. An account servicer sends a Securities Settlement Transaction Confirmation (sese.025) to an account owner to confirm the delivery or receipt of financial instruments against payment by book-entry.

pacs.009. The Financial Institution Credit Transfer (pacs.009) is sent by a debtor financial institution to a creditor financial institution, directly or through other agents and/or a payment clearing and settlement system. It is used to move funds from a debtor’s account to a creditor’s account, where both the debtor and creditor are financial institutions.4

The Financial Institution Credit Transfer can be used

1. if it is exchanged between agents and contains one credit transfer instruction where debtor and creditor are both financial institutions; 2. if the message does not allow for grouping—a Credit Transfer Transaction Information block must be present for each credit transfer transaction; and 3. the message can be used in domestic and cross-border scenarios.

4 The Financial Institution Credit Transfer (pacs.009) can also be used for transferring information to move funds. Standardization of Message Items Related to DVP Settlement 15

camt.054. The Bank to Customer Debit Credit Notification is sent by the account servicer to an account owner or to a party authorized by the account owner to receive the message. It can be used to inform the account owner, or authorized party, of a debit and/or credit entry reported to the account.

The Bank to Customer Debit Credit Notification message

1. provides information for cash management and/or reconciliation, 2. can be used to notify debit entries and credit entries, 3. can include underlying details of transactions that have been included in the entry, 4. can be received by someone who is not the account owner but a party entitled by the account owner to receive the account information (also known as a recipient), and 5. does not contain balance information (needs to be discussed).

Conventional messages such as ISO 15022 that correspond to ISO 20022 messages are shown in Figure 10.

Figure 9: Conventional Messages (ISO 15022) Corresponding to ISO 20022 Messages

ISO Messages ISO Messages

MT sese. NEWM Securities Settlement Transaction APMT, RECE Receive against Payment Instruction

Bond MT sese. Instruction Settlement NEWM Securities Settlement Transaction APMT, DELI Deliver against Payment Instruction

MT n sese. Receive against Payment Conﬁrmation Securities Settlement Transaction Conﬁrmation

Bond MT sese. Settlement

Confirmatio Deliver against Payment Confirmation Securities Settlement Transaction Confirmation

MT sese. Transaction Status Advice Securities Settlement Transaction Status Advice Result Matched n MT pacs. Credit Transfer Instruction Cash Settlement Transaction Instruction Cash Instructio Settlement

t camt.

t MT Bank to Customer Debit Credit Debit Conﬁrmation of Debit Notiﬁcation Repor

Cash camt.

Settlemen MT Bank to Customer Debit Credit Status Credit Conﬁrmation of Credit Notiﬁcation camt. = cash management, ISO = International Organization for Standardization, MT = message type, pacs. = payments clearing and settlement, sese. = securities settlement. Source: ADB Consultant for ABMF SF2 modifications to National Bank of Belgium. 2012. NBB-SSS Adaptation Plan to T2S Phase1: Harmonisation and New IT Platform. Brussels. 16 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Essential and minimum items transferred between market infrastructures (CSD and RTGS systems) and their participants are shown in Table 3–7 for sese.023, sese.024, sese.025, pacs.009, and camt.054, respectively.

Bond Settlement Instruction

An account owner (CSD participant) sends a Securities Settlement Transaction Instruction (sese.023) to an account servicer (CSD) to instruct the receipt or delivery of financial instruments with payment or by book-entry, respectively. Table 2 shows message items that are extracted from sese.023 as essential and minimum items to effect DVP settlement. These message items are the key items for harmonization of bond settlement. SF2 recommends that all bond settlement infrastructures adopt these message items when current systems are being reconstructed. This does not necessarily mean other items are not to be added to instructions.

Table 3: Message Items for Bond Settlement Instruction (sese.023)

Message Items Definition Transaction Unambiguous identification of the transaction as known by the instructing party Identification Securities Specifies if the movement on a securities account results from a deliver or a receive instruction (such Movement Type as DELI or RECE) Payment Specifies how the transaction is to be settled, for example, separate settlement or against payment (such as FREE or APMT) Settlement Date Date and time at which the securities are to be delivered or received. Financial Instrument Financial instrument representing a sum of rights of the investor vis-a-vis the issuer (such as Identification International Securities Identification Number) Settlement Quantity Total quantity of securities to be settled (such as face value) Safekeeping Account to or from which a securities entry is made Account Securities Identifies the type of securities transaction (such as REPU for repo and TRAD for settlement of Transaction Type trade) Delivering Identifies the chain of delivering settlement parties (such as Business Identifier Code) Settlement Parties Receiving Identifies the chain of receiving settlement parties (such as Business Identifier Code) Settlement Parties Debtor and/or Party that owes an amount of money to the (ultimate) creditor (such as Business Identifier Code); Debtor Agent debtor agent (financial institution servicing an account for the debtor) Creditor and/or Party to which an amount of money is due (such as Business Identifier Code); creditor agent Creditor Agent (financial institution servicing an account for the creditor) Settlement Amount Total amount of securities to be paid or received in exchange for the securities (amount of money in the cash entry) Credit Debit Indicate an entry is a credit or debit (such as CREDIT or DEBIT) Indicator Source: ABMF SF2. Standardization of Message Items Related to DVP Settlement 17

Message items which are not essential items to effect DVP may also be included as a “standard message items.” One example may be “trade date.” Trade date is an important item from a market practice perspective, in particular from cross-border transaction evidenced by the fact that Global SMPG recommends trade date as one of 10 common elements for securities settlement instruction and other messages.

Matched Results

Sese.024 defines Securities Settlement Transaction Status Advice. An account servicer (CSD) sends sese.024 to an account owner (CSD participant) to advise on the status of a Securities Settlement Transaction Instruction (sese.023) previously sent by the account owner or the status of a settlement transaction existing in the books of the servicer for the account of the owner. The status is the matched result (either matched or unmatched). Table 3 shows essential items to be informed as matched results.

Bond Settlement Confirmation

Sese.025 defines Securities Settlement Transaction Confirmation. An account servicer (CSD) sends sese.025 to an account owner (CSD participant) to confirm the delivery or receipt of financial instruments against payment by book-entry. The minimum items comprising bond settlement confirmation are shown in Table 4.

Table 4: Message Items for Matched Result Advice (sese.024)

Message Items Definition Transaction Provides unambiguous transaction identification information Identification Matching Status Provides the matching status of the instruction (matched or unmatched) Safekeeping Account to or from which a securities entry is made Account Financial Financial instruments representing a sum of rights of the investor vis-a-vis the issuer (such as Instrument International Securities Identification Number) Identification Settlement Quantity Total quantity of securities to be settled (such as face value) Settlement Date Date and time at which the securities are to be delivered or received Securities Specifies if the movement on a securities account results from a deliver or a receive instruction Movement Type Payment Specifies how the transaction is to be settled, for example, against payment (APMT) Receiving Identifies the chain of receiving settlement parties (such as Business Identifier Code) Settlement Parties Delivering Identifies the chain of delivering settlement parties (such as Business Identifier Code) Settlement Parties Source: ABMF SF2. 18 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Table 5: Message Items for Bond Settlement Confirmation (sese.025)

Message Items Definition Transaction Unambiguous identification of the transaction as known by the instructing party Identification Securities Specifies if the movement on a securities account results from a deliver or a receive instruction (such Movement Type as DELI or RECE) Payment Specifies how the transaction is to be settled, for example, separate settlement or against payment (such as FREE or APMT) Effective Settlement Date and time at which the securities are to be delivered or received Date Financial Instrument Financial instrument representing a sum of rights of the investor vis-a-vis the issuer (such as Identification International Securities Identification Number) Settlement Quantity Total quantity of securities to be settled (such as face value) Safekeeping Account to or from which a securities entry is made Account Securities Identifies the type of securities transaction (such as REPU for repo and TRAD for settlement of Transaction Type trade) Delivering Identifies the chain of delivering settlement parties (such as Business Identifier Code) Settlement Parties Receiving Identifies the chain of receiving settlement parties (such as Business Identifier Code Settlement Parties Debtor and/or Party that owes an amount of money to the (ultimate) creditor (such as Business Identifier Code); Debtor Agent debtor agent (financial institution servicing an account for the debtor) Creditor and/or Party to which an amount of money is due (such as Business Identifier Code); Creditor agent Creditor Agent (financial institution servicing an account for the creditor) Settlement Amount Total amount of securities to be paid or received in exchange for the securities (amount of money in the cash entry) Credit Debit Indicate an entry is a credit or debit (such as CREDIT or DEBIT) Indicator Source: ABMF SF2.

Cash Settlement Information and Instruction

Pacs.009 defines Cash Settlement Information and Instruction. It is used to move funds from a debtor account to a creditor account, where both the debtor and creditor are financial institutions. The minimum items comprising Cash Settlement Information and Instruction are shown in Table 5.

Cash Settlement Confirmation

Camt.054 defines Cash Settlement Confirmation. It is sent by the account servicer to an account owner or to a party authorized by the account owner to receive the message. It can be used to inform the account owner, or authorized party, of debit or credit entries reported to the account. The minimum items comprising Cash Settlement Confirmation are shown in Table 6. Standardization of Message Items Related to DVP Settlement 19

Table 6: Message Items for Cash Settlement Instruction (pacs.009)

Message Items Definition End to End Unique identification, as assigned by the initiating party, to unambiguously identify the transaction Identification Transaction Unique identification, as assigned by the first instructing agent, to unambiguously identify the Identification transaction that is passed on, unchanged, throughout the entire interbank chain Interbank Amount of money moved between the instructing agent and the instructed agent Settlement Amount Debtor and/or Financial institution that owes an amount of money to the (ultimate) financial institutional creditor Debtor Agent - BICFI Creditor and/or Financial institution that receives an amount of money from the financial institutional debtor Creditor Agent – BICFI BICFI = Business Identifier Code for Financial Institutions. Source: ABMF SF2.

Table 7: Message Items for Cash Settlement Confirmation (camt.054)

Message Items Definition Notification Unique identification, as assigned by the account servicer, to unambiguously identify the account Identification notification Creation Date Time Date and time at which the message was created Account Unambiguous identification of the account to which credit and debit entries are made Amount Amount of money in the cash transaction Credit Debit Indicates whether the entry is a credit or a debit entry Indicator Status Status of an entry on the books of the account servicer Bank Transaction Set of elements used to fully identify the type of underlying transaction resulting in an entry Code Source: ABMF SF2.

More detailed message items for bond settlement instructions, matched results, bond settlement confirmations, cash settlement instructions (including information), and cash settlement confirmations are shown in Appendix 3. IV

ISO 20022 Standardization

Adoption of ISO 20022 in ASEAN+3

ABMF SF2 members and experts shared their plans and policies to adopt ISO 20022 at a future time when existing CSD (book-entry) and RTGS systems are being reconstructed. ABMF SF2 members and experts also identified significant trends in the adoption of IS0 20022 in ASEAN+3 economies.

Based on the information obtained at ABMF meetings, the current status of adoption of ISO 20022 in ASEAN+3 is shown in Tables 7 and 8 for CSD and RTGS systems, respectively.

All economies in ASEAN+3 that have not already adopted international standards for messages and numbering, including technological aspects related to bond settlement, will have done so by 2020. The current status of adopting international standards for CSD and RTGS systems in each economy in Table 8 is presented as a preliminary assessment that will be confirmed and updated, if necessary, as not all central banks and CSDs have announced their plans.

All CSDs in the 10 economies where bond markets already exist have either adopted or decided to adopt international standards (ISO 20022 or ISO 15022) for messages. The China Central Depository and Clearing Company and Japan Securities Depository Center (JASDEC) are already operating their book-entry systems based on ISO 20022. The Hong Kong Monetary Authority, Monetary Authority of Singapore, and Thailand Securities Depository Co. are already operating their book-entry systems based on ISO 15022. All CSDs in ASEAN have agreed to adopt ISO 20022 as the standard for their CSDs by 2020. Regarding RTGS systems, the People’s Bank of China (PBOC) and Autoriti Monetari Brunei Darussalam (AMBD) are already operating their systems based on ISO 20022. The Hong Kong Monetary Authority, Monetary Authority of Singapore, and Bank of Thailand are already operating RTGS systems based on international standards. All central banks in ASEAN have agreed to adopt ISO 20022 as the standard for RTGS systems by 2020.

Example of Migration to ISO 20022 (Japan)

Zengin Data Telecommunication System, which is a domestic funds transfer system of the Japanese Banks’ Payment Clearing Network (Zengin-net), adopted ISO 20022 in 2011. JASDEC adopted ISO 20022 for its PSMS and book-entry transfer system in 2014. The Bank of Japan Financial Network System, which is the final settlement system for Japanese yen as well as the central bank’s book-entry system for Japanese Government Bonds, is scheduled to adopt ISO 20022 in October 2015. In the case of Zengin Data Telecommunication System, conventional proprietary messages remain without a specific decommission period. In the case of JASDEC’s book-entry transfer system, a 5-year coexisting period (ISO 20022 and ISO 15022) is scheduled to conclude with the decommissioning of ISO 15022 at the end of 2018. In the case of the Bank of Japan Financial Network System, conventional proprietary ISO 20022 Standardization 21

Table 8: Adoption of ISO 20022 in ASEAN+3 CSDs

Standardization of Message Items (SSS)System Renewal

Inauguration ISO Eco- Name of Bond Charac. Comm current Reconstruct. nomy CSD Settlement SystemInst. ISO ISO ISIN BIC code set protocol Overall system period BN AMBD NPSS GY ()Y (X)Y YYY () BN (TBD)CY (X) Y (X) YYYY (X) X CN CCDC CBGS G/C NY YYYYY CN CSDC MNS G/C NY (X)Y (X)Y YYY (X) Nov. CN SHCH SHCH-SSS CNY (X) Y (X) YYYY (X)Dec HK HKMACMU G/C YNYYYYYMar. ID BI BI-SSSS GYY (X) YYYYY (X) Mar ID KSEI C-BEST CYY () YY() YYY() BOJ-NETJGB /Jan JP BOJ GNY () Y () Y () YYY() Service JP JASDEC BETS C YYYYYYYJan. KH CSX-G/C N KR KSD SSS/SAFE G/C NY (X)Y YY (X)Y Y (X) Nov LA BOL-G/C N MM CBM - G/C NY (X)Y () Y () Y () Y () Y (X) MY BNMRENTAS SSTS G/C Y ()Y () YY ()Y YY() Jul PH BTr BTr-ROSSGY () Y () Y () Y () YYY () Nov PH PDTC PDTC Depository G/C Y () Y () Y () Y () YYY () Mar SG MASMEPS SGS GY NY YYYYDec SG CDPDCSSCY () Y () YY ()Y YY ()- TH TSDPTI G/C YNYYYYYOct VN VSDVSD-BES G/C YY(X) YY (X)Y YY(X) May.

Cross-border STP ready (ISO ) Cross-border STP ready (ISO ) Not ready but decided

Not clear and need to be conﬁrmed Not ready yet

AMBD = Autoriti Monetari Brunei Darussalam; ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BES = book-entry system; BETS = Book-Entry Transfer System; BI = Bank Indonesia; BIC = Bank Identifier Code; BIDV = Bank for Investment and Development of Vietnam; BI-SSSS = Bank Indonesia-Scripless Securities Settlement System; BN = Brunei Darussalam; BNM = Bank Negara Malaysia; BOJ = Bank of Japan; BOJ-NET = Bank of Japan Financial Network System; BOK = The Bank of Korea; BOK Wire+ = The Bank of Korea Financial Wire Network; BOL = Bank of Lao; BOT = Bank of Thailand; BSP = Bangko Sentral ng Pilipinas; BTr = Bureau of Treasury; C-BEST = Central Depositary and Book-Entry Settlement; CBGS = Central Bond General System; CBM = Central Bank of Myanmar; CCDC = China Central Depository and Clearing; CDP = Central Depository (Pte.) Limited; CMU = Central Moneymarkets Unit; CN = People’s Republic of China; CSDC = China Securities Depository and Clearing; CSX = Cambodia Securities Exchange; DCSS = Debt Securities Clearing and Settlement System; HK = Hong Kong, China; HKMA = Hong Kong Monetary Authority; ID = Indonesia; IFTS = Interbank Funds Transfer System; ISO = International Organization for Standardization; JASDEC = Japan Securities Depository Center; KESEI = PT Kustodian Sentral Efek Indonesia; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MAS = Monetary Authority of Singapore; MEPS+ = MAS Electronic Payment System; MM = Myanmar; MNS = Multilateral Netting System; MY = Malaysia; N = no; NPSS = National Payment Settlement System; PBOC = People’s Bank of China; PH = Philippines; PDTC = Philippine Depository and Trust Corporation; PTI = Post Trade Integration; RENTAS = Real-time Electronic Transfer of Funds and Securities System; RoSS = Registry of Scripless Securities; SGS = Singapore Government Securities; SHCH = Shanghai Clearing House; SSS = Securities Settlement System; SAFE+ = Speedy, Accurate, Faithful, Efficient; RENTAS = Real-time Electronic Transfer of Funds and Securities; RTGS = real-time gross settlement; SG = Singapore; SSTS = Scripless Securities Trading System; STP = straight-through-processing; TH = Thailand; TSD = Thailand Securities Depository; VN = Viet Nam; VSD = Vietnam Securities Depository; Y = yes. Notes: In the Philippines, the interface between the Bureau of the Treasury and its participants is provided by PDS Group. Therefore, the above information is from the PDS Group. Information on the People’s Republic of China; Hong Kong, China; the Republic of Korea; Singapore; and Thailand needs to be updated. i. ISO 15022: ISO 15022 is adopted for the messages related to bond settlement. ii. ISO 20022: ISO 20022 is adopted for the messages related to bond settlement. iii. ISIN (adoption): ISIN is adopted (full membership in NNA exists). iv. BIC: BIC can be used, including conversion by using a table with proprietary codes. v. Character code set: Unicode (UTF-8) is adopted. vi. Communication protocol: TCP/IP is adopted as communication protocol. vii. Inauguration of the current system: Inauguration year of the current bond settlement system. viii. Reconstruction period: Plausible year of completing of reconstruction based on the assumption of ADB Consultant for ABMF SF2. Source: ABMF SF2. 22 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Table 9: Adoption of ISO 20022 in ASEAN+3 Real-Time Gross Settlement Systems

Standardization of Message Items (RTGS)System Renewal

ISO Eco- Name of the Char. code Commun. Inauguration current Reconstruct. nomy Operator System ISO ISO BIC set protocol Overall system period BNAMBD- NY Y YYY CN PBOC HVPS NY YYYY

HK HKMACHATSY NY YYYDec

ID BIBI-RTGS YY ( X)Y ( )Y Y ( ) Y ( X)Nov

JP BOJ BOJ-NET NY ( ) Y ( ) YYY ( ) , Nov

KH NBC- NY ( X)Y ( X)Y ( X)Y ( X)Y ( X) X

KR BOK BOK-WireNY ( X) YYYY ( X)Apr LA BOL -Y YYYY MM CMB -NY ( )Y ( ) Y ( ) Y ( ) Y ( X) RENTAS MY BNM Y ( )Y ( )Y( ) YYY( )Jul / / IFTS PH BSP PhilPass YY ( )Y YYY( )/Dec SG MASMEPS YNYYYY Dec TH BOT BAHTNETY NY YYY SBV VN NY ( X)Y ( X)Y ( X)Y ( X)Y ( X) X (BIDV)

Cross-border STP ready (ISO ) Cross-border STP ready (ISO ) Not ready but decided

Not clear and need to be conﬁrmed Not ready yet

ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BAHTNET = Bank of Thailand Automated High-value Transfer Network; BI = Bank Indonesia; BIC = Bank Identifier Code; BIDV = Bank for Investment and Development of Vietnam; BMS = Bursa Malaysia; BN = Brunei Darussalam; BNM = Bank Negara Malaysia; BOJ = Bank of Japan; BOJ-NET = Bank of Japan Financial Network System; BOK = The Bank of Korea; BOK Wire+ = The Bank of Korea Financial Wire Network; BOT = Bank of Thailand; BSP = Bangko Sentral ng Pilipinas; CHATS = Clearing House Automated Transfer System; CN = People’s Republic of China; HK = Hong Kong, China; HKMA = Hong Kong Monetary Authority; HVPS = High-Value Payment System; ID = Indonesia; IFTS = Interbank Funds Transfer System; ISO = International Organization for Standardization; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MAS = Monetary Authority of Singapore; MEPS+ = MAS Electronic Payment System; MM = Myanmar; MY = Malaysia; N = no; PBOC = People’s Bank of China; PH = Philippines; PhilPass = Philippine Payments and Settlements System; RENTAS = Real-time Electronic Transfer of Funds and Securities System; RoSS = Registry of Scripless Securities; RTGS = real-time gross settlement; SG = Singapore; STP = straight-through-processing; TCP/IP = Transmission Control Protocol/Internet Protocol; TH = Thailand; VN = Viet Nam; Y = yes. Notes: The State Bank of Viet Nam is planning to be a cash settlement operator by adopting ISO 20022. Information on the People’s Republic of China; Hong Kong, China; the Republic of Korea; Singapore; and Thailand needs to be updated. i. ISO 15022: ISO 15022 is adopted for the messages related to bond settlement. ii. ISO 20022: ISO 20022 is adopted for the messages related to bond settlement. iii. BIC: BIC can be used, including conversion by using a table with proprietary codes. iv. Character code set: Unicode (UTF-8) is adopted. v. Communication protocol: TCP/IP is adopted as communication protocol. vi. Inauguration of the current system: Inauguration year of the current bond settlement system. vii. Reconstruction period: Plausible year of completing of reconstruction based on the assumption of ADB Consultant for ABMF SF2. Source: ABMF SF2. ISO 20022 Standardization 23

Figure 10: Migration from ISO 15022 to ISO 20022 in JASDEC

Coexisting period of ISO and ISO until end of

Network

JASDEC = Japan Securities Depository Center, JEXGW = JASDEC Extensible Gateway, SWIFT = Society for Worldwide Interbank Financial Telecommunication. Source: JASDEC modified by ADB Consultant for ABMF SF2.

messages will be decommissioned at the starting day of new ISO 20022 messages (13 October 2015), reflecting demands from market participants. An illustration of JASDEC’s migration from ISO 15022 to ISO 20022 is shown in Figure 11.

Establishing an Institutional Framework for ISO 20022

Since bond market infrastructures such as CSD and RTGS systems will adopt ISO 20022 as the message standard when it comes time to reconstruct such infrastructure, all ASEAN+3 economies will become harmonized and, through standardization, achieve cross-border STP.

Considering such a situation, each market infrastructure operator is expected to contribute to ISO 20022 activities, including joining the decision-making processes of ISO 20022-related messages and standards. All ASEAN+3 economies are expected to establish the relevant organization to support ISO activities when they are ready to become a full member of ISO. The current ISO membership of ASEAN+3 economies is shown in Table 9.

In order to contribute to ISO activities, it is important to establish an institutional framework, such as a regional Securities Standard Evaluation Group (SSEG) and Payment Standard Evaluation Group (PSEG) in ASEAN+3 and Technical Committee 68 (TC68) national mirror committee in each economy. Also, it is recommended to facilitate discussions on the standardization of messages based on ISO 20022 and related issues, including ISIN allocation. An overview of ISO is shown in Appendix 4. 24 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Table 10: Membership in ISO 20022-Related Organizations of ASEAN+3 Economies

ISO member TC memberRMG PSEG SSEG BN Correspondent member (ABCI) KH Correspondent member (ISC) CN Full member (SAC) Participant member Member (PBOC) HK Correspondent member (ITCHKSAR)Observing member ID Full member (BSN)

JP Full member (JISC) Participant member Member (BOJ)Member (BOJ, Member (BOJ, Zenginkyo, NTT JASDEC, Mizuho Data, JPMC, CB, BTMUFJ, NTT BTMUFJ) Data) KR Full member (KATS) Participant member Member (KFTC Member (KFTC) and KATS) LA Subscriber member (DISM) MY Full member (DSM)Observing member MM Correspondent member (MSTRD) PH Full member (BSP)Observing member

SG Full member (SPRING SG)Participant member Member Member Member (Standard (Standard Chartered Bank) Chartered Bank, Deutsch Bank) TH Full member (TISI) Observing member VN Full member (STAMEQ)

ABCI = Authority for Building Control and Construction Industry of Brunei; ASEAN+ 3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BN = Brunei Darussalam; BOJ = Bank of Japan; BSN = Badan Standardisasi Nasional (National Standardization Agency of Indonesia); BSP = Bangko Sentral ng Pilipinas; BTMUFJ = Bank of Tokyo Mitsubishi UFJ; CN = People’s Republic of China; DISM = Department of Intellectual Property, Standardization, and Metrology; DSM = Department of Standards Malaysia; HK = Hong Kong, China; ID = Indonesia; ISC = Institute of Standards of Cambodia; ISO = International Organization for Standardization; ITCHKSAR = Innovation and Technology Commission of the Government of the Hong Kong Special Administrative Region; JASDEC = Japan Securities Depository Center; JISC = Japanese Industrial Standards Committee; JP = Japan; JPMC = J.P. Morgan Chase Bank; KATs = Korean Agency for Technology and Standards; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; Mizuho CB = Mizuho Corporate Bank; MM =Myanmar; MSTRD = Myanmar Scientific and Technological Research Department; MY = Malaysia; PBOC = People’s Bank of China; PH = Philippines; PSEG = Payments Standards Evaluation Group; RMG = Registration Management Group; SAC = Standardization Administration of China; SG = Singapore; SPRING SG = Standards, Productivity, and Innovation Board, Singapore; SSEG = Securities Standards Evaluation Group; STGAMEQ = Directorate for Standards, Metrology, and Quality of Viet Nam; TC68 = Technical Committee 68; TH = Thailand; TISI = Thai Industrial Standards Institute; VN = Viet Nam. Source: ABMF SF2 V International Securities Identification Number

ABMF SF2 has been promoting the International Securities Identification Number (ISIN) to be used as a standard securities number to identify bonds issued in ASEAN+3 economies. ABMF SF2 has also been promoting timely ISIN allocation in each economy in ASEAN+3 in accordance with the recommendation of ANNA. An ISIN identifies the economy where the bond is issued by adding a two-character country code, based on ISO 3166, at the beginning of the number. The economy where the bond is deposited (in a CSD) is regarded as the economy where the bond has been issued. An ISIN is to be allocated by the NNA in each economy. An overview of ISIN is shown in Appendix 5.

The 10 ASEAN+3 economies with developed bond markets have established NNAs. The remaining economies that do yet have an NNA shall be supported by ADB, ANNA, and the other 10 economies in the establishment of an NNA when each economy is ready to issue bonds regularly. Table 10 shows the current status of NNAs and the allocation of ISIN in each ASEAN+3 economy.

In order to promote cross-border STP in ASEAN+3, securities need to be identifiable by nonresident investors in other economies. When issuing securities, data (information) on the securities, including securities numbering (ISIN), also need to be known by nonresident investors located in other economies. To meet such requirements, the ISIN needs to be allocated in a timely manner in accordance with the ANNA recommendation (within 24 hours of the request). During Phase 1 of ABMF SF2, some of the international experts pointed out that a significant number of economies in ASEAN+3 do not satisfy the requirements of the ANNA recommendation. However, this survey revealed that the timeliness of ISIN allocation has improved drastically in recent years and many economies in the region were nearly meeting the 24-hour requirement.

The ISIN allocation flows for government bonds and corporate bonds in each economy of ASEAN+3 are shown in the Attachment 5. 26 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Table 11: National Numbering Agencies and the Allocation of ISIN in ASEAN+3 Economies

National Numbering Agency (NNA) Allocation of ISIN Availability in English CN China Securities Regulatory Commission (CSRC)/China Within 48 hours No Securities International Standards Committee (CSISC) HK Hong Kong Exchanges and Clearing Ltd. (HKEx) Within 48 hours Yes ID Indonesian Central Securities Depository (KSEI) Within 24 hours Yes JP Tokyo Stock Exchange (TSE)/Securities Identification Code Within 24 hours No Committee (SICC) KR Korea Exchange (KRX) Within 24 hours No MY Bursa Malaysia (BM) Within 24 hours Yes PH Securities Exchange Commission (SEC) Within 24 hours Yes SG Singapore Exchange Limited (SGX) Within 24 hours Yes TH Thailand Securities Depository (TSD) Within 24 hours Yes VN Vietnam Securities Depository (VSD) Within 24 hours No ASEAN+ 3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BN = Brunei Darussalam; CN = People’s Republic of China; HK =Hong Kong, China; ID = Indonesia; ISIN = International Securities Identification Number; JP = Japan; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MM = Myanmar; MY = Malaysia; PH = Philippines; SG = Singapore; TH = Thailand; VN = Viet Nam. Note: The NNA should allocate ISIN within 24 hours following the request and make the ISIN available to users at the same time in each economy. A proprietary securities number is generally allocated by each central securities depository. Source: ABMF SF2. VI

Collateral and Repo Services

Overview of Repo Transactions

It is generally anticipated that tightening regulatory frameworks, such as implementation of the Dodd–Frank Wall Street Reform and Consumer Protection Act and Basel III capital requirements, will cause shortages of good collateral. The importance of liquidity has been emphasized by many high-ranking central bank officers and experts. Amid this background, ABMF SF2 has been grappling with cross-border collateral and cross-currency repo issues over the course of Phase 3 and assessing the differences in repo markets in the region, including transaction flows and messages. This issue remains a challenge.

There are several types of repo transactions. In this report, repo transactions are categorized into two types. One is a repurchase agreement (sell and buy-back), which is commonly known as repo in many markets, by transferring ownership title. The other type is borrowing or lending (including pledged) that does not transfer ownership title, considering the transaction flows and interest payment processes. This classification is in line with market practices in Europe, which categorizes the former type as a repurchase agreement (repo) and the latter as a pledge agreement (pledge). For more details on the cross-border use of repo and collateral, please refer to Appendix 6.

In Europe, the cross-border use of collateral has been under consideration since the 1990s and a system has been successfully implemented. Indeed, the complexities of the cross- border use of collateral can only be properly analyzed based on a thorough understanding of collateralization in a national context.

Repo Transactions in ASEAN+3

According to a survey conducted by the Self-Regulatory Organization Working Group, a repurchase agreement (sell and buy-back) is more prevalent in most economies than a borrowing or lending (pledge) repo.5 In addition, the Global Master Repurchase Agreement (GMRA) proposed by the International Capital Market Association seems to be gaining acceptance in ASEAN+3 economies.

The survey also highlighted that transaction flows related to collateral and repo services, including interest and tax payments such as withholding, are different in each economy in the region. It was recognized that the standardization of repo transaction flows would not be

5 The Self-Regulatory Organization Working Group (SRO WG) is a voluntary group that convenes in conjunction with ABMF. Mr. Ryuichi Shiina of the Japan Securities Dealers Association led the survey effort and presented on repo markets in ASEAN+3 economies at several SRO WG. 28 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Table 12: Repurchase Transactions in ASEAN+3

Repurchase Agreement or Sale and Purchase Pledged or Borrowing and Lending CN (Interbank market) (Interbank market) • Outright repo: 3.4% of trade volume • Pledged repo: 96.6% of trade volume • Transfer of ownership occurs • Non-transfer of ownership HK • Classic repo • Borrowing and lending market exists, but is not clear whether it is used as an alternative to repo ID • Sell and buy-back: 50%-70% • Does not exist • Classic asset blocking 20%-40% JP • Gensaki transactions (sale and purchase): 20% share in • Bond borrowing and lending used as an repo market alternative to repo (cash collateralized repo): approximately 80% share of the repo market KR • (OTC repo) Most repos are so-called classic repo that • Borrowing and lending market exists, but combines spot sale and forward buy in a single contract. Sell is not used as an alternative to repo and buy-back repo is almost nonexistent. • (Exchange repo) Only classic repo MY • Classic repo and sell and buy-back • None PH • Classic repo with third-party collateral management • None SG • Real repo (transfer of ownership) • Does not exist TH • Most repos are in the form of classic repo, while sell and • Securities borrowing and lending exists, buy-back is not popular because there is no tax incentive but is not active VN • All repos are in the form of classic repo • Does not exist ASEAN+ 3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BN = Brunei Darussalam; CN = People’s Republic of China; HK =Hong Kong, China; ID = Indonesia; JP = Japan; KR = Republic of Korea; MM = Myanmar; MY = Malaysia; PH = Philippines; SG = Singapore; TH = Thailand; VN = Viet Nam. Source: Self-Regulatory Organization Working Group (Mr. Ryuich Shiina) as modified by ADB Consultant for ABMF SF2.

an easy task given wide differences across ASEAN+3 economies in the tax operations and legal issues associated with these transactions.

Figure 12 presents an overview of repo transactions in Japan as a case study for ABMF members and experts.

A repurchase agreement (sell and buy-back) is a bond sales transaction in which the traded bonds (spot legs) is traded back in the opposite direction (forward legs) on the date and at the price specified in an agreement concluded in advance between the parties of the transaction. The repurchase agreement (sell and buy-back) incorporates risk management measures such as the use of a package settlement provision, margin call feature, and substitution.

In a borrowing or lending transaction, one party (the lender) lends bonds to a second party (the borrower). After a specified period, the borrower returns bonds of the same kind and in the same amount to the lender, thereby settling the lending transaction. Previously, the type of borrowing and lending transaction that prevailed in Japan was used for avoiding paying the securities transaction taxes due when the bonds were sold. A transaction tax is one of the most important factors in each market for the acceptance of a certain type of repo. The Collateral and Repo Services 29

transaction tax on repo trades was abolished in Japan. As such, a repurchase agreement based on the GMRA and transferring ownership is now prevalent.

Figure 11: Overview of Repo Transactions in Japan

Sell and Buy-Back Borrowing and Lending Bonds Bonds Af period of time (F (

Cash collateral Borr Managing section) ter a certain Lender of bond Af period of time inancing section) Buy

Seller of bonds Funds ter a certain ower of bonds er of bonds

Bonds Bonds (Buy back) Lending costs s

Funds (Sell back) Cash collateral Interest Source: Ministry of Finance Japan with modifications by ADB Consultant for ABMF SF2. VII Updating the Status of Settlement Barriers

When it was launched in 2010, one of the main objectives of ABMF, as revealed in the results of a survey of the Group of Experts, was the removal of settlement barriers (Figure 13).

ABMF SF2 members and experts focused on mitigating settlement barriers through discussions and activities under Phases 1, 2, and 3. User requirements and market practices, including legal and regulatory issues, still need to be harmonized and standardized. In this section, the current status of these barriers in ASEAN+3 is discussed.

This report does not suggest that all regulations and controls need to be abolished, since many are essential to protect ASEAN+3 economies from external turmoil. As such, it should be the discretion of regulators and central banks in individual economies whether and when

Figure 12: ABMF’s Focus on Settlement Barriers

SF SF

More Taxes s Messaging Cash controls FX controls credit balances, conversion, d format Securities overdrafts repatriation numbering Pre- Investor registration involve matching Omnibus Settlement Physical Number of market accounts cycle certiﬁcates Quotas Fewe r

Private sector Public sector Area of inﬂuence

SF Improve information ﬂows in the markets Timely information, uniform disclosure, price transparency, market statistics, information on corporate actions, and legal information such as bankruptcy and insolvency laws.

ABMF = ASEAN+3 Bond Market Forum, FX = foreign exchange, SF1 = Sub-Forum 1, SF2 = Sub-Forum 2. Source: Group of Experts Report modified by ADB Consultant for ABMF SF2. Updating the Status of Settlement Barriers 31

to remove such regulations and controls. For this reason, it is important that the current status of settlement barriers are surveyed and clarified.

Barriers Related to ABMF SF2

Message standard

The standardization of messages based on ISO 20022 is progressing in ASEAN+3. As shown in this report, either ISO 20022 or ISO 15022 has already been implemented in leading economies in ASEAN+3. Those economies that have not yet adopted an international standard for messages are planning to implement ISO 20022 when their CSD and RTGS systems are in the process of being reconstructed.

Pre-matching

Lack of automated pre-settlement matching was often identified as the cause of failure of delivery of a traded bond. As a result of the survey and discussions of ABMF SF2, implementation of an automated PSMS is recommended and included as a part of the reference DVP model.

Securities numbering

All ASEAN+3 economies in which bond markets exist have adopted ISIN and established an NNA for ISIN issuance. According to the Phase 3 survey, the allocation of ISIN within 24 hours has been achieved in most of the economies. Dissemination of bond-related information associated with ISIN has been recognized as an important issue. Those economies that do not yet have an NNA understand the importance of establishing one. ADB and ANNA are ready to support them.

Settlement cycle

ABMF SF2 has surveyed the settlement cycle of both government bonds and corporate bonds in each market and found wide differences among ASEAN+3 economies. In addition, settlement cycles can differ for government bonds and corporate bonds, and for bonds traded by residents and nonresidents, in the same economy. This remains a challenge for cross-border trade and settlement; however, the issue needs to be addressed globally because a regional solution might risk impeding transactions with the other parts of the world.

Physical certificates

Bonds are dematerialized or immobilized in all economies that already have bond markets in the region, although physical certificates (mainly for corporate bonds) remain in some economies. Bonds are completely dematerialized in the People’s Republic of China and Japan. 32 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Other Remaining Challenges

The following issues related with taxation and regulations remain challenges.

Taxation

ABMF SF2 has also discussed taxes related to interest payments and redemption. Some economies impose a capital gains tax and stamp duty for a bond traded by a foreign investor, though these are normally exempted in most other markets. Taxes related to interest payments are another important remaining challenge.

Capital Controls and Cash Controls

The People’s Republic of China maintains capital controls that require permission from the authorities to invest inside and outside of the domestic economy. Thailand restricts the cash holdings of foreigners. All other ASEAN+3 markets—except Hong Kong, China; Japan; and Singapore—require regulatory reporting based on the real-demand principle, a requirement to substantiate the underlying transaction for foreign exchange. SF2 members have recognized the need for such controls and reporting requirements; on the other hand, the regulatory reporting process could potentially be standardized if the objectives of the reporting were similar.

Account Structure

The account structure of each CSD differs by economy, mainly because of regulations and taxation. An omnibus account structure may be more convenient than a segregated account structure from a cross-border trade and settlement perspective. However, there is also an emerging trend of adopting a segregated account structure, with consideration of the transparency of the market. Account structure is another important subject and further study is needed. VIII

Policy Recommendations

ABMF SF2 has been promoting adoption of international standards related to bond market infrastructures in the region, which has been supported by the Asian Bond Markets Initiative Task Force 3. ABMF SF2 members and experts are grateful for understanding and support by the authorities. The following policy recommendations are in line with Asian Bond Markets Initiative objectives.

Harmonization of Message Flow

DVP Model 1 of the Bank for International Settlements (BIS) definition shall be adopted for bond settlement in ASEAN+3, when the market infrastructures in each economy, such as CSD and RTGS systems, undergo reconstruction. A bond shall be blocked (earmarked) first. After the transfer of funds, which means after completing cash settlement, the blocked bond shall be released to effect (complete) DVP settlement, considering that bonds are less liquid than cash.

Adoption of International Standards

International standards shall be adopted when the market infrastructures, such as CSD and RTGS systems, undergo reconstruction and/or total refurbishment. The following are examples of the international standards to be adopted:

•• message standard: ISO 20022, •• financial institution identifier: ISO 9362 (BICFI), •• securities numbering: ISO 6166 (ISIN), •• country code: ISO 3166-1, and •• currency code: ISO 4217.

Standardization of Message Items Essential and minimum message items to effect DVP settlement shall be standardized based on ISO 20022. The following messages and their items are proposed on a preliminary basis for further discussion:

•• bond settlement instruction: sese.023, •• matched results: sese.024, •• bond settlement confirmation: sese.025, •• cash settlement information and instruction: pacs.009, and •• cash settlement confirmation: camt.054. 34 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Facilitating Standard Evaluation Groups

It is advised that each economy that does not have an ISO 20022 T68 national mirror committee consider establishing the committee by joining TC68 as a participating member when the economy is ready to contribute to the decision-making processes related to ISO 20022. Establishing SSEG and PSEG in the region will also be discussed.

Establishing an NNA

ABMF SF2 has been promoting ISIN as the standard securities numbering in ASEAN+3 economies. Also, considering the importance of the standardization of securities numbering for cross-border STP, ABMF SF2 advises that those economies that do not yet have an NNA establish one once the economy reaches the stage of issuing a significant amount of bonds.

Repo ABMF SF2 recommends adopting a repurchase agreement (sell and buy-back type repo), which is a standard repo transaction in line with the GMRA. It is also recommended that transaction flows related to collateral and repo services be surveyed. IX

Roadmap Including Next Steps

Roadmap

2015–2016: Standardization phase

•• Agree on a reference model of DVP flow and essential (minimum) message items for DVP settlement in the region as a preliminary basis for discussions. •• Promote ISIN and BICFI as the standard securities numbering and financial institution identifier in the region, respectively. •• Promote awareness of international standards through TC68 national mirror committees to discuss issues including an RMG, SSEG, and PSEG, as well as an NNA. •• Discuss market practices at the national level and regional level, if possible. •• Support the Cross-Border Settlement Infrastructure Forum.

2017–2018: Implementation phase

•• Establish TC68 national mirror committees, including an SSEG and PSEG, in those economies that are ready to support such activities in the region. •• Implement standards in economies that are ready for adoption and migration to international standards. •• Review the reference model and standard message items among the members and experts. •• Operate and coordinate the regional activities of harmonization and standardization in economies that are ready to contribute to such activities.

2019–onward: Fully operational phase

•• Fully contribute to TC68 activities and establish related committees and groups in all ASEAN+3 economies. •• Establish T68 national mirror committees in all economies, including an SSEG and PSEG in ASEAN+3. •• Implement international standards in all economies in ASEAN+3. •• Promote regional activities of harmonization and standardization in ASEAN+3. •• Review the reference model and standard message items among the group members and experts. •• Operate and coordinate the regional activities of harmonization and standardization in ASEAN+3.

An overview of the latest ABMF SF2 roadmap is shown in Figure 13. 36 Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 (Phase 3 Report)

Figure 13: Roadmap Overview

Implementation Standardization phase Fully operational phase phase - - -

CSIF Roadmap

Implementation phase Implementation phase Implementation phase Integration phase - - - -

Develop standard Develop CSD-RTGS Implement CSD- Implement message ﬂows and linkage RTGS linkages integrated solution items

Developing a Deﬁning Starting central hub and Specifying detailed user production connecting essential user requirements, operation of each CSD and requirements design, coding, CSD-RTGS RTGS system and testing linkages with the hub

CSD = central securities depository, CSIF = Cross-Border Settlement Infrastructure Forum, RTGS = real-time gross settlement. Source: ABMF SF2.

Next Steps

The following activities will be conducted:

1. draft reference DVP flow will be agreed upon by ABMF SF2 members; 2. draft message items based on ISO 20022 will be agreed upon; 3. ISIN will be adopted as a common standard of securities numbering in ASEAN+3 and allocated in each economy in line with ANNA’s recommendation; 4. harmonization of market practices, including collateral and repo practices, in ASEAN+3 will be further surveyed; and 5. Brunei Darussalam, Cambodia, the Lao People’s Democratic Republic, and Myanmar will be supported by ADB and the other ASEAN+3 economies in developing their bond market infrastructures. Appendix 1 Members and Experts Including Observers and the ADB Secretariat

Table A1.1: National Members and Experts

Institution Name Mardini HJ Eddie BN NM Autoriti Monetari Brunei Darussalam (AMBD) Lim Shaw Fhen NM China Security Regulatory Commission (CSRC) Lu Dabiao Zon Jun China Central Depository and Clearing Co., Ltd. (CCDC) Ding Yahua CN NE Shanghai Clearing House (SHCH) Pi Jianping China Foreign Exchange Trade System-National Cui Wei Interbank Funding Center(CFETS) NM Hong Kong Monetary Authority (HKMA) Li Shu-Pui HK Michael Dai NE Bank of China (Hong Kong) Zhihuan E Ministry of Finance, Indonesia Agung Galih Satwiko NM Financial Services Authority (OJK), Ministry of Finance Bayu Samodro ID Indonesian Central Securities Depository (ICSD) Margeret Mutiara Tang NE Indonesia Clearing and Guarantee Corporation (ICGC) Indriani Darmawati Indonesia Stock Exchange (IDX) Urip Budhi Prasetyo NM Japan Securities Depository Center, Inc. (JASDEC) Yuji Sato Takahito Yamada Misa Takada JP Bank of Japan (BOJ) Akira Yokoya NE Megumi Takei Yuya Ueda Mizuho Corporate Bank, Ltd. Akihiko Mitani KH NM Securities & Exchange Commission of Cambodia (SECC) Va Sovy Korea Securities Depository (KSD) Jong Hyung Lee NM KR Korea Exchange (KRX) Jae Hyun NE Korea Securities Computing Corporation (KOSCOM) Jae Moon So Boualith Khounsy Ministry of Finance Bounthum Lomany LA NM Securities and Exchange Commission Office, Bank of the Saysamone Chantachack Lao PDR

continued on next page 38 Appendix 1

Table A1.1 continued

Institution Name MM NM Central Bank of Myanmar Daw May Maung Gyi Mohd Shaharul Zain MY NM Bond Pricing Agency Malaysia (BPAM) Meor Amri bin Meor Ayob Simon Ng Sean Cho Philippine Dealing System Holdings Corp.-PDS Group Cesar Criisol (PDS) NM PH Rafael S. Algarra, Jr. Bankers Association of the Philippines (BAP) Cesar O. Virtusio NE Omgeo Cornelia C. Dagdag SG NM Singapore Exchange (SGX) Kok Leong Lai TH NM The Stock Exchange of Thailand (SET) Chanisa Chutipat Duong Ngoc Tuan Vietnam Securities Depository (VSD) Luu Trung Dung VN NM Tran Thi Thu Huyen Hanoi Stock Exchange (HNX) Tran Tuan BN = Brunei Darussalam; CN = People’s Republic of China; HK = Hong Kong, China; ID = Indonesia; ISIN = International Securities Identification Number; JP = Japan; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MM = Myanmar; MY = Malaysia; NE = national expert; NM = national member; PH = Philippines; SG = Singapore; TH = Thailand; VN = Viet Nam. Source: ABMF SF2.

Table A1.2: International Experts

Institution Name Citibank Rudy Ingkiriwang BNP Paribas Patrick Vanderbeck Clearstream Alton Chan Fei Tang Boon-Hiong Chan Deutsche Bank AG Hannah-Vina Nunez Euroclear Gaetan Gosset HSBC Patrick Edmond Cichy Masayuki Tagai J.P. Morgan Danny Tan State Street Bank and Trust Steven Chan State Street Global Advisors Hon Cheung Alexandre Kech SWIFT Antonio Delorenzo Mireia Guisado Parra

continued on next page Members and Experts Including Observers and the ADB Secretariat 39

Table A1.2 continued

Institution Name The Bank of New York Mellon Eric Chng The Bank of Tokyo Mitsubishi UFJ Ltd Taketoshi Mori

Table A1.3: Observers

Institution Name Mohd Zul Azmi Haji Mohd Ali BN Autoriti Monetari Brunei Darussalam Hafizuddin Hassanuddin Yan Jia China Central Depository & Clearing Co., Ltd Lei Huang Zi Zheng Zepeng Hong China Securities Depository and Clearing Corporation Yang Liu Xi Zheng CN Liang Xia Xiaotian Mu Tailei Wan National Association of Financial Market Institutional Peng Sun Investors (NAFMII) Mingzheng Gao Ke Sun Asia Securities Industry and Financial Markets Rebecca Terner Lentchner Association Citibank, N.A. Hong Kong Cindy Chen Victor Wing Tai Ng Stefan Lepp Clearstream Banking S.A Gerd Hartung Fabrice Tomenko Davin Cheung Sherry Wang HK Olivier Grimonpont Euroclear Bank Fennie Kwok Dan Kuhnel Carlo Minieri Shu-pui Li Flora Wong Hong Kong Monetary Authority Esmond Lee Kwok Hung Lee Omgeo-DTCC Jean-Remi Lopez State Street Asia Limited Steven Chan continued on next page 40 Appendix 1

Table A1.3 continued

Institution Name Bank of Indonesia Devi Riyante Fiscal Policy Agency, Ministry of Finance Indonesia Vincentius Krisna Juli Wicaksono Indonesia Central Securities Depository Delonika Yuki Eka Putra Rezza Frisma Prisandy Jd Indonesia Financial Services Authority (OJK) Eko Rizanoordibyo ID Arif Budiman Indonesian Central Securities Depository Gusrinaldy Akhyar Parjiono Ministry of Finance Dalyono PT Kliring Penjaminan Efek Indonesia (KPEI) Iding Pardi Daiwa Securities Co., Ltd. Yutaka Yokoyama Tomohiko Kamimae Japan Securities Dealers Association Ryuichi Shiina Ministry of Finance Japan Katsuyuki Tomizawa Yasuhiro Ono Mizuho Bank, Ltd. Koji Kawase Daisuke Ogawa Mori Hamada & Matsumoto Toru Ishiguro Nomura International (Hong Kong) Limited Tatsuya Yasuda JP Nomura Securities Co., Ltd. Reiko Nobuhiro NTT DATA Corporation Naotaka Shibasaki NTT DATA Institute of Management Consulting Masahiro Nishihara NTT DATA Getronics Corporation Toshio Kawakami Hiroshi Kawagoe Sumitomo Mitsui Banking Corporation Haruyuki Takano Takeshi Taniguchi Marl Lee Tokyo Stock Exchange Koji Ito Marina Doi Sopheap Chan Lida Noh Ministry of Economy and Finance, Cambodia Chantha Chhoeng KH Vanny But Samnang Kan Likea Hor Securities and Exchange Commission of Cambodia Leakhena Song

continued on next page Members and Experts Including Observers and the ADB Secretariat 41

Table A1.3 continued

Institution Name Bank of Communication (Seoul Branch) Woong Ryeol Kim Sungwoo Shin The Bank of Korea Byoung Mok Lee Jeeyoung Jung Financial Supervisory Service Hyun-Ju Choi Jeonju University Heejoon Jeong Suk Hyun Korea Capital Market Institute (KCMI) Hyun Suk Seokho Han Korea Exchange In-ug Ryu Korea Financial Investment Association (KOFIA) Han Jo Kim KR Suju Kwon Mandy Ku Korea Securities Depository(KSD) Jong Hyung Lee Eujin Kwon Yunhak Lee Young Min Cho Korea Securities Computing Corporation (KOSCOM) Wan Sung Kim Sun Jin Jang Seok Bae Lee Min Soo Kwon Ministry of Strategy and Finance Beomseok Kim Chanpasith Sengphaathith LA Ministry of Finance, Lao PDR Visada Sipaseuth Zainal Hasfi Hashim Bank Negara Malaysia Lailatul Akma Mohd Shukor MY Aden Nadia Jabarri Thomas Meow CIMB Investment Bank Berhad Loong Yeow Boon continued on next page 42 Appendix 1

Table A1.3 continued

Institution Name Kuei-Hua Wu Hsiao Chink Tang Kelly Raquel Borres Asian Development Bank (ADB) Sheila Sombillo Shigeto Inukai Matthias Schmidt Remedios Macapinlac Bangko Sentral ng Pilipinas Eleanor S. Turaray Bella Santos Bankers Association of the Philippines Pinky Padronia PH Citibank N.A Reyes Theresa Ma. Theresa Ravalo Karen Bahia PDS Group Eleanor Rivera Apples Francisco Antonio Nakpil Vicente Graciano Felizmenio, Jr. Securities and Exchange Commission Jose Vermon Filio Ephyro Luis Amatong Bureau of the Treasury Erwin Sta. Ana Omgeo John Wu Qingyang Lim SG Singapore Exchange Megan Teo Jill Hong Chinda Yapanawech Bank of Thailand Ketkeaw Borvornniruttisai Nadhavudh Dhamasiri Ministry of Finance, Thailand Sukmeena Bhasavanich TH Chortip Svetarundra The Securities and Exchange Commission, Thailand Jomkwan Kongsakul Ariya Tiranaprakij Thai Bond Market Association Pisit Leeahtam Tada Phutthitada

continued on next page Members and Experts Including Observers and the ADB Secretariat 43

Table A1.3 continued

Institution Name Tran Anh Tuan Hanoi Stock Exchange Ngoc Anh Thi Dinh VN Ha Thi Nguyen Vietnam Bond Market Association Thao Ta Thi Bich UK Payments Council James Whittle BN = Brunei Darussalam; CN = People’s Republic of China; HK = Hong Kong, China; ID = Indonesia; ISIN = International Securities Identification Number; JP = Japan; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MM = Myanmar; MY = Malaysia; PH = Philippines; SG = Singapore; TH = Thailand; VN = Viet Nam; UK = United Kingdom.

Table A1.4: ADB Secretariat

Institution Position Name Deputy Head of Members and Experts Including Observers and the Noritaka Akamatsu ADB Secretariat Satoru Yamadera (from Oct. Principal Financial Sector Specialist 2014)

ADB Secretariat Financial Sector Specialist Kuei-Hua Wu (Jul.–Sep. 2014) Senior Financial Sector Specialist Shinji Kawai (until Jun. 2014) (Banking) Economics Officer Richard Supangan Economics Officer Raquel Borres (until Mar. 2015) Officer Sheila Sombillo Senior Manager, NTT DATA ADB Consultant for SF2 Taiji Inui Corporation ADB Consultant for SF1 Custody Business Specialist Matthias Schmidt ADB Consultant for SF1 Professor, Waseda University Shigehito Inukai Appendix 2 Purpose and Governance Structure of ABMF SF2

Purpose of ASEAN+3 Bond Market Forum

The Association of Southeast Asian Nations (ASEAN)+3 Bond Market Forum (ABMF) was established in September 2010 based on the endorsement of the ASEAN+3 Finance Ministers’ Meeting as a common platform to foster standardization of market practices and harmonization of regulations relating to cross-border bond transactions in the region.1

ABMF is expected to discuss various bond market issues to further develop liquid and well-functioning bond markets to make cross-border bond investment and settlement both smoother and cheaper; hence, the region’s abundant savings will be channeled more effectively into the region’s increasing investment needs.

ABMF aims to (i) assess the existing regulatory frameworks and identify recommendations on how to foster harmonization of regulations and market practices that facilitate cross- border bond transactions in the region; (ii) enhance dialogue between the private sector and ASEAN+3 officials to develop bond markets in the region and promote harmonization, standardization, and integration; and (iii) provide opportunities to exchange knowledge, expertise, and experience between the private and public sectors in the region.

ABMF took stock of the Group of Experts (GoE) report on cross-border bond transactions and settlement issues.2

Organizational Structure and Governance

ABMF is organized under Task Force 3 (TF3) of the Asian Bond Markets Initiative (ABMI). ABMF consults with the co-chairs of TF3 in undertaking any regional activities and reports to TF3 on a regular basis regarding the progress of its activities. The organizational structure of ABMF is presented overleaf.

The ABMF consists of two sub-forums: Sub-Forum 1 (SF1) and Sub-Forum 2 (SF2) (Figure A2.1). The objective of SF1 is to close the information gap in regulations, market practices, and other areas in the region’s bond markets. SF2 focuses on enhancing straight- through-processing (STP) in ASEAN+3. This report is about SF2.

1 The Joint Ministerial Statement of the 13th ASEAN+3 Finance Ministers’ Meeting on 2 May 2010 in Tashkent, Uzbekistan states: “We [ASEAN+3 Finance Ministers] took note of the Group of Experts’ findings and suggestions on facilitating cross-border bond transactions and settlement, and welcomed the establishment of the technical working group on Regional Settlement Intermediary (RSI) to further evaluate the policy recommendations. We endorsed the establishment of ASEAN+3 Bond Market Forum (ABMF) as a common platform to foster standardization of market practices and harmonization of regulations relating to cross-border bond transactions in the region.” 2 ASEAN+3 Asian Bond Markets Initiatives Task Force 4. Groups of Experts Report. http://asean3goe.adb.org Purpose and Governance Structure of ABMF SF2 45

Figure A2.1: Organizational Structure of the ASEAN+3 Bond Market Forum

ASEAN Finance Ministers and Meet annually Central Bank Governors

ASEAN Deputies Meet semi-annually

Monitor progress and ABMI Steering Group coordinate future plans

TASK FORCE

TF TF TF TF TACT

Promoting Issuance of Facilitating the Improving Regulatory Improving Related Technical Local Currency- Demand of Local Framework Infrastructure for the Assistance Denominated Bonds Currency-Denominated -Strengthening regulatory Bond Market -Credit Guarantee and Bonds and supervisory framework -Infrastructure for Investment Facility -Development of for securities securities settlement (CGIF) investment environment -Facilitating collaboration -Increasing liquidity of -Promotion of Asian for institutional among SROs in the region bond markets Currency Note investors -Improving bankruptcy -Fostering credit culture Programme -Information procedures related to bond -Developing professional -Promoting issuance of dissemination transaction services structured ﬁnance -AsianBondsOnline -Promoting application of instruments international accounting and auditing standards GoE (Group of ABMF Experts)

SF SF CSIF

ABMI = Asian Bond Markets Initiative; ABMF = ASEAN+3 Bond Market Forum; ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; CSIF = Cross-Border Settlement Infrastructure Forum; SF =Sub- Forum; SRO = self-regulatory organization; TACT = Technical Assistance Coordination Team; TF = Task Force. Source: ABMF.

Purpose and Position of ABMF SF2

The GoE report identified various settlement barriers related to messaging formats, securities numbering, matching, and settlement cycle. Thus, the ABMF SF2 addresses these problems to enhance regional STP by harmonization of transaction procedures and standardization of messages.

It is desirable to execute cross-border transactions without any manual processes or data conversion among market infrastructures in the region. This ideal situation can be realized if all transactions are operated through a system using common standards and consistent messaging. This is not currently possible because individual economies have their own practices and standards, which is inevitable because certain transaction procedures follow national requirements to account for unique circumstances. In addition, some segments of 46 Appendix 2

a market may prefer ways of handling transactions, which creates differences in transaction procedures, hence requiring additional conversion to international practices. Furthermore, differences in language remain a significant barrier as some ASEAN+3 economies use their own characters for payment systems and communications. Adopting international standards frameworks such as International Organization for Standardization (ISO) 20022 can mitigate impediments and barriers, which will enhance interoperability in ASEAN+3 bond markets.3

Phase 1 studies of ABMF SF2 mainly discussed business flows by focusing on government bond transactions, which are larger and relatively simpler compared with corporate bond transactions. The studies identified and standardized the procedures in trade and settlement, particularly delivery-versus-payment (DVP) of government bonds. In addition, ABMF SF2 discussed other settlement-related barriers such as securities numbering, settlement cycle, and matching to improve settlement procedures.4

Phase 2 studies of ABMF SF2 succeeded the agenda set forth in the GoE report and Phase 1 studies. The GoE report pointed out barriers to promoting STP in ASEAN+3 bond markets. Phase 2 studies covered five barriers that were detailed in the GoE report: messaging formats, pre-matching, securities numbering, settlement cycles, and physical certificates. Phase 2 studies also covered DVP flows of corporate bonds; government bond flows in Brunei Darussalam, Cambodia, the People’s Democratic Republic, and Myanmar; flows of interest and redemption payments; message formats and items; and market practices as well as foreign exchange and cash controls to implement STP.5

Possible Goals of SF2

One of the possible goals of ABMF SF2 is to promote STP. To achieve this objective, SF2 has clarified differences among ASEAN+3 economies about DVP and interest payment flows, message items, and market practices. Moreover, SF2 has defined typical DVP and interest payment flows for references by operators of bond market infrastructures. Another goal is to promote ISO 20022 and related international standards, in particular International Securities Identification Number and Business Identifier Code, based on the survey results (Figure A2.2).

Through the Phase 1 and 2 studies, SF2 has revealed that each economy has its own DVP flow and market practices. These differences could be barriers to achieving STP. Not all ASEAN+3 economies adopt the same rules, since they have unique legal and business requirements. To promote STP, each economy is expected to adopt the same DVP and interest payment flows to the extent possible when they are in the process of reconstructing their current bond infrastructures. If all ASEAN+3 economies comply with typical flows defined by ABMF SF2, the region’s barriers to STP will be reduced steadily.

3 ISO is a worldwide federation of national standards bodies. ISO 20022 provides the financial industry with a common platform for the development of messages in a standardized XML syntax. 4 ABMF SF2. Phase 1 Report. https://wpqr1.adb.org/LotusQuickr/asean3abmf/Main.nsf/h_Toc/ 3B92 9170855F3F0E482579D4002E9940/?OpenDocument 5 ABMF SF2. Phase 2 Report. http://asianbondsonline.adb.org/features/abmf_phase_2_report/ subforum2_asean+3_information_transaction_flows_settlement_infrastructures.pdf?src =spotlight Purpose and Governance Structure of ABMF SF2 47

Figure A2.2: Possible Goals of Sub-Forum 2 ASEAN proprietary practices

Current dierences among economies dierences from international standards

Future to conform to international standards to be registered as international standards after conforming in the region

ISO ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; ISO = International Organization for Standardization. Note: International standards (such as ISO 20022) will be the focal point and hub of local standards. Source: ABMF SF2.

Concerning message format and items, as well as numberings and coding, ASEAN+3 proprietary practices (local standards) demonstrate differences from international standards, including ISO 20022. Also, proprietary practices of ASEAN+3 are different from economy to economy and market to market.

Therefore, proprietary practices of ASEAN+3 could be changed to meet international standards. It is important to harmonize practices in the region to make the differences narrower. International standards, such as ISO 20022, should form the basis of local standards to make harmonization a reality. Also, practices in ASEAN+3 that have been identified as being at par with international standards should be considered as a benchmark (Figure A2.3).

Methodology Overview

Phase 3 activities of ABMF SF2 are divided into six stages as illustrated in Figure A2.4.

Stage A: Determination of Survey Area

SF2 members agreed on the scope of the research of Phase 3 activities. Phase 2 activities covered market practices and DVP flows in corporate bond markets, and flows related to interest payments and redemption in both government and corporate bond markets. In 48 Appendix 2

Figure A2.3: Contribution of ASEAN+3 to International Standards

ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; International Organization for Standardization. Note: International standards (such as ISO 20022) will be the focal point and hub of local standards. Source: ABMF SF2.

Phase 3, SF2 has studied a reference DVP model; message items of settlement instruction; and confirmation, ISIN, repo, and other topics related to bond settlement.

The Asian Development Bank (ADB) Consultant for ABMF SF2 drafted the survey questionnaire for ASEAN+3 economies. It was then distributed to national members and experts for their responses.

Stage B: Market (Economy) Visit

The ADB Secretariat and consultant visited each economy to validate the information and data contained in the survey responses. Furthermore, during such visits, discussions with ABMF members and experts were held to collect more information. Topics of discussion were the reference DVP model, message standards, ISIN, repo, and the roadmap, among others.

Stage C: Comparison Analysis

ABMF SF2 conducted two types of comparison analysis. One analysis was of the DVP model. ABMF SF2 has tried to create a DVP model for ASEAN+3 bond market. If each market has its own business flow for bond transactions, the realization of STP will be difficult. Acceptance of same DVP model would be a first step toward harmonization of bond settlement. Other analysis was about message standards. SF2 determined the key message corresponding with the DVP model: settlement instruction, matched result, message confirmation, cash settlement instruction, and cash settlement confirmation.

Stage D: Standardization

Through the above stages, ABMF SF2 set forth a reference DVP model and message standards for settlement instruction and confirmation for the sake of cross-border STP in the future. Purpose and Governance Structure of ABMF SF2 49

Figure A2.4: Phase 3 Activities of ABMF SF2

STAGE A: STAGE B: STAGE D: Determination of Economy Visit Standardization Survey Area •Through economy visits and •Agreed on the scope of the •Visiting each economy to survey comparison analysis, SF sets survey by SF members •Discussing DVP model, message reference DVP model and •Drafting of the survey standard, ISIN, repo, and message standards about questionnaire by consultant roadmap with regulator, settlement instruction and •Responding to questionnaire by infrastructure operator, and conﬁrmation national members market participants

STAGE C: STAGE E: Comparison Analysis Roadmap

•Comparing reference DVP model •Visualizing adoption of with present DVP ﬂows of each international standard by each market economy •For the sake of standardization, •Planning study framework of comparing message deﬁnition of future ASEAN bond market ISO with those of TS and other developed message items

ADB = Asian Development Bank; ASEAN+3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; DVP = delivery-versus-payment; ISIN = International Securities Identification Number; ISO = International Organization for Standardization; T2S = Target 2 Securities. Source: ABMF SF2.

Stage E: Roadmap

ABMF SF2 has set out a roadmap for the future state of ASEAN+3 bond market infrastructures.

Survey Questionnaire

In order to try to reach its goals, ABMF SF2 conducted a survey on the issues related to barriers by sending a questionnaire to national members and international experts. The following are the primary topics of the ABMF SF2 Phase 3 survey:

1. reference model about DVP settlement, 2. message items related to DVP settlement, 3. settlement matching, 4. ISIN, 5. collateral and repo, 6. harmonization of market practices, 7. roadmap, 8. policy recommendations, and 9. other issues. Appendix 3 Message Items for Cross-Currency DVP

Examples of message items and instances to effect cross-currency delivery-versus-payment (DVP) settlement are shown as a preliminary basis for discussion in Figure A3.1.

On 15 July 2014, HSBC Securities Japan Limited (IBJPJPJT), the account owner, instructs the instructs Japan Securities Depository Center (JJSDJPJT) to receive against payment securities. The securities are to be delivered by Mizuho Bank Tokyo (MHCBJPJT). The Financial Instrument is JP3165570AC61. The quantity is the face amount JPY 7,899,300,000. This is done through a Securities Settlement Transaction Instruction (sese.023).

This instruction contains the following information details

1. Transaction Identification: HSBCTK005REC02 2. Securities Movement Type: receive 3. Payment: against payment 4. Settlement Date: 15/07/2014 5. Financial Instrument: JP316570AC61 6. Quantity: face amount 7,899,300,000 7. Safekeeping Account: 1272491 8. Securities Transaction Type: trade 9. Delivering Depository: JJSDJPJT (JASDEC) 10. Delivering Party 1: MHCBJPJT (Mizuho Bank Tokyo) 11. Receiving Settlement Party 1: IBJPJPJT (HSBC Securities Limited) 12. Debtor Agent: BLICHKHX (HSBC Bank USA, N.A.) 13. Creditor Agent: MHCBHKHH (Mizuho Bank HK Branch) 14. Settlement Amount: HKD 452,000 debit

Message items for (a) bond settlement instruction from participants to the central securities depository (CSD), (b) matched results from the CSD to participants, (h) bond settlement confirmation from the CSD to participants, (d) and (e) cash settlement instruction from participants to Real-Time Gross Settlement (RTGS) and vice versa, and (f) cash settlement confirmation from RTGS to participants are shown in Tables A3.1 through A3.5. Message Items for Cross-Currency DVP 51 r ᧥

t r d ᧥ r Bank

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Preliminary sese.023.001.03 Items_Table A3.1 Message Message Items for Cross-Currency DVP 53 Example2: 0 sese.023.001 0 0 , 2 T 5 message to JASDEC by I 4

D D E Mizuho Bank Tokyo send DVP K R MHCBHKHH (Mizuho Bank HK Branch) BLICHKHX (HSBC Bank USA, N.A.) JJSDJPJT (JASDEC) IBJPJPJT (HSBC Securities Limited) H C Example1: 0 0 0 , 2 5 4 T

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n n e e y y y c h o q q a t i t t t n n n n n a a i i d d t s s r r r e e e e e d r n n n n m o a o o a a a i i i BIC d d d d d n I T I Cod e U P 9362 "Banking - Banking telecommunication messages Business Identifier Code (BIC)". C P describe d Code (BIC)" I U counterparty requests to receive the financial instrument or from where delivers the financial instruments. I Cod e describe d Code (BIC)" P C F C described in ISO 9362 "Banking - Banking telecommunication messages Business Identifier Code ( F I F describe d Code (BIC)” A Cod e I t t t t t t e e e e e e S S S S S S Type r r r r r r t t e e e e e e e i i i i i i n f f f f f f S i i i i i i u t t t t t t e o n n n n n n d e e e e e e m o d d d d d d I I I I I I A C > > d

t > n > > > > > > s I t t m t > e g C C C C g i > > y I I I I b A t I I r > A > A > B B B B t > P r r F F r r D t m 1 t s t y y y y t t t l h C C y t > > > > > > b p b n n n n m d s d d I I t t d d d d d d S I P C I A A I I B D C D C I B D A I A A C < < < < < < < < < < < < < < < < < < < < < < ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ...... 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ ISO20022 Multiplicity draft r o t a c n n n n n n i o o o o o o d i i i i i i t C C C C Message Element t t t t t t I I I I n t n I I I a a a a a a B B B B e n t F F c c c c c c i i i i i i i y y y y g y e f f f f f f C C b r i i i i i i n n g n n I I A t t t t t t e o r r t A A B A B A A t n n n n n n i r r o o D n s e e e e e e t t t 1 o o u i i i t o t d d d d d d y o d d d I I I I I I t b p b r e e e e e e m r r r a P C D D C D A C SettlementAmount CashParties Preliminary sese.023.001.03 Items_Table A3.1 Message Table A3.1 continued A3.1 Table 54 Appendix 3 on 2 6th e bonds ) .024.00 1 vi ce. se po rat tu s ad ATA Corporati ai ght cor ) mple4: Exa mple4: 1 000CEDSAJ tc hed) nk receive se 5 1 - 70- 4 1 02 d s tr AC6 1 li ver) 00 1 0000 (tra de T I DE RC N TT D tched staas ma tched continued on next page on next continued 3165 70 AC H (ma EL I (de RAD Mizuho Ba MIZUHOTK0001 HKD 452,000 M J PY 7,899,300,000 T JP (ISIN: unse cure D tu s on 26th e bonds ) po rat mit ed receive vi ce. as matched sta ad ATA Corporati ai ght cor Exa mple3: 1 000CEDSAJ 00 1 es Li curiti es atc hed) 5 1 - 70- 4 1 02 d s tr AC6 1 TT D 02 4. (tra de) 194272 1 T I BED BC Se 3165 70 sese. HS HSBCTK005REC02 HKD 452,000 MAC H (m TRAD J PY 7,899,300,000 JP (ISIN: N unse cure RECE (receive) RECE eht yb dengi sed metsys gni A rebmun . )NISI( noi rebmuN taci f i tnedI sei t i ruceS lanoi tanretnI tbed a fo , lapicni rp eht i . e . , , tnuoma ecaf eht gnitneserper tnuoma na sa desserpxe ytitnauQ desserpxe sa na tnuoma gnitneserper eht iecaf .eht e rp a fo , ., lapicni tnuoma , tbed cti on . s ISIN eht erehw DSC eht si ti ,tnemelttes al l inav nialp a nI .niahc tnemelttes eht ni ytrap tsriF . tnuoma ecaf tnerruc ro t ,nuoma ecaf lanigi ro ,st inu ni tnemurtsni laicnani f fo yt i tnauQ str u n umbe r (if mposed o f a he ss ign ue r. iss

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De fi y of is y h a .delttes eb ot seitiruces fo ytitnauq latoT ytitnauq fo seitiruces ot eb .delttes . no i t ca sna r t eh t f o s l i a t ed eh t s e i f i t ned I ns acti un tr oun tr den tificati . y r t ne hs ac eh t n i yenom f o t nuomA he c he tra E ach co on is to be settle i t ca sna r t eh t woh s e i f i cepS of t on of on al Organizati on for Standardizati on (ISO). Th ei daea e f dei icepS etad dna .emit k d igit. .dehctamnu s i sutatS .dehctamnu tificati arf S niOSI etaD . tamrof uous transacti on i .dehctam s i sutatS .dehctam en tooR tnemucoD tooR a chec d a .etad deificepS .etad t o o R e g a s s eM pa ge1/2 pplied to the settlement of a security transfer. a s r e t ema r a P uous id cti ng des un ambig ed N ati ons Internati mb ig ntifies the type of securities transacti on . ed I str u str ument. Una delivers the financial instruments. c ounterparty requests to receive the financial instrument or in Provi Financial instruments representing a sum rights of the of vis-a-vis investor Financial 2-character prefix repr esen ting t Unit in numbers for securities in that country. one e xists), an Account to from or which a securities entry is made. Unambiguous identification for the account between the account owner and the account servicer. t eS r e i f i t ned I Typ e em i T e t aD t e S e doC t e S e d oC t e S e doC t e S e doC t e S e doC t e S e doC t nuomA t nuomA t x eT t x eT e t aD t x eT Text cdsSTltts c<1. . 1 [ t tSse i tcS<]1 >cvdAstSxTml >pTtnmvMseitcS<]1..1[ siPltgc<1 .0[ >seitPmlttSgvcR<]1. > d I x T r n w O t c c A <] 1 . . 1 [ Tag > > n s R d f . c p S . oN<]1 1 [ saamtt<1. . 1[ tS<]1 >smaraPmlt > f n I n s R l t d d A <] 1 . . 0 [ > d I m r t s n I n i F <] 1 . . 1 [ > p T x T s e i t c S <] 1 . . 1 [ dItDd<1. . 1 [ tbDtdC<]1 >dnI > t n e m u c o D <] 1 . . 1 [ > t c c A g p k f S <] 1 . . 1 [ > t m A m l t t S <] 1 . . 0 [ > s t S g h c t M <] 1 . . 0 [ > y t Q m l t t S <] 1 . . 1 [ > t m A e c a F <] 1 . . 1 [ > d h c t m U <] 1 . . 1 [ DlttS] . .> tDml t 1 t [ S<]1 XM L > y r t s p D <] 1 . . 0 [ > d h c t M <] 1 . . 1 [ > s l t D x T <] 1 . . 0 [ > m T t D <] 1 . . 1 [ > N I S I <] 1 . . 0 [ > t m A <] 1 . . 1 [ > t m P <] 1 . . 1 [ > y t Q <] 1 . . 1 [ > n s R <] n . . 1 [ > d C <] 1 . . 1 [ > d C <] 1 . . 1 [ > d C <] 1 . . 1 [ > t D <] 1 . . 1 [ > t D <] 1 . . 1 [ > d I <] 1 . . 1 [ .. 1]rT xId> [1 [0 ISO20022 Multiplicit y< 30VecivdAsutatSnoitcasnarTtnemeltteSseitiruceS noi tac i f i tnedInoi tcasnarTrenwOtnuoccA no i t o amr f n I no s aeR l ano i t i ddA o ai i tacif tnedItnemurtsnIlaicnaniF noi den tification epyTnoitcasnarTseitiruceS s e i t r a P t n eme l t t e S g n i v i e c e R on I e p y T t n eme v oMs e i t i r u c e S oain t ibeDtiderC rotacidnI Table A3.2: (b) sese.024 Securities Settlement Transaction Status Advice (Matched Results from CSD to Participants) CSD to Participants) from Results (Matched Advice Status Securities Settlement Transaction sese.024 A3.2: (b) Table n o s a e R d e i f i c e p S oN s r e t ema r a P t n eme l t t e S ns acti t nuo c cAg n i pe e k e f a S ume aF t nuomAec y t i t n a uQ t n eme l t t e S t n u omA t n eme l t t e S ss age Element em i T e t aD rTr a noitacifitnedI e doC Me e t aD t n eme l t t e S ificati on y r o t i s o p eD ail s e doC y t i t n a uQ e doC t nuomA e t aD d e h c t amnU no s a eR t n emy a P d e h c t aM e t aD NI S I oun tService ar y dra Pr elimin ft A3.2 sese.024.001.03 s_ Table sacti on Ident sacti on Det Acc t n emu c oD Tra n MatchingStatus Tra n geessa Item M Message Items for Cross-Currency DVP 55 Example4: Example4: (Mizuho Bank) as matched status advice. status as matched Mizuho Bank receive sese.024.001Mizuho Bank receive IBJPJPJT (HSBC Securities Limited) Securities (HSBC IBJPJPJT JJSDJPJT (JASDEC) MHCBJPJT JJSDJPJT (JASDEC) advice. Example3: (Mizuho Bank) sese.024.001 assese.024.001 status matched HSBC Securities Limited receive LimitedHSBC receive Securities JJSDJPJT (JASDEC) MHCBJPJT JJSDJPJT (JASDEC) IBJPJPJT (HSBC Securities Limited) Securities (HSBC IBJPJPJT Definition ode (BIC)" ode (BIC)" C C page2/2 a settlement chain , in teracts with th e de pository. a settlement chain , in teracts with th e de pository. as described in ISO 9362 "Banking - Banking telecommunication messages as described in ISO 9362 "Banking - Banking telecommunication messages dentifier dentifier I I First partyFirst in the settlement chain. In a plain settlement, vanilla it is the CSD where the in Party th at, Party th at, in counterparty requests to receive the financial instrument where from or the counterparty delivers the financial instruments. organisation. an to identify way unambiguous and Unique Unique and unambiguous way to identify an organisation. an to identify way unambiguous and Unique Identification of the party. the of Identification Identification of the party. the of Identification Identification of the party. the of Identification Identification of the party. the of Identification Identifies the chain of delivering settlement parties. settlement delivering of chain the Identifies Code allocated to a financial or non-financial institution by the ISO 9362 Registration Author ity, Business Code allocated to a financial or non-financial institution by the ISO 9362 Registration Author ity, Business Type IdentifierSet IdentifierSet IdentifierSet IdentifierSet [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [0..1] [0..1] [0..1] [0..1] ISO20022 Multiplicity Tag>

Preliminary

Message Element sese.024.001.03

AnyBIC AnyBIC AnyBIC AnyBIC A3.2

Identification Identification Identification Identification Party1 Depository Party1 DeliveringSettlementParties Items_Table

Message Table A3.2 continued Table 56 Appendix 3 orporate orporate c traight s Example6: (Mizuho Bank) (Mizuho Mizuho Bank receive receive Bank Mizuho continued on next page on next continued unsecured onfirmationby using sese.025.001. SecuritiesSettlementTransactionC MHCBJPJT JPY 7,899,300,000 JPY MIZUHOTK0001 2014-07-15 JJSDJPJT (JASDEC) JJSDJPJT 0000100 TRAD (trade) TRAD JASDEC0001 JP316570AC61 D ATA Cor poration (ISIN: N TT 26th bonds) DELI(deliver) orporate orporate c traight s Example5: (Mizuho Bank) (Mizuho unsecured HSBC Securities Limited receive onfirmation by using sese.025.001 using by onfirmation SecuritiesSettlementTransactionC 2014-07-15 JJSDJPJT (JASDEC) JJSDJPJT JASDEC0001 MHCBJPJT 1272491 TRAD (trade) TRAD JPY 7,899,300,000 JPY HSBCTK005REC02 AGMT (againstAGMT payment) (against AGMT payment) JP316570AC61 D ATA Cor poration (ISIN: N TT 26th REDE (receive) REDE bonds) ity, he t y ssigns ed a t of a of is composed of of composed is

effec t b esigned s gency tha The ISIN The , the principal, the , . ount ownerount (or the , payment i , e . e . (ISO). ation leared, i s ollowed by the national security number security national the by ollowed tionalnumbering a les in the market the transactionin the in. les settle will he depository. he ade. tan dardi ttled.parameters These are definedthe by instrumentor from where the counterparty m ith t Definition y. ryis ompleted and c ountryhas na a s, original face amount or current face amount. face current or amount face original s, ount, i . face am ount, the esenting onditions that must be fulfilled before a particular ent ation for S ties account results from a deliver or a receive instruction. receive a or a deliver from results account ties In aIn plain vanilla CSDthe it is settlement, the where the country of issue, f country the w interacts non-financial institution by the ISO 9362 Registration Author ISO Registration the 9362 by non-financial institution hain , ities in thatin ities countr rep r an amount ous way to identify an organisation. an identify wayto ous heck digit. Each heck c hicha securities epresenting h a transaction is c transaction a hic h page1/2 c nda a settlement c a s fors secur or from w or

ime at w o t hat, in hat, instrument. number securities are delivered. are securities i one exists),one a

2- character pr efix r Unique and unambigu and Unique Date in ISO format. ISO in Date Specifieddate. Date and t and asdescribed ISOin 9362 "Banking Banking- telecommunication messages Business- identifier (BIC)" code Securitiestransaction expressedtype as an ISO20022 code. (if ISIN Document Root Document instructingparty managing the account). Unambiguous identification of the transaction as known by the account servicer of Unambiguoustransaction account asbythe the known identification transactionof a financial instrument can se be instructingparty compliancein rusettlement with counterpartyrequests receiveto financial the deliversfinancialthe instruments. Party t Specifieddate and time. Message Root Message Identification of the party. the of Identification Parametersexplicitlystate c the which Unique and unambiguous way to identify an organisation. an identify to way unambiguous and Unique Unambiguous identification of the transaction as known by the acc the by known as transaction the of identification Unambiguous Details of the trade. the of Details Details related to the account and quantity involved in the transaction. the in involved quantity and account the to related Details unit in instrument of financial Quantity Unambiguous identification for the account between the account owner and the account account the and owner account the between account the for identification Unambiguous tion Number (ISIN). A numbering system d numbering A (ISIN). Number Id entifica tion International Sec urities United Nations International Organi z Specifies how the transaction is to be settled, for example, against payment. against example, for settled, be to is transaction the how Specifies Quantity expressed as a Specifies if the movement on a securi a on movement the if Specifies Identifiesthe chain of delivering settlement parties. Financial instrument representing a sum of rights of the investor vis-a-vis the issuer. the vis-a-vis investor of the rights of sum a representing instrument Financial Account Firstparty chain. settlement the in debt Identifies the type of securities transaction. securities of type the Identifies Provides transaction type and identification information. identification and type transaction Provides Quantity of financial instrument effectively settled. effectively instrument financial of Quantity Code allocated to a Codefinancialallocatedto or Type CodeSet CodeSet Amount IdentifierSet IdentifierSet Text [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1]

[1..1]

[1..1] [1..1] [1..1] [1..1] CodeSet [1..1] [1..1] [1..1] [0..1] Text [0..1] [0..1] [0..1] [0..1] [0..1] ISO20022 Multiplicity draft

Preliminary

sese.025.001.03

MessageElement Table A3.3: (h) sese.025 Securities Settlement Transaction Confirmation (Bond Settlement Confirmation from CSD to Participants) from (Bond Settlement Confirmation Confirmation A3.3: (h) Securities Settlement Transaction sese.025 Table A3.3

FaceAmount DateTime Date AnyBIC AnyBIC Quantity Identification Code Date Identification Identification SecuritiesMovementType Payment ISIN Party1 SettledQuantity AccountOwnerTransactionIdentification EffectiveSettlementDate Depository SafekeepingAccount AccountServicerTransactionIdentification SecuritiesTransactionType Items_Table

QuantityAndAccountDetails TransactionIdentificationDetails FinancialInstrumentIdentification DeliveringSettlementParties TradeDetails SettlementParameters SecuritiesSettlementTransactionConfirmationV05 Document Message Message Items for Cross-Currency DVP 57 (Mizuho Bank Bank (Mizuho (DVP se ttlement

Example6: Mizuho Bank receive receive Bank Mizuho Branch)

done by through HKD RTGS HKD through by done onfirmationby using sese.025.001. SecuritiesSettlementTransactionC BLICHKHX (HSBC Bank USA, N.A.) CREDIT HKD 452,000 HKD IBJPJPJT(HSBC Securities Limited) JJSDJPJT (JASDEC) JJSDJPJT HKMAHKHC is CHATS) MHCBHKHH HK (Mizuho Bank Bank (Mizuho (DVP se ttlement

Example5: Branch)

done by through HKD RTGS HKD through by done HSBC Securities Limited receive onfirmation by using sese.025.001 using by onfirmation SecuritiesSettlementTransactionC HKD 452,000 HKD BLICHKHX(HSBC Bank USA, N.A.) HKMAHKHC DEBIT MHCBHKHH IBJPJPJT(HSBC Securities Limited) JJSDJPJT (JASDEC) JJSDJPJT is CHATS) HK

n dentifier dentifier I I escribed escribed escribed i ode ode (BIC)" institution ith C C ode (BIC)" arties. C p dentifier dentifier I I dentifier I ettlement h the account w the reac h o ass t s securities the for he depository. he instrumentor from where the counterparty tion messages - Business - messages Banking telecommunica tion - ttlement amountttlement based marketon tolerance level. ith t stration Authority, as d Authority, 9362 Regi stration ISO he stration Authority, as d Authority, 9362 Regi stration ISO he stration Authority, as d Authority, 9362 Regi stration ISO he ifferent Definition ue. In aIn plain vanilla CSDthe is it settlement, the where w interacts 362 "B anking ution by t nstit ution ution by t nstit ution ution by t nstit ution hain , d is money of d if transaction he ed and which will be credited to/debited from the account owner's account the cashfrom to/debited credited be andwill ed which t n on messages - Business - messages Banking telec ommunicati on - on messages - Business - messages Banking telec ommunicati on - on messages - Business - messages Banking telec ommunicati on - a financial i a a financial i a a financial i a

page2/2 ion servicing an account for the debtor. the for account an servicing ion ion servicing an account for the creditor. the for account an servicing ion o o o ambiguous way to identify an organisation. an identify to way ambiguous i nvolved a settlement c a i ode (BIC)" ibed in ISO 9 in descr ibed as amount an hich nstitution through which the transaction must p the which through nstitution C institut arties hat, in hat, ISO 9362 "Banking 9362 ISO ISO 9362 "Banking 9362 ISO ode (BIC)" ode ode (BIC)" ode dentifier n n Financialinstitut Amount effectively settl effectively Amount Amount ofcashentry.the in money Financial Financial account. It may differ from the instructed se instructed the from may It differ account. counterpartyrequests receiveto financial the deliversfinancialthe instruments. Party t Financial i Uniqueand un Indicates whether an entry is a credit or a debit. a or credit a is entry an whether Indicates Identification of the party. of the Identification Identification of the party. of the Identification Identification of the party. the of Identification Identification of the party. the of Identification Unique and unambiguous way to identify an organisation. an identify to way unambiguous and Unique Identification of the party. of the Identification Identification of the party. the of Identification Party that owes an amount of money to the (ultimate) creditor. (ultimate) the to money of amount an owes that Party i Code al located t Code al located t (BIC)" p Cash i w to Party Identifies the chain of receiving settlement parties. settlement receiving of chain the Identifies Firstparty chain. settlement the in nancial institution by the ISO 9362 Registration 9362 the ISO by institution non-fi nancial or to a fina ncial allocated Code Authority, I non-financial institution by the ISO 9362 Registration Author ity, Registration 9362 ISO the by institution non-financial or financial a to allocated Code Business - messages telecommunication Banking "Banking - 9362 in ISO described as non-financial institution by the ISO 9362 Registration Author ity, Registration ISO 9362 the by institution non-financial or financial a to allocated Code Business - messages telecommunication Banking "Banking - 9362 described in ISO as C C ISO 9362 "Banking 9362 ISO Code al located t Type Amount IdentifierSet CodeSet IdentifierSet IdentifierSet IdentifierSet IdentifierSet IdentifierSet IdentifierSet [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [0..1] [0..1] [0..1] [0..1] [0..1] [0..1] [0..1] [0..1] [0..1] [0..1] ISO20022 Multiplicity draft

Preliminary sese.025.001.03

MessageElement A3.3

AnyBIC BICFI AnyBIC AnyBIC BICFI BICFI AnyBIC Identification Identification Identification Identification Identification Identification Identification CreditDebitIndicator Creditor Intermediary Amount CreditorAgent DebtorAgent Debtor Party1 Depository Items_Table

SettledAmount ReceivingSettlementParties CashParties Table A3.3 continued Table Message 58 Appendix 3 page1/1 IBJPJPJT CLRG 11 example. 7 example. 8 HKMA0001 HSBCHK0001 MHCBHKHH MHCBHKHH MHCBJPJT MHCBJPJT BLICHKHX BLICHKHX HSBCTK005REC02 HSBCTK005REC02 HKD 452,000 HKD 452,000 IBJPJPJT 2014/7/15T11:30:30 2014/7/15T11:30:30 CLRG HSBCTK005REC02 HSBCTK005REC02 pr e- entification entification nk tasks he message. pleted. id erio d. cal limitations to to lin k tasks relating r o , pa ssed on, unchanged, s ed or pr oprietar y ed or pr oprietar y ed or pr oprietar y ed or pr oprietar y ecogni z ecogni z ecogni s arty fo r a pre-agreed p ecogni z in 9362 ISO "Banking Banking - in 9362 ISO "Banking Banking - in 9362 ISO "Banking Banking - er instructed p nternationally r nternationally r nternationally r nternationally r i i i i n n n sed fo r reconciliation, trackin g n u nique p tify the transaction. This identification is passed on, on, passed is identification This transaction. the tify ssigned under a ssigned under a ssigned under a ssigned under a u entification is Definition d i gent, to una mbiguously i dentify the transaction that ssage e nstitution, as a nstitution, as a nstitution, as a m nstitution, as a

ode (BIC)" ode (BIC)" ode (BIC)" ode (BIC)" e C C C C h t tran saction id entification can b e nstructing a that inancial i inancial i inancial i Th e inancial i f f f f dentifier dentifier dentifier dentifier ure I I I I ake s m usiness usiness usiness usiness o as t ssigned by the first i as assigned b y th e in structing party, an d se nt to n ext party ch ain u nambiguously id enti fy t ntire in terbank chain. Usage : scheme. scheme. scheme.

in structing party h Date and time at which the message was created. was message the which at time and Date entification id Unique and unambiguous identification of a entification id Financial institution servicing an account for the creditor. Unique and unambiguous identification of a Number of individual transactions contained in the message. the in contained transactions individual of Number Amount of money moved between the instructing agent and the instructed agent. instructed the and agent instructing the between money moved of Amount Unique and unambiguous identification of a entification id Financial institution servicing an account for the creditor. Code allocated to a financial institution by the ISO 9362 Registration Authority, as described in ISO 9362 "Banking - Banking Banking - "Banking 9362 ISO in described as Authority, Registration 9362 ISO by the institution financial a to allocated Code telecommunication messages - B telecommunication messages - B debtor. institutional financial the money from of amount an receives that institution Financial Unique and unambiguous identification of a scheme. telecommunication messages - B Specifies the details on how the settlement of the transaction(s) between the instructing agent and the instructed agent is com is agent instructed the and agent instructing the between transaction(s) the of settlement the how on details the Specifies Method used to settle the (batch of) payment instructions. agreed period. agreed Financial institution that owes an amount of money to the (ultimate) financial institutional creditor. institutional financial (ultimate) the money to of amount owes an that institution Financial telecommunication messages - B Set of characteristics shared by all individual transactions included in the message. pass on multiple references, the end-to-end identification must be passed on throughout the entire end-to-end chain. end-to-end entire the throughout on passed be must identification end-to-end the references, multiple on pass relating to the transaction. It can be included in several messages related to the transaction. Usage: In case there are techni are there case In Usage: transaction. the to related messages several in be included can It transaction. the to relating unchanged, throughout the entire end-to-end chain. Usage: The end-to-end identification can be used for reconciliation or to li Set of elements providing information specific to the individual credit transfer(s). credit individual the to specific information providing elements of Set instruction. payment a reference used to elements of Set Unique identification, as a throughout the e a is uni que for id entification m ake su re th at the tr ansaction Usage : Th e in structing agent has to th e in terbank level. o n th e tr ansaction Usage: Th e Point - to p oint reference, Text IdentifierSet described as Authority, Registration 9362 ISO by the institution financial a to allocated Code IdentifierSet described as Authority, Registration 9362 ISO by the institution financial a to allocated Code IdentifierSet described as Authority, Registration 9362 ISO by the institution financial a to allocated Code IdentifierSet Text DateTime Text CodeSet Amount Text iden unambiguously to party, initiating the by assigned as identification, Unique ISO20022 Multiplicity XML Tag Type [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [1..1] [0..1] [1..1] [1..1] [0..1] [0..1] [0..1] [1..1] [0..1] [1..1] [1..1] [1..*] [1..1] [1..1] [1..1] [0..1] [1..1] Table A3.4: (d) and (e) pacs.009 Financial Institution Credit Transfer (Cash Settlement Instruction) (Cash Transfer Credit Institution Financial pacs.009 and (e) A3.4: (d) Table Message Element BICFI BICFI BICFI BICFI FinancialInstitutionIdentification FinancialInstitutionIdentification FinancialInstitutionIdentification SettlementMethod FinancialInstitutionIdentification EndToEndIdentification TransactionIdentification pacs.009.001.04

CreationDateTime Creditor CreditorAgent NumberOfTransactions SettlementInformation InterbankSettlementAmount Debtor DebtorAgent MessageIdentification PaymentIdentification A3.4

GroupHeader CreditTransferTransactionInformation FinancialInstitutionCreditTransferV03(pacs.009.001.03) Table Message Items for Cross-Currency DVP 59 page1/2 100 100001 Example. 10 BLICHKHX DBIT DBIT HKMA0001 IBJPJPJT HKD 452,000 200 continued on next page on next continued 100001 Example. 9 2014-7-15T11:30:45 2014-7-15T11:30:45 2014-7-15T11:30:40 2014-7-15T11:30:40 BLICHKHX CRDT CRDT HKMA0001 BOOK (booked) BOOK (booked) (to be discussed) (to be discussed) HKD 452,000 Definition Unique and unambiguous identification of a financial institution, as assigned under an internationally recognized or Unique and unambiguous identification of a financial institution, as assigned under Common information for the message. point reference, as assigned by the account servicing institution, and sent to the account owner or party Point - to point reference, as assigned by the account servicing institution, and sent Unique and unambiguous way to identify an organisation. proprietary identification scheme Notifies debit and credit entries for the account. Unambiguous identification of the account to which credit and debit entries are made. authorized to receive the message, unambiguously identify message. Usage: The account servicing institution has to make sure that the m essage Identification is unique per account owner for a pre-agreed period. Set of elements used to identify the parties related underlying transaction. Party that owes an amount of money to the (ultimate) creditor. Unique and unambiguous identification for the account between owner servicer. Provides information on the underlying transaction(s). Unique and unambiguous identification of a party. Unique identification of an account, as assigned by the account servicer, using scheme. be provided to Set of elements used to specify an entry in the debit credit notification. Usage: At least one reference must identify the entry and its underlying transaction(s). Set of elements used to fully identify the type underlying transaction resulting in an entry. Bank transaction code in a proprietary form, as defined by the issuer. Provides details on the entry. "Banking - Banking telecommunication messages Business I dentifier C ode (BIC)" Financial institution servicing an account for the creditor. Code allocated to a financial institution by the ISO 9362 Registration Authority, as described in "Banking - Banking telecommunication messages - Business I dentifier C ode (BIC)". Text notification. Unique identification, as assigned by the account servicer, to unambiguously identify Text Identification assigned by an institution. CodeSet Proprietary bank transaction code to identify the underlying transaction. CodeSet Status of an entry on the books account servicer. Text Date Time Date and time at which the message was created. CdtNtfctn> Date Time Date and time at which the message was created. IdentifierSet as described in ISO 9362 Code allocated to a financial or non-financial institution by the ISO 9362 Registration Authority, IBJPJPJT CodeSet Indicates whether the transaction is a credit or debit transaction. CodeSet Amount Indicates whether the entry is a credit or debit entry. Amount of money in the cash entry. ISO20022 Multiplicity XML Tag Type [1..1] [1..1] [0..1] [1..1] [1..1] [1..1] [1..1] [0..1] [0..1] [1..1] [1..*] [1..1] [0..1] [0..1] [0..1] [1..1] [1..1] [1..1] [0..*] [1..1] [1..1] [1..1] [1..1] [0..*] [1..1] [0..1] [0..*] i Table A3.5: (f) Settlement Confirmation) (Cash Notification Debit Credit Bank to Customer camt.054 Table

AnyBIC iﬁcationV03(camt.054.001.03) IdentifierSet as described in ISO 9362 Code allocated to a financial or non-financial institution by the ISO 9362 Registration Authority, CdtNtfctn> ISO20022 Multiplicity XML Tag Type [0..1] [0..1] [1..1] [0..1] [0..1] [0..1] i

AnyBIC iﬁcationV03(camt.054.001.03)

Overview of International Standards

The International Organization for Standardization (ISO) is an independent, nongovernmental organization made up of members from national standards bodies of 165 countries as of January 2015. Members play a vital role in how ISO operates through the General Assembly that decides strategic objectives. There are three member categories (full member, subscriber member, and correspondence member). The Central Secretariat in Geneva, Switzerland coordinates the system directed by the Secretary-General (Figure A4.1).

ISO standards are developed by the people that need them, through a consensus process. Experts from all over the world develop the standards that are required by their sector. These experts are proposed by national members. ISO develops technical standards in many areas including technology, product safety, and energy management. More than 19,000 ISO

Figure A4.1: ISO Governance Structure

Reporting/responsibility General Assembly Advisory

Council Standing Committees Council President’s Committee

TMB Policy Development Committees

Technical Committees

ISO = International Organization for Standardization, TMB = Technical Management Board Note: The Secretary General is a member of the President’s Committee, report to the President and to Council and receives advice from the policy and advisory groups (who also advise Council). The Central Secretariat is responsible for supporting the governance and policy and advisory structure and the operations of ISO. Source: ISO website, http://www.iso.org/iso/home/about/about_governance.htm 62 Appendix 4

standards have been published. The work is divided between technical committees. The development process is carried out through experts participating in committees and working groups. Agreement and approval of a standard reflects a double layer of consensus: first within the industry (market players) and then with the ISO country members.

ISO Technical Committee 68 (TC68) for Financial Services

There are two levels of country membership: participating member and observing member. Also, there are liaison organizations which are international or broadly based regional organizations working or interested in similar or related fields. Liaison organizations are categorized into three levels: level A (to participate at the technical committee or subcommittee levels and their working groups), level B (to receive information about the technical committees, subcommittees, and/or their working groups; mainly for intergovernmental organizations), and level C (to participate at the working group level only).

TC68 created important financial standards:

1. ISO 4217 Codes for the Representation of Currencies and Funds 2. ISO 6166 International Securities Numbering System (ISIN) 3. ISO 9362 Business Identifier Code (BIC) 4. ISO 9564 Personal Identification Number (PIN) 5. ISO 10383 Codes for Exchanges and Market Identification (MIC) 6. ISO 10962 Classification of Financial Instruments (CFI code) 7. ISO 13616 International Bank Account Number (IBAN) 8. ISO 15022 Scheme for Messages (Data Field Dictionary) 9. ISO 20022 Universal Financial Industry Message Scheme 10. ISO 17442 Legal Entity Identifier (LEI)

The governance and decision-making processes of ISO TC68 are as follows:

The international standards are developed through a worldwide network of national standards bodies. Such development work is performed within technical committees, their subcommittees, and working groups. There were 163 national standards bodies represented within the ISO Framework as of January 2015. The ISO standards development process is carried out through experts participating in committees and working groups. Agreement and approval of a standard reflects a double layer of consensus: first within the industry (market players) and then across ISO member countries (Figure A4.2).

Registration Management Group

The Registration Management Group (RMG) is the highest ISO 20022 registration body: it monitors the overall registration process and has oversight of the Registration Authority. It reports directly to ISO TC68 and is the umbrella organization that deals with all matters related to ISO 20022. The RMG membership comprises senior industry experts nominated by ISO member countries or category A liaison organizations.

The role of RMG is to promote and support the involvement of financial service actors to facilitate the registration and maintenance of high-quality, globally relevant, ISO 20022 compliant business models for the exchange of information for financial services. Overview of the International Organization for Standardization 63

Figure A4.2: ISO TC68 for Financial Services

ISO Technical Committee TC

Financial Services

SC SC SC Security Securities Banking ISO Registration Management Group

Registration Technical Support Authority Group

Standards Evaluation Groups

ISO = International Organization for Standardization, SC = steering committee, TC = technical committee. Source: ISO.

Essential activities of the RMG in support of this objective are to

1. oversee the ISO 20022 Registration Authority (RA); 2. ensure the Registration Process operates effectively and responds to technical and business challenges in support of the Registration Authority, including the setup and disbandment of sub-groups (e.g., Standards Evaluation Groups); 3. review and approve Business Justifications to manage the business scope of the ISO 20022 repository seeking to achieve full coverage of financial service activities; 4. provide a contact point for any organization wishing to engage with the standard; and 5. proactively communicate on all matters related to ISO 20022.

The mission of RMG is to ensure that ISO 20022 is a trusted standard providing high-quality business models for the exchange of information for financial services.

The key dimensions in support of this mission that the RMG must strive to deliver are

1. continuous engagement: trust that the registration process, and the management of that process, is open, accessible, and founded on a fair, reasonable, and non- discriminatory governance model; 2. effectiveness and efficiency: an efficient registration process that produces high- quality ISO 20022 compliant deliverables in a sustainable, timely, and accessible manner; and 3. delivery: ensure that the registration process produces deliverables that are relevant to the business needs of financial services. 64 Appendix 4

Figure A4.3: Relationships and Responsibilities of RMG

KEY: Red color indicates a responsibility

ISO/TC ISO RMG ISO sytem (ISO Members and ISO Continually Committees) communicate with each other

- Reports to in case of problems - Recommends RA in standards - Oversees RA execution activities

(SWIFT) - Send RA ISO/CS activities report RA annually - Perform RA duties as per the standard - RA Agreement signed

CS = Central Secretariat, RA = Registration Authority, RMG = Registration Management Group, SWIFT = Society for Worldwide Interbank Financial Telecommunication, TC68 = Technical Committee 68. Source: International Organization for Standardization (ISO).

The relationships and responsibilities of RMG are shown in Figure A4.3.

ISO 20022 RMG registration and maintenance processes are listed below:

1. The RMG plays a critical role in the registration process, since representative engagement from the industry is important. 2. The key document that the RMG focuses on is the Business Justification that describes the scope and need for new ISO 20022 messages. 3. These Business Justifications are, in fact, like a proposal from a community of users who are expressing a need to define ISO 20022 messages. 4. The critical role of the RMG membership is to avoid overlapping scopes of ISO 20022 messages, and to manage the resources needed for the registration process (1 month). 5. The submitting organization retains any intellectual property rights. 6. The Standards Evaluation Groups (SEGs) are critical in that they evaluate the ISO 20022 messages from a business perspective. Again, representative engagement from the industry is important (maximum of 3 months). 7. Messages become available in the ISO 20022 repository after evaluation, and the status of a submission is fully transparent

Figures A4.4 and A4.5 show the registration and maintenance processes, respectively, of ISO 20022. Overview of the International Organization for Standardization 65

Figure A4.4: Registration Processes of ISO 20022

ISO The registration process

Submitting Financial industry group or standards body organization R M Business Business justification justification G Project approval and allocation to a SEG RMG m o Submitting Development and provisional registration organization n and RA i Business validation t SEG Repository o Ocial registration r RA and publication Dictionary s Submitting Optional pilot testing Catalogue organization and users or first implementers

RA = Registration Authority, RMG = Registration Management Group, SEG = Standards Evaluation Group. Source: International Organization for Standardization (ISO).

Figure A4.5: Maintenance Processes of ISO 20022 ISO The maintenance process Timing

By June Users CRs Users introduce Change Requests to the RA

By July SEG screens Change Requests (CRs) SEG Submitting organisation prepares ‘Maintenance By August Submitting organization Change Request’ with each CR implementation By October SEG approval/rejection SEG

By December Submitting Development of new versions organization and RA By February Validation of new versions SEG Repository

April–May Registration and publication RA Dictionary

Submitting First implementers organization Catalogue and users

RA = Registration Authority, SEG = Standards Evaluation Group. Source: International Organization for Standardization (ISO). 66 Appendix 4

Benefits of ISO 20022 financial services standardization

Industry standards are critical to the safe operation of the payments industry. The strategic benefits include

1. reduced operational costs: improved operational efficiency and reduced indirect costs; 2. reduced cost of compliance and risk management: reduced indirect costs associated with operational and legal compliance testing and maintenance; 3. improved Integrity at less cost: interoperability across networks and infrastructure; 4. greater service provider choice at reduced cost: open standards will improve the range and choice of service providers; 5. faster and cheaper industry innovation: easier to reuse and extend common services, reducing time to market; and 6. end-user benefits: common standards for payments aid straight-through-processing and the simplification of back-office operations.

By introducing ISO 20022, the following benefits can be realized:

1. the capability to extend both payment and remittance data in support of emerging requirements, such as enhanced data or fraud intelligence data sharing; 2. improved industry interoperability between counterparties, both within the economy and cross-border in other markets and currencies, thereby reducing complexity, costs, and risk of data manipulation and conversion in the interbank space and between banks and end users; 3. improved payments resilience via cross-scheme interoperability for scheme participants, and easier redirection of payment flows irrespective of payment type for end users, particularly in times of crisis or during service disruptions; and 4. reduced barriers to entry to the economy payments infrastructure and supply market, including banks.

Standards Evaluation Group (SEG)

The ISO 20022 SEGs are made up of industry experts in specific business domains of the financial industry as defined by ISO 20022. SEG members are nominated by ISO TC68 member countries and liaison organizations (Figure A4.1).

The role of an SEG is threefold:

1. to ensure that the right industry groups are informed of proposed developments to ensure all business requirements will be addressed; 2. to validate the newly developed message definitions from a business perspective as representative of future users in order to ensure that what will be posted in the ISO 20022 repository by the Registration Authority really addresses the needs of future communities of users as described in the Business Justification accepted by the RMG in the first place; and 3. to approve changes to existing message definitions. Overview of the International Organization for Standardization 67

Table A4.1: SEG-ISO 20022 Standards Evaluation Groups

ISO memberTC68 member RMG PSEG SSEG BN Correspondent member (ABCI) KH Correspondent member (ISC) CN Full member (SAC) Participant member Member (PBOC) HK Correspondent member (ITCHKSAR) Observing member ID Full member (BSN)

JP Full member (JISC) Participant member Member (BOJ)Member (BOJ, Member (BOJ, Zenginkyo, NTT JASDEC, Mizuho Data, JPMC, Bank, BTMUFJ, NTT BTMUFJ) Data) KR Full member (KATS) Participant member Member (KFTC Member (KFTC) and KATS) LA Subscriber member (DISM) MY Full member (DSM)Observing member MM Correspondent member (MSTRD) PH Full member (BSP)Observing member

SG Full member (SPRING SG)Participant member Member Member Member (Standard (Standard Chartered Bank) Chartered Bank, Deutsch Bank) TH Full member (TISI) Observing member VN Full member (STAMEQ)

ABCI = Authority for Building Control and Construction Industry of Brunei; ASEAN+ 3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BN = Brunei Darussalam; BOJ = Bank of Japan; BSN = Badan Standardisasi Nasional (National Standardization Agency of Indonesia); BSP = Bangko Sentral ng Pilipinas; BTMUFJ = Bank of Tokyo Mitsubishi UFJ; CN = People’s Republic of China; DISM = Department of Intellectual Property, Standardization, and Metrology; DSM = Department of Standards Malaysia; HK = Hong Kong, China; ID = Indonesia; ISC = Institute of Standards of Cambodia; ISO = International Organization for Standardization; ITCHKSAR = Innovation and Technology Commission of the Government of the Hong Kong Special Administrative Region; JASDEC = Japan Securities Depository Center; JISC = Japanese Industrial Standards Committee; JP = Japan; JPMC = J.P. Morgan Chase Bank; KATs = Korean Agency for Technology and Standards; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MM = Myanmar; MSTRD = Myanmar Scientific and Technological Research Department; MY = Malaysia; PBOC = People’s Bank of China; PH = Philippines; PSEG = Payments Standards Evaluation Group; RMG = Registration Management Group; SAC = Standardization Administration of China; SG = Singapore; SPRING SG = Standards, Productivity, and Innovation Board, Singapore; SSEG = Securities Standards Evaluation Group; STGAMEQ = Directorate for Standards, Metrology, and Quality of Viet Nam; TC68 = Technical Committee 68; TH = Thailand; TISI = Thai Industrial Standards Institute; VN = Viet Nam. Source: Association of National Numbering Agencies (ANNA).

Payments SEG. The scope of the Payments SEG includes the messages supporting transactions and business processes related to credit transfers, direct debits, and checks.

Securities SEG. The scope of the Securities SEG includes the messages supporting transactions and business processes related to equities, fixed income, funds, and derivatives. Appendix 5 Overview of the International Securities Identification Number

Introduction

The International Organization for Standardization (ISO) 6166 provides a uniform structure for the International Securities Identification Numbering (ISIN) system that uniquely identifies securities (bonds). The latest version of the ISO Standard 6166 was adopted and implemented (effective 1 August 2014). The ISIN consists of a prefix using the alpha-2 country code, the basic number which is nine characters in length, and a check digit. Figure A5.1 provides an example of an ISIN for a government bond.

The issuing economy of a bond is determined by the economy where the bond is registered in a depository of the economy, regardless of the economy of issuer or currency of denomination. ISIN is allocated by the national numbering agency (NNA) of an economy.

By adopting ISIN, local markets will gain more visibility in the global financial marketplace, enabling stronger cross-border flows in both directions.

Due to agreements among all members of the Association of National Numbering Agencies (ANNA), each NNA has unrestricted access to all other members’ ISINs and defined data elements.

Overview of ANNA and NNA

ANNA is a Belgian cooperative incorporated in 1992 and acts as the Registration Authority for ISO 6166 (ISIN). As of June 2015, ANNA had 116 NNA members, consisting of 90 full members and 26 partners, representing ISIN adoption and usage in 122 economies worldwide. ANNA does not appoint entities to act as NNAs. The steps required to establish an NNA are described later in this appendix.

The objectives of ANNA are to 1. globally develop and promote standards under ANNA‘s control; 2. commit to work for the benefit of the financial industry; 3. codify, classify, and make data accessible and available to industry participants; 4. contribute to the ISO standards development process; and 5. ensure timeliness, accuracy, and quality in the application of standards.

An overview of ANNA-related international standards is shown in Figure A5.2.

ANNA-related organizations are shown in Figure A5.3. Overview of the International Securities Identification Number 69

Figure A5.1: Sample ISIN Code Structure for a Government Bond

Basic code digit Country code Check digit Example : th -year bonds

ISIN J P A X

Issuer code securities type code

securities code ᧭ A

Type of Name Issuance times serial Issued Issued securities number year month

ASEAN+ 3 = Association of Southeast Asian Nations plus the People’s Republic of China, Japan, and the Republic of Korea; BN = Brunei Darussalam; CN = People’s Republic of China; CUSIP = Committee on Uniform Security Identification Procedures; HK= Hong Kong, China; ID = Indonesia; ISIN = International Securities Identification Number; ISO = International Organization for Standardization; JP = Japan; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MM = Myanmar; MY = Malaysia; PH = Philippines; SG = Singapore; TH = Thailand; US = United States; VN = Viet Nam. Source: NTT DATA Corporation.

Figure A5.2: Overview of ANNA-Related International Standards

TC Financial SC SC Services Security and Operations Core Banking

SC ISIN Securities and related LEI financial instruments (Identification) ISO ISO CFI FISN (Classification) ISO DIS Data Field ISO DIS MIC BIC IGI Dictionary ISO ISO ISO CD ISO

International Securities Identification Number Classification of Financial Instruments Market Identifier Code Business Identifier Code Registration Authority Issuer & Guarantor Identifier Circulated Draft Registration Authority Draft International Standard Financial Instrument Short Name ANNA Legal Entity Identifier SWIFT SC = steering committees, SWIFT = Society for Worldwide Interbank Financial Telecommunication, TC68 = Technical Committee 68. Source: Association of National Numbering Agencies (ANNA). 70 Appendix 5

Figure A5.3: ANNA-Related Organizations

ANNA ANNA Membership Partners

ASB ANNA ANNA Technical Board Secretariat Committee

Working Task Regional Groups Forces Groups

37 Source: Association of National Numbering Agencies (ANNA).

In ASEAN+3, the 10 economies in which bond markets already exist have each established an NNA, although NNA responsibilities in the Philippines will (possibly) be transitioning from the Philippines Dealing & Exchange Corp. to the Securities and Exchange Commission. Table A5.1 shows the NNAs in ASEAN+3 economies.

Steps to Establishing an NNA

There steps required to establish an NNA include the following:

1. The jurisdiction’s capital market endorses the move to adopt ISO standards for financial instruments. 2. The regulator or market supervisory body appoints the entity to act as the NNA for that jurisdiction; ANNA recommends that only one entity is appointed. 3. An application is submitted to ANNA when the entity is in a position to start allocating ISIN. 4. Upon successful adherence to partnership requirements, application for full membership can be made; the application is voted on by full members of ANNA. 5. The documents and agreements required are ANNA’s Articles of Incorporation, a partnership agreement (only applicable for partnership), an application for membership (only applicable for full membership), a letter of understanding (only applicable for full membership), and membership guidelines (for full members and partners). Membership guidelines are regularly updated and approved at general meetings. Overview of the International Securities Identification Number 71

Table A5.1: NNAs in ASEAN+3

ASEAN (existing)

Market Total ISINs allocated Country Code National Numbering Agency Segment (July ) CN China Securities Regulatory Commission Regulator, HK Hong Kong Exchanges and Clearing, Ltd. Stock Exchange , ID Indonesian Central Securities Depository CSD, JP Tokyo Stock Exchange Stock Exchange , KR Korean Exchange Stock Exchange , MY Bursa Malaysia Stock Exchange , Transitional phase (currently covered by the US Regulator (Q- PH NNA) Q ) , SG Singapore Exchange LimitedStock Exchange , TH Thailand Securities Depository CSD , VN Vietnam Securities DepositoryCSD , ASEAN economies (pending NNA appointment)

Country Code National Numbering AgencySubstitute NNA ISINs assigned (July ) BN Brunei DarussalamGermany KH Cambodia Germany LA Lao Peoples Democratic Republic Germany MM MyanmarGermany

BN = Brunei Darussalam; CN = People’s Republic of China; HK = Hong Kong, China; ID = Indonesia; ISIN = International Securities Identification Number; JP = Japan; KH = Cambodia; KR = Republic of Korea; LA = Lao People’s Democratic Republic; MM = Myanmar; MY= Malaysia; NNA = national numbering authority; PH = Philippines; SG = Singapore; TH = Thailand; VN = Viet Nam. Source: Association of National Numbering Agencies.

Allocation of ISIN

The NNA in each economy is responsible for issuing the ISIN for bonds issued in that economy (Figure A5.4). NNAs are coordinated through ANNA. One of the ANNA’s recommendations states that the NNAs should allocate ISINs within 24 hours following the request, while also making the ISIN available to users at the same time.

Global ISIN Database and ANNA Service Bureau

ANNA developed the ANNA Service Bureau (ASB) to collect and disseminate ISIN information via a common platform to meet the needs of its members. ASB’s services are also available to external market participants via subscription. This development emphasizes ANNA’s commitment to moving the industry toward straight-through-processing. Working in conjunction with the NNAs, the ASB assists with improving all aspects of the timely, accurate, and standardized identification of financial instruments, as well as equitable distribution of this information. The ASB and its partners, Swiss Infrastructure and Exchange (SIX) Financial (Switzerland) and the Committee on Uniform Securities Identification 72 Appendix 5

Figure A5.4: Typical Flow of ISIN Allocation

Issuers

Issuing Agents Within Hours ) Issuance Information ) Publication of New ISIN CSD CSD Participants

) Requirement ) Approval for New for New ISIN ISIN Only local language Information Venders Numbering in some markets Agency

) Updating ) Reporting New ISIN ANNA ISIN ISIN Database Not reported in a (Association of National Database Numbering Agencies) timely manner CSD = central securities depository, ISIN = International Securities Identification Number, NNA = national numbering agency. Source: Association of National Numbering Agencies (ANNA).

Figure A5.5: ANNA Service Bureau System

NNAs

NNAs NNAs NNAs NNAs NNAs

NNAs

Synchronization ISIN DB ISIN DB New York Zurich

Web Server Web Server New York Zurich Standard & Poor‘s SIX Financial Information Ltd.

DB = database, ISIN = International Securities Identification Number, NNA = National Numbering Agency. Source: Association of National Numbering Agencies (ANNA). Overview of the International Securities Identification Number 73

Procedures (CUSIP) Global Services (United States), operate as a central hub to receive and consolidate ISIN data from all ANNA members and partners, and assists in the dissemination of this information to global market participants. Figure A5.5 shows illustrates the functions of the ASB.

Key Issues Related to ISIN

Universal acceptance of ISIN is important in meeting the goal of cross-border straight- through-processing, which is the electronic handling of trade clearing and settlement without manual intervention. ISINs are used by share custodians to track the holdings of institutional investors in a format that is consistent across markets worldwide.

The ASEAN+3 Bond Market Forum Sub-Forum 2 is promoting the following ISIN-related standards: •• ISIN is available within 24 hours following the request of issuance, •• the sharing of ISIN with investors in other markets, and •• all information is written in English. Appendix 6 Cross-Border Use of Collateral and Repo

The ASEAN+3 Bond Market Forum Sub-Forum 2 (ABMF SF2) has entered into Phase 3. This phase includes a survey on the cross-border use of collateral. This issue has many facets, including key factors influencing the demand for cross-border use of collateral; the current environment with central banks, internationally active banks, markets, and infrastructures; policy considerations; arrangements for the use of foreign collateral; and potential central bank actions. The mandate of ABMF SF2 in this respect is interpreted in such a manner that this survey should not result in empirical research with regard to market developments in the area of cross-border use of collateral, but rather in an overview of the legal and logistical complexities requiring further attention and resolution in order to facilitate such use. It starts with the domestic situation on an economy-by-economy basis. From there, it turns to cross-border use of collateral. Indeed, the complexities of the cross-border use of collateral can only be properly analyzed based on a thorough understanding of collateralization in a national context.1

Eligible Collateral

Theoretically, most tangible and non-tangible assets may be used as collateral in order to ensure the fulfillment of obligations. For example, in the Settlement Finality Directive (SFD) of the European Union (EU),2 collateral security is defined as “all realizable assets provided under a pledge (including money provided under a pledge), a repurchase or similar agreement, or otherwise, for the purpose of securing rights and obligations potentially arising in connection with a system, or provided to central banks of the Member States or to the future European central bank.”3 However, in the financial markets, collateral consists usually of bonds, shares, or other debt instruments. This is also called financial collateral. In the Financial Collateral Arrangements Directive (FCAD) of the EU,4 this notion is defined as “shares in companies and other securities equivalent to shares in companies and bonds and other forms of debt instruments if these are negotiable on the capital market, and any other securities which are normally dealt in and which give the right to acquire any such shares, bonds or other securities by subscription, purchase or exchange or which give rise to a cash settlement (excluding instruments of payment) including units in collective investment undertakings, money market instruments and claims relating to or rights in or in respect of any of the foregoing.”5

1 This document was originally drafted by Mr. Erwin Nierop of the European Central Bank when he was a secondee of the ADB. The ADB Secretariat appreciates his contribution, including insightful comments and advice, to this initiative. 2 European Parliament. 1998. Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on Settlement Finality in Payment and Securities Settlement Systems. 3 European Parliament. 1998. Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on Settlement Finality in Payment and Securities Settlement Systems, Article 2(m). 4 European Parliament. 2002. Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on Financial Collateral Arrangements. 5 European Parliament. 2002. Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on Financial Collateral Arrangements, Article 2.1(e). Cross-Border Use of Collateral and Repo 75

Theoretically, the bonds may be in the form of individual or global certificates or in the form of book-entry rights. Individual certificates may be held individually and may be held in, for example, bank safes. Global certificates may be co-owned by different owners and are usually deposited with central securities depositories. In the FCAD, book entry rights are under book- entry securities collateral defined as follows: “financial collateral provided under a financial collateral arrangement which consists of financial instruments, title to which is evidenced by entries in a register or account maintained by or on behalf of an intermediary.”6 As in the case of payments with money in scrip form, transfers of book-entry securities are relatively easy in that they do not require physical transfers of certificates or, alternatively, documents proving the transfer of rights. Such transfers may be made to an own account of the collateral taker (in the case of repos) or to a pledge account (in the case of pledge). Collateralization of physical certificates is of course nothing new; in fact, it used to be practice before the introduction of book-entry securities. However, both in the case of repos as well as pledge, it raises a number of issues which are less important in dematerialized systems with book-entry rights. For example, in a repo transaction, the owner of the physical certificate could become temporarily the holder (in Latin: traditio brevi manu). If the physical security is held in the vaults of a bank, this bank could become from holder for the original owner holder for the new temporary owner (in Latin: traditio longa manu). In pledge constructions, it is usually necessary to bring the pledged assets out of the sphere of control of the collateral provider, which means in the case of physical assets that they have to be deposited somewhere else or, in the case of keeping by a third party, that they would have to be earmarked as having been pledged.

Repurchase Agreements (repos)

As far as relevant here, repos are transactions where parties agree to buy and sell bonds and reverse these transactions at a certain date against a certain price. In essence, this entails a (temporary) transfer of full ownership from the seller to the buyer. In the FCAD, this is under title transfer financial collateral arrangement defined as “an arrangement including repurchase agreements, under which a collateral provider transfers full ownership of financial collateral to a collateral taker for the purpose of securing or otherwise covering the performance of relevant obligations.”7

Repos are an attractive method for collateralization. First, they make the collateral taker independent of the collateral provider in case of the latter’s insolvency. Second, the collateral taker may stipulate that he or she may resell the collateral and, instead of returning the original securities, return securities of the same type. Third, statutory provisions allowing, the collateral taker may appropriate the securities and hold or sell at his or her discretion. In certain jurisdictions, the problem though with repos may be that they may be considered as sham constructions hiding under the veil of an outright transaction that its actual purpose is only a temporary transfer of ownership for collateralization, thus avoiding statutory provisions on pledge, which are usually more cumbersome for the collateral taker. This could lead to invalidity and unenforceability of repos. Another challenge may be that repos in certain jurisdictions may be considered as contracts of speculation or gambling, which may for example be the case in jurisdictions applying Shariah law.

6 European Parliament. 2002. Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on Financial Collateral Arrangements, Article 2.1(g). 7 European Parliament. 2002. Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on Financial Collateral Arrangements, Article 2.1(b). 76 Appendix 6

In view of the importance of repos for the smooth functioning of the financial markets and collateralization in particular, the above uncertainties have led the EU to adopt in the SFD and the FCAD the principle that repos are legally valid and enforceable and EU member states had to implement this principle in their national legislation. In addition, the International Swaps Dealers Association took up on this topic and it developed a Master Repurchase Agreement, which is multi-jurisdictional, multiproduct, and multi-lingual. It is intended to be legally valid and enforceable in all relevant jurisdictions. It covers a number of financial products in separate annexes to the body of the agreement, and it is available in a number of different languages. In order to ensure the point of legal validity and enforceability, the International Swaps Dealers Association has submitted the Master Repurchase Agreement to legal counsel in the relevant jurisdictions in order to seek confirmation that it is legally valid and enforceable in these jurisdictions with generally positive replies.

Pledge Agreements (pledge)

Pledge agreements are transactions where the pledger or collateral provider agrees to establish a priority right in favor of the pledgee or collateral taker in case the collateral provider does not fulfill its financial obligations. In the FCAD, this is under security financial collateral arrangement defined as “an arrangement under which a collateral provider provides financial collateral by way of security in favor of, or to, a collateral taker, and where the full ownership of the financial collateral remains with the collateral provider when the security right is established.”8 Thus, in contrast to the situation in the case of repos where there is a full transfer of ownership from the collateral provider to the collateral taker, in the case of pledge there is no such transfer of full ownership but merely the establishment of a priority right.

This usually raises a number of questions. First, are there any specific formalities to establish a pledge? Second, are there any other parties with priority rights, possibly of a higher ranking, which may cover the pledged assets as well? These may, for example, be tax authorities on the basis of statutory provisions or other counterparties of the collateral provider on the basis of concurrent contracts. Third, in case of nonfulfillment of contractual obligations by the collateral provider, may the collateral taker—although he does not have the full ownership of the collateral—nevertheless realize the collateral? If the nonfulfillment is due to insolvency, could the liquidating authority postpone the realization of the collateral and for how long? If the waiting period is very long, this may hamper the smooth functioning of the financial markets. Fourth, is the collateral taker authorized to use the collateral during the duration of the pledge agreement? Indeed, immobilization of collateral for the duration of the pledge agreement may hamper the smooth functioning of the financial markets. Fifth, how can the collateral taker be protected against a situation where the collateral provider pledges the assets more than once at the same time? Obviously, answers to these questions may usually be found in statutory provisions and case law, but it is important to identify the relevant issues at stake. Indeed, the more and the heavier the conditions for pledge, the less suitable the instrument becomes for financial collateral, where eventually considerations of financial stability impose the possibility of the fast realization of collateral. That said, many systems are pledge-based and this is in itself not prohibitive for financial collateral, but it is important to (i) achieve clarity on the situation and (ii) identify those impediments which are so grave that they may hamper the smooth functioning of the financial markets, pose a threat to financial stability, and thus require contractual or statutory solutions.

8 European Parliament. 2002. Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on Financial Collateral Arrangements, Article 2.1(c). Cross-Border Use of Collateral and Repo 77

Comparing repos and pledge, it is clear that from a perspective of the security of the collateral taker repos achieve the stronger protection (provided of course that they are valid and enforceable). The collateral taker obtains full ownership, may use the collateral without restrictions, and can realize it immediately (also through appropriation) whenever relevant. Repos may, therefore, be the preferred option for collateral taking. However, there may be other considerations which may rather support the use of pledge for collateral taking. As indicated above, the most important consideration may be that there are already pledge- based systems in place and that they seem to work well, which reduces the business case to switch over to pledge-based systems.

Other Techniques

There are other techniques for the establishment of collateral such as the creation of pools of collateral. For example, while repos are nowadays widely used for the taking of collateral, there may be other types of agreements being used for the collateralization of financial obligations. Furthermore, in certain countries collateral pools are established, which are governed by specific statutory provisions.

Cherry-Picking

In case of insolvency, many jurisdictions allow a liquidating authority to pick and choose which obligations will be fulfilled (the transactions in-the-money) and which ones will not (the transactions out-of-the-money). In the first case, the collateral taker will usually not have to fulfill his or her obligations as long as the collateral provider does not do so from his or her side (in Latin: exceptio non adimpleti contractus). In the latter case, the collateral taker will, one way or another, have to realize the collateral and after realization file a claim as a general creditor in the bankrupt estate in case of any losses.

Netting

The notion of netting was introduced in the financial markets in the 1980s in order to diminish systemic or Herstatt risk.9 It was intended to provide for the possibility of compensation or set-off of mutual rights and obligations between counterparties in transactions leading to a situation where only the net (hence, netting) debt had to be paid without a possibility for cherry-picking. Netting may be bilateral between two parties or multilateral (between more than two parties). In the SFD, the notion of netting is defined “the conversion into one net claim or one net obligation of claims and obligations resulting from transfer orders which a participant or participants either issue to, or receive from, one or more other participants with the result that only a net claim can demanded or a net obligation be owed.”10 The most advanced form of netting is close-out netting. In the FCAD, under close-out netting provision this is defined as “a provision of a financial collateral

9 Herstatt was a relatively small commercial bank established in Cologne, Germany, which went bankrupt in 1984. Since it was relatively small, normally the contagion or spillover effect of this bankruptcy on the financial markets as a whole would have been limited. However, it appeared that a number of other banks had exposure to Herstatt and that they had hedged these exposures in the financial markets with other counterparts, leading to the risk of a domino effect of the Herstatt bankruptcy in that other banks would also fail to fulfill their obligations and thus be drawn into insolvency as well. 10 European Parliament. 1998. Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on Settlement Finality in Payment and Securities Settlement Systems, Article 2(k). 78 Appendix 6

arrangement, or of an arrangement of which a financial collateral arrangement forms part, or, in the absence of any such provision, any statutory rule by which, on the occurrence of an enforcement event, whether through the operation of netting or set-off or otherwise:

•• the obligations of parties are accelerated so as to be immediately due and expressed as an obligation to pay an amount representing their estimated current value, or are terminated and replaced by an obligation to pay such an amount; and/or •• an account is taken of what is due from each party to the other in respect of such obligations, and a net sum equal to the balance of the account is payable by the party from whom the larger amount is due to the other party.11”

Cross-Border Use of Collateral

In a cross-border context, there is an additional element to the financial collateral: it is denominated in a foreign currency or located in a foreign jurisdiction.

Apart from logistical challenges, the main challenge from a legal point of view is the fact that in principle two legal systems become relevant. The first one is the law governing the credit operation. The second one is the law governing the collateral. In dematerialized book-entry right systems, the latter is usually the law of the economy where the book-entry system is located. These two legal systems may differ as far as the establishment, administration, and realization of collateral are concerned and it would have to be explored whether these differences are so grave that they are prohibitive for the cross-border use of collateral.

There are several instruments to foster cross-border use of collateral, namely through International Central Securities Depositories (ICSDs), links between Securities Settlement Systems (SSS), remote access to SSSs, and Correspondent Bank Models. In the ICSD variant, the collateral is deposited in the ICSD and the collateral provider and the collateral taker both keep accounts with the ICSD, thus allowing them to transfer the collateral from one account to another. In the links between SSS option, the interconnected SSSs would provide for the possibility that an SSS in economy A (the economy where the credit operation takes place and the collateral taker is located) would keep collateral located in economy B at an SSS in economy B. In the third construction, the collateral taker in economy A would have remote access to an SSS in economy B. In the fourth approach, the credit operation would take place in economy A and the collateral would be established, administered, and where appropriate realized in economy B on behalf of the collateral taker located in economy A. These models are further elaborated in a report on cross-border collateral arrangements prepared by the Committee on Payment and Settlement Systems of the Bank for International Settlements (BIS) and published by the BIS in January 2006.

Standards

In the EU, the SFD was adopted in order to foster the smooth operation of payment systems at a time when national payment systems were interconnected through the Trans-European Real-Time Gross Settlement Payment System in order to facilitate the free flow of the EU’s single currency, the euro, throughout the euro area. In addition, since SSS resemble payment

11 European Parliament. 2002. Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on Financial Collateral Arrangements, Article 2.1(c), Article 2.1(n). Cross-Border Use of Collateral and Repo 79

systems, the SFD was also declared applicable to SSS. More in particular, the SFD provides for the following: application to designated funds transfer systems and their participants; •• irrevocability of transfer orders once entered into a system; •• validity and enforceability of bilateral and multilateral netting arrangements; •• irrevocability of payments entered into a system before a bankruptcy declaration is published (no retroactive effect of bankruptcies, no so-called zero-hour rules, whereby the effects of a bankruptcy work back to 12 midnight of the day of the bankruptcy leading to the possible unwinding of transactions after that time, but before the bankruptcy declaration); •• the law governing the system determines the rights and obligations of an insolvent participant; and •• insulation of collateral provided in the framework of participation in a system from the insolvency of the provider, whereby the law applicable to book-entry securities provided as collateral is the law of the jurisdiction where the relevant register, account, or centralized deposit system is located.

In the same vein, the FCAD was adopted in order to create an EU regime for the provision of securities and cash as collateral under both security interest and title transfer structures including repos. This was intended to contribute to the integration and cost-efficiency of the financial markets as well as to the stability of the financial system in the EU, thereby supporting the freedom to provide services and the free movement of capital in the single market in financial services. The FCAD focuses on bilateral financial collateral arrangements. In order to ensure the legal certainty of financial collateral arrangements, member states had to ensure that certain provisions of insolvency law would not apply to such arrangements, in particular those that would inhibit the effective realization of financial collateral or cast doubt on the validity of techniques such as bilateral close-out netting, the provision of additional collateral in the form of top-up collateral and substitution of collateral. In particular, the FCAD provides for the following:

•• application of effective, simple regimes for the creation of collateral under title transfer (repo) or pledge structures (twin track); •• abolition of formalities and procedures to create and enforce financial collateral (financial instruments and cash); •• recognition of the right to reuse pledged collateral; •• protection of collateral from certain insolvency effects (through recognition of substitution, top-up collateral, and close out netting); and •• creation of legal certainty on applicable law regarding book-entry securities by extending the above SFD principle).

Both directives, therefore, support financial stability but, admittedly, to the detriment of those general creditors of a bankrupt institution, who cannot claim this privileged position. This has sometimes led to differences of opinion between representatives of ministries of finance (and central banks) focusing on financial stability on the one hand and ministries of justice defending the interest of general creditors as protected in general provisions of bankruptcy law on the other hand. The two directives, therefore, attempt to strike a balance between the different interests at stake. They are binding on EU member states and they require implementation at a national level. The question may be raised if and to what extent the two directives could be used as examples for countries and regions in other parts of the world if and when they adopt rules on collateral. In this context, it is acknowledged that the two directives are in their presentation obviously determined by EU specificities. However, 80 Appendix 6

on the substance they address issues, which are relevant for collateral issues around the globe, and this in a concise fashion (the SFD consist of only 14 and the FCAD of only 13 articles).

In addition to the EU’s SFD and FCAD, there are several other initiatives that are relevant to collateralization and cross-border use of collateral:

•• The Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary. This is an International Convention with 53 members, adopted on 13 December 2002 in the Hague, the Netherlands, which determines which countries’ laws apply with regard to book-entry securities. •• The Standards of the Committee on Payment and Settlement Systems of the Bank for International Settlements and the International Organization of Securities Regulators. These comprise 19 standards. Standard 1 on the legal framework reads as follows: “Securities clearing and settlement systems should have a well-founded, clear, and transparent basis in the relevant jurisdictions.”12 •• Unidroit Project on Harmonised Substantive Rules Regarding Indirectly Held Securities. This is an international initiative supported by countries such as Australia, Canada, and Japan, as well as the EU, in order to adopt an international convention with regard to book-entry securities.

12 Bank for International Settlements. Committee on Payment and Settlement Systems. https://www .bis.org/Thecpmi/ Appendix 7 Foreign Exchange and Cash Control

CN HK ID JP KR MY PH SG TH VN SummaryObservation FX Trades with Yes No Yes No No Yes No No Yes and No Yes The PRC Indonesia Investors Underlying Funds maintained in the QFIIs foreign currency accounts Foreign All FX forward Foreign Foreign Nonresidents buy or Foreign Foreign THB is freely Custodians may be able to Malaysia Thailand need to Investment and special CNY accounts cannot be used for the investors are value investors investors sell MYR must conﬁrm investors are investors are convertible for SPOT provide foreign investors with and Viet Nam have a consider the purposes other than onshore securities investment not subject to transactions are not are not that it is in relation to a not subject to not subject to value FX against both foreign currency and VND regulation about FX timing of any must match subject to subject to ﬁrm underlying any any THB for all other cash accounts for the purpose trades with local restrictions with the any any commitment which restrictions restrictions value dates requires of facilitating the funding of underlying currency underlying restrictions restrictions may include buy or proper underlying securities transactions and investment arrangement securities sales on Bursa transactions repatriation of proceeds transactions Malaysia Securities

Prohibition of Yes No Yes No No Yes No No No Yes The PRC and Investors Oshore FX Oshore FX is not permitted Foreign IDR cannot be Foreign Foreign MYR can only be traded Foreign Foreign Foreign investors are VND must be performed Indonesia prohibit may not be Trading for investors are transferred investors investors onshore investors are investors are not subject to any onshore with an authorized oshore FX trading able to Investment not subject to oshore are not are not not subject to not subject to restrictions ﬁnancial institution for nonresidents obtain local any subject to subject to any any currency restrictions any any restrictions restrictions when restrictions restrictions needed Pre-fundingYes No No No No No No No No Yes The PRC Investors Pre-funding for securities settlement is required Foreign Foreign Foreign Foreign Foreign investors are Foreign Foreign Foreign investors are FX should be completed at the and Viet Nam have need to investors are investors are investors investors not subject to any investors are investors are not subject to any latest for value day before the regulation make funds not subject to not subject to are not are not restrictions not subject to not subject to restrictions the settlement date to fund about pre-funding available any any subject to subject to any any purchases Market practice before restrictions restrictions any any restrictions restrictions requires all securities sending restrictions restrictions transactions to be trade pre-funded orders

Prohibition of Yes No No No No No No No No No Only the PRC Third-Party FX Although there is no explicit regulation prohibiting third- Foreign Foreign Foreign Foreign Foreign investors are Foreign Foreign Foreign investors are Foreign investors are not prohibit party FX to obtain CNY the CSRC regulations require a investors are investors are investors investors not subject to any investors are investors are not subject to any subject to any restrictions third-party FX subcustodian to execute FX for its QFIIs Therefore it is not subject to not subject to are not are not restrictions not subject to not subject to restrictions eectively not possible to execute third-party FX to obtain any any subject to subject to any any CNY restrictions restrictions any any restrictions restrictions restrictions restrictions 82 Appendix 7

- l s. r on e g ca ti s. fo s ans ons ent in lo th va

or ti paper s ct en t e to odi er of a st ri um ta dent non- ke ci rk po se rren cy st tr e ea te bs r si st ve eport hes us cu fo re e re R ma in and cu im ex doc T limi wo cr . aft r dr , fo er an d yO ia FX g s. m ne s,

C, the in sia, and or n Na stors. st ig ea, r ili ppi mm ar po se et gulate the re dones ve ve ha il and eport ndonesia, Su fo in The PRC, In the Republic Ko Ph T Vi im r The PR I Mal ay Viet Nam do not permit ov for nonresidents Thailand re amount of cash balance fo r foreign in d ’s e n y ig no t Th tt an ce n s ent of ct i is re FX ri le io e s. , , ma . cl mi fo and D are s at st r re rren cy sa ent has he ons ons ons ts on fo t s. ent es cu ent ent on s ng t to si t VN ti or cti cti cti em m ti n ed de ri er mi purc ec ns st ig ru ru ru um um u w erdraf s. s. bj tt le cu oceeds advice, an re st st cl co st ve he onv ondi llo equ ir VN pr se in in doc in in c in se c doc r Ye T fo agai su Ye Ov a in s t ent T t t. om d B an n fr bank of si erdraf e ig edi l B oun ts TH

ov re cr ppor ia c e pe hav proper ade

of fo TH an d rc su ty ac s an th he t

s es t S non-re h e. or he s m th ir to on r t gn i bu t he BO st ent

ng limi ac nt in wi mme

eac si d at re d, ve pl r

requ (NRB si co ts to me ed

nt In ha vi day fo in

ent we re iv - n equi or a to me ore r pay llo

ce ig st r a li ty y erdraf s. s. re re illi on io ve ci om cc ount cc ount TH or fr a do cu Ye An Ye Fo end-of m a NR BA ). Ov are pr fa does in agreem on sh . ns d n c d s io afts . t to n or ct dr ig ec stors, st ri not . . er re bj st ve e e backe ve SG No Fo in are su any re No Ov up to SGD millio n ar permitte for foreig in unless the overdrafts ar by economi activity a d

e ill e re in es ts w th l s to FX th ons or on . nt ca ti equi to ob ta th om ed proﬁ

ti equ ir r

no t la lo nd/ fr wi ia at me is to of em a under tr re id h st s are . ed gs regu xc hange ol ic tu ve e ns ered in ts SP, , r syst under has fu repa in n order B io g

st wh d l and ar ons e ig n e in at in tt an ce s C earn ta ul ic ig re we regi purc erdraf s. le s. e th pi rv rc re mi fo lo

PH Ye Th Ru Ye Ov by al regul Ci fo be BSP bank if be se re and ca BS RD r ts fo s. ons s t to n or cti ed ig ec st ri no t no t dent w . erdraf s. re bj st si ve llo MY No Fo in are su any re . Ye Ov are a non- re s g to on in dent tt ed ti n: nor to ed at r pre- r ra mi ve llio a st la

on han n-re si oan. bi t . ti l equi per Go s ke han

r rea, t ra dec re No or he

la he ma re not

t st are to Ko no t mo to

Loans

s of to ve of

. to g mo

of up lli on: are in in se ed s s bi . n on lli on ng ts ir dent id ank pre-dec ly ti bank ig

si B a ed.

ra re r ount ount e FX purpo prov rrowi la fo ke W W bi erdraf s. s. m m r rrent o e e th r equi KR KR ma th Non re -B are requ dec of th KR cu Ye Fo -A Ye Ov fo -A KRW b illi on: r . ns d n ts s. s io ig t to n or or tte ct re ig ec st st ri not fo mi . . erdraf re bj r st e ve ve JP in fo No Fo in are su any re No Ov ar per to R ga l in n R e to . non- ed ly le s ng ig ID ID or th g

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s fo

y ns un ts n nt

cti b be a a re ig of rm l of co ure mo re n ed it al st agai underl

not ac an sa io fo onﬁ cr and equi n.

nat , s) ss r tr by mu per un ts c at s or

e of ie , ro are g D

on s. iv st on ia s ed in ti ent ac ent ent t he ent cco ti at ve US l or ly erdraw ac a ul ha se in e va

em ty, st um um ones ov s. s. sh rc gu la rren cy( at d ve to ans uppor upport pec ID in be Ye Re Ye Ca doc s under in Pu doc cu st en ti s s tr abov equi In . d n ts ons s s. ig te t to n or or it cti re ig ec st st ri not fo . . erdraf re bj r st e ve ve HK No Fo in No Ov ar perm are su an y re fo in st ne, d, n i tt ed- nt mu e tte tt ed.

mi ou ld me eadl th und ed l mi re IIs is millio mi d

e st f sh If a re ta al ve th nt QF es per

tu To bed in ll y i

a, . D approv me quot fu ac

of han oun t.

no t

hs t scr st tt anc US nt he al

he quot t am ve re not

are t

of mi pre ont . in me is re to ts mo ent st

he and en t m

t approv is e ve ed pa l ount

xc eed al t he in in it in stm ci ns erdraf s. s. am th th e in mi ve

pon educ nbound CN Ye U Ye Ov li ce re wi i no t e in pr th r in bu t wi equ iv r fo t of s ng l sh e ti ro nc Ca dent n- nt erdraf la si epor and Ba No re FX R Co Ov Foreign Exchange and Cash Control 83 r y is on fo en t tr en t. on on ci er ti ey on s, ti ti va ia th e or ta er tr barri st ig n nagem en do

e bs nd re ve mi in fu ma fo wh to th Li repa r m s. n. fo e on. Na a yO io nt at s to ti non - on ts at et ia ti it ri bi me re tr Vi ta dent one si mm ar bm me si d repat prohi repa The PRC ha s so limi In su appropri The Philippines and requi re do cu Su et e ce rk x e th ns ta th e of me ma at ll been gai hav y wi earan x

th l th s a on co i d g cl and ta ll ed . in ese ns eel ta in nt is in te e/ had ng e lﬁ fr hat io ti ia st ed t api fu me at th tt ed tr nam c be re prov enc st ca ne y ce s. n pport et e id mi te di ve om een su do cu in mo re in Vi an d ev fr th o and ca repa ob lig b Ye In VN . No TH nd s te fu ia or

or tr st dent . n- nd s. si ve ades ee ly No No re in tr and/ fu fr repa SG h ts FX ll ic ons or e em on. ti wi be om

ed proﬁ wh

ti th

la re n fr ia at and/ to D FX of th

ig unde r syst

tu tr s to ed if lid g re wi regu fu es o ngs nt as in BSR fo , e nc repa red order ns a BSP, s

ic ch l and ar me ered e n re rv in tta s Co earni ta ul bank st st ai pur le s. e th pi requi se e rc mi ve

is to re and ca requi regi BSP obt be th Ru by Ci in PH Ye Th no ns on l, ti and . io ta are ia e ct pi ts, me tr ri th . ere ca st co MY re on repa of proﬁ in No Th no or ns on s ti on . io s are ti ia ct le eed s me tr ri . ll ec sa st co here KR No T re on repa of in co proc nd s te fu ia or r ent tr y st d . nd s. si ve on- ades eel JP No N re in fr tr and /o repa fu d be te

ia ore. tr s. sh nnot ID Ye ID R ca repa o nd s te fu ia or r . tr y st dent . n- nds si ve ades eel HK No No re in fr tr and /o repa fu l ia r- r- r- - it pa l l al te e y. r n a te te in ci r pl pa af af Fo e Af ngl

in llio ci pre- te . ci on ce

th te pr be in al af . in od. mi d approv ia FE nd s, h pr m e) pr te he an E tr

pondi e fu c ro t peri ia nc of SA ont (f tr th D of approv rres repa th up m pa l d t tta

r on , SAF i il e US ci io co wi io to repa mi at par ck- e a per in

wh pr pes ri re ed per lo , e ed pr be s r ty at any on E’ abov up quot ri ear an ear epat open-ended or onc y n and or equi l st he io ck- -y milli SAF ed ts ts ts c s. R epat t ve ca ned lo e r at s ys r al at in ri es h fis ri th re be wa defi r profi profi profi h D s. r al her ont x x x te

epat an epat equi educ CN Ye Fo ta r m US R r ot is ta af ta approv eac c r n on io on at ti ri ta mi epat R Li BOT = Bank of Thailand; BSP = Banko Sentral ng Pilipinas; BSRD = Bangko Sentral Registration Document; CN = People’s Republic of China; FX = foreign exchange; HK= Hong Kong, China; Kong, HK= Hong exchange; China; FX = foreign of Republic CN = People’s Document; Registration Sentral ng Pilipinas; BSRD = Bangko Sentral Thailand; BSP = Banko = Bank of BOT Korea; of KR = Republic JP = Japan; Standardization; for Organization ISO = International Number; Securities Identification rupiah; ISIN = International IDR = Indonesian ID = Indonesia; Securities; PH = Philippines; QFII Qualified Foreign for Account Baht NRBS =Nonresident Account; Baht ringgit; NRBA =Nonresident = Malaysian MYR = Malaysia; MY won; = Korean KRW Nam; USD = US dollar; VN Viet dollar; TH = Thailand; THB Thai baht; SGD = Singapore SG = Singapore; Exchange; Foreign of Administration SAFE = State Investors; Institutional dong. VND = Vietnamese Source: Appendix 8 Resource Information

Association of National Numbering Agencies (ANNA). http://www.anna-web.org/index.php

ANNA. Service Bureau. http://www.anna-web.org/files/ASB.pdf

Bank for International Settlements, Committee on Payment and Settlement Systems. 2006. Cross-Border Collateral Arrangements. Basel.

European Parliament. Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on Settlement Finality in Payment and Securities Settlement Systems.

European Parliament. 2002. Directive2002/47/EC of the European Parliament and of the Council of 6 June 2002 on Financial Collateral Arrangements.

International Organization for Standards (ISO). Standards Evaluation Groups. http://www .iso20022.org/ standards_evaluation_groups.page

———. Payments Standards Evaluation Group. http://www.iso20022.org/ payments _standards_evaluation_group.page

———. Securities Standards Evaluation Group. http://www.iso20022.org/ securities _standards_evaluation_group.page

———. 2014. ISO 20022 Settlement and Reconciliation Maintenance 2013–2014: Message Definition Report-Part 2. Geneva.

———. 2013. ISO 20022 Payments Clearing and Settlement August 2013: Message Definition Report. Geneva.

———. 2013. ISO 20022 Bank-to-Customer Cash Management May 2013: Message Definition Report-Part 2. Geneva.

Ministry of Finance (Japan). 2014. Debt Management Report 2014. http://www.mof.go.jp/ english/jgbs/publication/debt_management_report/2014/saimu2-1-2.pdf

ADB. 2013. ASEAN+3: Information on Transaction Flows and Settlement Infrastructures http://www.adb.org/publications/asean3-information-transaction-flows-and -settlement-infrastructures References 85

———. 2014. Basic Principles on Establishing a Regional Settlement Intermediary and Next Steps Forward: Cross-Border Settlement Infrastructure Forum. http://www.adb.org/ publications/basic-principles-establishing-regional-settlement-intermediary-next -steps

———. 2015. Progress Report on Establishing a Regional Settlement Intermediary and Next Steps: Implementing Central Securities Depository–Real-Time Gross Settlement Linkages in ASEAN+3. http://www.adb.org/publications/progress-report -establishing-regional-settlement-intermediary-and-next-steps Appendix 9 Information Sessions and Main Agenda Items of ABMF SF2

16th ASEAN+3 Bond Market Forum Sub-Forum 2 (ABMF SF2) on 2 September in Hong Kong, China

•• A pioneering industry approach based on partnership by Mr. Stefan Lepp, Chief Executive Officer, Clearstream •• Securities numbering, including allocation of International Securities Identification Number, by Mr. Dan Kuhnel, Chairman, Association of National Numbering Agencies •• Linking Asian capital markets with the international ecosystem by Olivier Grimonpont, General Manager, Regional Head, Asia-Pacific, Euroclear •• Possible roadmap and policy recommendations (tour de table session) by members and experts

17th ABMF SF2 in Manila, Philippines

•• IS0 20022 management process and governance by Mr. James Whittle, UK Payments Council •• Function and importance of National Market Practice Group by Mr. Taketoshi Mori, Bank of Mitsubishi-Tokyo UFJ •• Progress of implementation of international standards by Dr. Taiji Inui, ADB Consultant for ABMF SF2 and Senior Manager NTT DATA Corporation

18th ABMF SF2 in Manila, Philippines •• Next Steps of ABMF by Mr. Satoru Yamadera, Asian Development Bank Secretariat •• Phase 3 Report by Dr. Taiji Inui Attachment Typical Flow and Possible Example of Bonds Numbering - Government Bond and Corporate Bond -

Typical flows and possible examples of allocating International Securities Identification Number to government bonds and corporate bonds in the region were created based on information collected through market visits and answers from the questionnaire sent to the SF2 members. 88 Attachment

BN: (Government Bond) Possible Example of Bonds Numbering

National Numbering Agency (NNA)

It is not intended to force this flow as a typical flow of bonds numbering in the market. It is an example of the possible flows. within 24 hours MOF

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New Market AMBD ISIN Participants

4. Reporting 5. Updating New ISIN ISIN Database ANNA

ISIN

Database AMBD - Autoriti Monetari Brunei Darussalam ANNA - Association of National Numbering Agencies

BN: (Government Bond) Possible Example of Bonds Numbering

1. MOF sends issuance information to AMBD. 2. AMBD allocates ISIN within 24 hours. 3. AMBD announces new ISIN to market participants. 4. AMBD reports new ISIN to ANNA. 5. AMBD updates ISIN database.

BN = Brunei Darussalam, ISIN = International Securities Identification Number, MOF = Ministry of Finance. Typical Flow and Possible Example of Bonds Numbering 89

BN: (Corporate Bond ) Possible Example of Bonds Numbering

National Numbering Agency (NNA)

Issuers It is not intended to force this flow as a typical flow of bonds numbering in the market. It is an example of the possible flows. within 24 hours

Issuer

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market AMBD Participants

4. Reporting 5. Updating New ISIN ISIN Database ANNA

ISIN

Database AMBD - Autoriti Monetari Brunei Darussalam ANNA - Association of National Numbering Agencies

BN: (Corporate Bond ) Possible Example of Bonds Numbering

1. Issuance agent sends issuance information to AMBD. 2. AMBD allocates ISIN within 24 hours. 3. AMBD announces new ISIN to market participants. 4. AMBD reports new ISIN to ANNA. 5. AMBD updates ISIN database.

BN = Brunei Darussalam, ISIN = International Securities Identification Number. 90 Attachment

CN:(Government Bond) Typical Flow of Bonds Numbering

within 48 hours National Numbering Agency (NNA) MOF

1. Issuance Information

CCDC 2. Forwarding Issuance Information

3. Allocating New ISIN 4. Updating ISIN 5. Announcing Database CSRC/CSISC New ISIN Market ISIN Participants Database

ANNA 6. Reporting New ISIN in about a few weeks

CCDC - China Central Depository & Clearing Co., Ltd CSISC - China Securities International Standards Committee CSRC - China Securities Regulatory Commission ANNA - Association of National Numbering Agencies

CN: (Government Bond) Typical Flow of Numbering

1. MOF as the directly issuer sends issuance information to CCDC. 2. CCDC forwards the information of the bond to CSRC/CSISC to allocate new ISIN. CCDC also forwards the information of the bond to China Securities Information Technology Services (CSITS) to allocate new ISIN on behalf of CSRC (NNA) 3. CSRC/CSISC allocates ISIN within 48 hours for CSRC. 4. CSRC/CSISC updates ISIN database. 5. CSRC/CSISC publishes to market participants. 6. CSRC/CSISC reports new ISIN to ANNA (in a few weeks).

CN =People’s Republic of China, ISIN = International Securities Identification Number, MOF = Ministry of Finance. Typical Flow and Possible Example of Bonds Numbering 91

CN: (Corporate Bond ) Typical Flow of Numbering

Issuers Issuers Issuers

Lead manager Lead manager SSE, SZSE Underwriter Underwriter within 48 hours 1. Issuance Information

SHCH CCDC CSDC

2. Registration of New Issuer’s Information and Numbering Domestic Code for ISIN 3. Requesting for issuance of new ISIN

4. Allocate 6. Announcement of New ISIN CSRC/CSISC ANNA New ISIN 7. Reporting New ISIN in about a few weeks National Numbering Agency (NNA)

5. Updating ISIN CCDC - China Central Depository & Clearing Co., Ltd Database SHCH - Shanghai Clearing House ISIN CSDC - China Securities Depository and Clearing Corporation CSRC - China Securities Regulatory Commission Database CSISC - China Securities International Standards Committee ANNA - Association of National Numbering Agencies

CN: (Corporate Bond ) Typical Flow of Numbering

1. Lead manager (underwriter) which is issuance agent sends issuance information to one of CSDS (SHCH, CCDC, or CSDC) depending on the type of the bond. 2. Each CSD registers new issuer’s information and numbering domestic code for ISIN. 3. Each CSD requests to issue new ISIN to CSRC/CSISC as the National Numbering Agency (NNA) in China. Each CSD also forwards the information of the bond to China Securities Information Technology Services (CSITS) to allocate new ISIN on behalf of CSRC (NNA). 4. CSRC/CSISC allocates ISIN within 48 hours for CSRC. 5. CSRC/CSISC updates ISIN database. 6. CSRC/CSISC announces new ISIN on its website. 7. CSRC/CSISC reports new ISIN to ANNA (in a few weeks).

CN = People’s Republic of China, CSD = central securities depository, NNA = national numbering authority. 92 Attachment

HK: (Government Bond ) Typical Flow of Bonds Numbering

National Numbering Agency (NNA)

Treasury within 1-2 days Department 1. Issuance 2. Tentative Information Allocation of New ISIN Market HKMA Participants

3. Requirement 4. Approval 5. Publication for New ISIN of New ISIN of New ISIN

HKEx ANNA 6. Reporting New ISIN

7. Updating ISIN HKMA - Hong Kong Monetary Authority Database HKEx - Hong Kong Exchanges and Clearing Ltd ISIN ANNA - Association of National Numbering Agencies Database

HK: (Government Bond) Typical Flow of Bonds Numbering

1. Treasury Department sends issuance information to HKMA. 2. HKMA tentatively allocates new ISIN. 3. HKMA requests an approval of new ISIN to HKEx. 4. HKEx approves ISIN within 1-2 days. 5. HKEx posts new ISIN on HKEx website on the third preceding evening of listing day. 6. HKEx reports new ISIN to ANNA. 7. HKEx updates ISIN database.

Note • Market participants in other economies can identify the relevant ISIN from the ISIN database published in the HKEx and ANNA Service Bureau websites. Then, the market participants can obtain the exact information from the prospectus and terms sheet of the corresponding ISIN from the HKEx website.

HK = Hong Kong, China; ISIN = International Securities Identification Number. Typical Flow and Possible Example of Bonds Numbering 93

HK: (Corporate Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA) Issuers

within 1-2 days IssuingIssuer Agents

1. Issuance 2. Tentative Information Allocation of New ISIN Market HKMA Participants

3. Requirement 4. Approval 5. Publication for New ISIN of New ISIN of New ISIN

HKEx ANNA 6. Reporting New ISIN

7. Updating ISIN Database ISIN HKMA - Hong Kong Monetary Authority HKEx - Hong Kong Exchanges and Clearing Ltd Database ANNA - Association of National Numbering Agencies

HK: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuing agent sends issuance information to HKMA. 2. HKMA tentatively allocates new ISIN. 3. HKMA requests an approval of new ISIN to HKEx. 4. HKEx approves ISIN within 1-2 days. 5. HKEx posts new ISIN on HKEx website on the third preceding evening of listing day. 6. HKEx reports new ISIN to ANNA. 7. HKEx updates ISIN database.

Note • Market participants in other economies can identify the relevant ISIN from the ISIN database published in the HKEx and ANNA Service Bureau websites. Then the market participants can obtain the exact information from the prospectus and terms sheet of the corresponding ISIN from the HKEx website.

HK = Hong Kong, China; ISIN = International Securities Identification Number. 94 Attachment

ID: (Government Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA)

within 24 hours MOF DGDM

1. Issuance Information

4. Publication of New Market KSEI ISIN Participants 2. Allocate New ISIN 5. Reporting 3. Updating ANNA ISIN Database New ISIN BI - Bank Indonesia DGDM - Directorate General of Debt Management ISIN KSEI - Indonesian Central Securities Depository Kustodian Sentral Efek Indonesia Database ANNA - Association of National Numbering Agencies

ID: (Government Bond) Typical Flow of Bonds Numbering

1. MOF sends issuance information to BI and KSEI. 2. KSEI allocates and releases new ISIN within 24 hours. 3. KSEI automatically updates ISIN database. 4. KSEI announces new ISIN to KSEI’s members (securities companies and custodian banks) by e-mail and posts on KSEI website. 5. KSEI reports new ISIN to ANNA every day.

Note • KSEI provides ISIN information on KSEI’s website. Nonresident investors can get ISIN information from this website.

ID = Indonesia, ISIN = International Securities Identification Number, MOF = Ministry of Finance. Typical Flow and Possible Example of Bonds Numbering 95

ID: (Corporate Bond ) Typical Flow of Bonds Numbering

National Numbering Agency (NNA)

Issuers

within 24 hours Issuing Agents

1. Issuance Information

3. Publication of New ISIN Market KSEI Participants 2. Allocation of New ISIN 4. Reporting 5. Updating New ISIN ISIN Database ANNA

ISIN

Database KSEI - Indonesian Central Securities Depository Kustodian Sentral Efek Indonesia ANNA - Association of National Numbering Agencies

ID: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuing agent sends issuance information to KSEI. 2. KSEI allocates ISIN within 24 hours. 3. KSEI announces new ISIN to KSEI’s members (securities companies and custodian banks) by e-mail and posts on KSEI website. 4. KSEI reports new ISIN to ANNA every day. 5. KSEI automatically updates ISIN database.

Note • KSEI provides ISIN information on KSEI’s website. Nonresident investors can get ISIN information from this website. • KSEI publishes new ISIN in English and local language. • KSEI will automatically update in ISIN Database for New ISIN Code.

ID = Indonesia, ISIN = International Securities Identification Number, MOF = Ministry of Finance. 96 Attachment

JP: (Government Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA) within 24 hours

MOF

4. Issuance 1. Issuance Information Information 2. Tentative Allocation of New ISIN Market JASDEC Participants 3. Publication of New ISIN

6. Updating 5. Allocation ISIN Database of New ISIN 7. Reporting New ISIN ISIN TSE/SICC ANNA Database BOJ - Bank of Japan SICC - Securities Identification Code Committee ANNA - Association of National Numbering Agencies

JP: (Government Bond) Typical Flow of Bonds Numbering

1. JASDEC obtains issuance information from MOF. 2. JASDEC tentatively allocates new ISIN. 3. JASDEC announces new ISIN to market participants. 4. TSE/SICC obtains issuance information from MOF. 5. TSE/SICC allocates new ISIN. 6. TSE/SICC updates ISIN database. 7. TSE/SICC reports new ISIN to ANNA.

• Note Government bonds will adopt ISIN in October 2015. Business flow of numbering may change.

SIN = International Securities Identification Number, JASDEC = Japan Securities Depository Center, JP = Japan, MOF = Ministry of Finance, TSE = Tokyo Stock Exchange. Typical Flow and Possible Example of Bonds Numbering 97

JP: (Corporate Bond ) Typical Flow of Bonds Numbering

National Numbering Agency (NNA) Issuers

within 24 hours Issuing Agents 1. Issuance Information

2. After Registering New 6. Publication Issue’s Information, of New ISIN Market JASDEC Tentatively Numbering Participants New ISIN

3. Requirement 5. Approval for New ISIN of New ISIN

7. Reporting New ISIN ISIN TSE/SICC ANNA Database JASDEC - Japan Securities Depository Center, Inc. 4. Updating ISIN TSE - Tokyo Stock Exchange Database ANNA - Association of National Numbering Agencies

JP: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuing agent sends issuance information to JASDEC. 2. After registering new issue’s information, JASDEC tentatively numbers New ISIN 3. JASDEC requests new ISIN to TSE/SICC. 4. TSE/SICC updates ISIN database. 5. TSE/SICC approves new ISIN within 24 hours. 6. JASDEC announces new ISIN to market participants 4 times a day and posts new ISIN on the JASDEC website once a day. 7. TSE/SICC reports new ISIN to ANNA.

Note • Corporate bonds have already adopted ISIN.

ISIN = International Securities Identification Number, JP = Japan, SICC = Securities Identification Code Committee. 98 Attachment

KH: (Government Bond) Possible Example of Bonds Numbering

National Numbering Agency (NNA) within 24 hours

MEF It is not intended to force this flow as a typical flow of bonds numbering in the market. It is an example of the possible flows. 1. Issuance Information 2. Tentative Allocation of New ISIN NBC

3. Requirement 4. Approval for New ISIN of New ISIN 5. Publication of New Market CSX ISIN Participants

6. Reporting 7. Updating New ISIN ISIN Database ANNA

ISIN MEF - Ministry of Economy and Finance Database NBC - National Bank of Cambodia CSX - Cambodia Securities Exchange ANNA - Association of National Numbering Agencies

KH: (Government Bond) Possible Example of Bonds Numbering

1. MEF sends issuance information to NBC. 2. NBC tentatively allocates new ISIN. 3. NBC requests to assign new ISIN to CSX. 4. CSX assigns ISIN within 24 hours. 5. CSX announces new ISIN to market participants. 6. CSX reports new ISIN to ANNA. 7. CSX updates ISIN database.

ISIN = International Securities Identification Number, KH = Cambodia. Typical Flow and Possible Example of Bonds Numbering 99

KH: (Corporate Bond ) Possible Example of Bonds Numbering

National Numbering Agency (NNA)

Issuers It is not intended to force this flow as a typical flow of bonds numbering in the market. It is an example of the possible flows. within 24 hours Issuing Agents

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market CSX Participants

4. Reporting 5. Updating New ISIN ISIN Database ANNA

ISIN

Database CSX - Cambodia Securities Exchange ANNA - Association of National Numbering Agencies

KH: (Corporate Bond ) Possible Example of Bonds Numbering

1. Issuing agent sends issuance information to CSX. 2. CSX allocates ISIN within 24 hours. 3. CSX announces new ISIN to market participants. 4. CSX reports new ISIN to ANNA. 5. CSX updates ISIN database.

ISIN = International Securities Identification Number, KH = Cambodia 100 Attachment

KR: (Government Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA) MOSF within 24 hours

1. Issuance Information

BOK

2. Apply 3. Assign

Market KOSCOM Participants

4. Inform

KRX ANNA 6. Report

5. Update MOSF -Ministry of Strategy and Finance ISIN BOK -Bank of Korea KRX - Korean Exchange Database KOSCOM - Financial IT & information vendor ANNA - Association of National Numbering Agencies

KR: (Government Bond) Typical Flow of Bonds Numbering

1. MOSF notifies issuance information to BOK 2. BOK applies for a new ISIN code. 3. KRX assigns ISIN. 4. KRX posts the ISIN code on its website and informs KOSCOM every 30 seconds. 5. KRX updates its ISIN database. 6. KRX reports to ANNA.

Notes • Provided that all submitted data and document are correct, ISIN is allocated within the day of application.

ISIN = International Securities Identification Number, KOSCOM = Korea Securities Computing Corporation, KR = Republic of Korea. Typical Flow and Possible Example of Bonds Numbering 101

KR: (Corporate Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA) Issuers

within 24 hours Issuing Agents

2.Assign

Market 1.Apply KOSCOM Participants

3. Inform

KRX ANNA 5. Report

4. Update KRX - Korean Exchange ISIN KOSCOM - Financial IT & information vendor ANNA - Association of National Numbering Agencies Database

KR: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuer or issuing agent applies for a new ISIN code. 2. KRX assigns ISIN. 3. KRX posts the ISIN code on its website and informs KOSCOM every 30 seconds. 4. KRX updates its ISIN database. 5. KRX reports to ANNA.

Notes • Provided that all submitted data and documents are correct, ISIN is allocated within the day of application.

ISIN = International Securities Identification Number, KOSCOM = Korea Securities Computing Corporation, KR = Republic of Korea. 102 Attachment

LA: (Government Bond) Possible Example of Bonds Numbering

National Numbering Agency (NNA) within 24 hours

MOF It is not intended to force this flow as a typical flow of bonds numbering in the market. It is an example of the possible flows. 1. Issuance Information 2. Tentative Allocation of New ISIN BOL

3. Requirement 4. Approval for New ISIN of New ISIN 5. Publication of New ISIN Market LSX Participants

6. Reporting 7. Updating New ISIN ISIN Database ANNA

ISIN

Database BOL - Bank of the Lao PDR LSX - Lao Securities Exchange ANNA - Association of National Numbering Agencies

LA: (Government Bond) Possible Example of Bonds Numbering

1. MOF sends issuance information to BOL. 2. BOL tentatively allocates new ISIN. 3. BOL requests to assign new ISIN to LSX. 4. LSX assigns ISIN within 24 hours. 5. LSX announces new ISIN to market participants. 6. LSX reports new ISIN to ANNA. 7. LSX updates ISIN database.

ISIN = International Securities Identification Number, LA =Lao People’s Democratic Republic, MOF = Ministry of Finance. Typical Flow and Possible Example of Bonds Numbering 103

LA: (Corporate Bond ) Possible Example of Bonds Numbering

National Numbering Agency (NNA)

Issuers It is not intended to force this flow as a typical flow of bonds numbering in the market. It is an example of the possible flows. within 24 hours Issuing Agents

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market LSX Participants

4. Reporting 5. Updating New ISIN ISIN Database ANNA

ISIN

Database LSX - Lao Securities Exchange ANNA - Association of National Numbering Agencies

LA: (Corporate Bond ) Possible Example of Bonds Numbering

1. Issuance agent sends issuance information to LSX. 2. LSX allocates ISIN within 24 hours. 3. LSX announces new ISIN to market participants. 4. LSX reports new ISIN to ANNA. 5. LSX updates ISIN database.

ISIN = International Securities Identification Number, LA= Lao People’s Democratic Republic. 104 Attachment

MM: (Government Bond) Possible Example of Bonds Numbering

National Numbering Agency (NNA) within 24 hours

MOF It is not intended to force this flow as a typical flow of bonds numbering in your market. It is one example of the possible flows. 1. Issuance Information 2. Tentative Allocation of New ISIN CBM

3. Requirement 4. Approval for New ISIN of New ISIN 5. Publication of New ISIN Market MSEC Participants

6. Reporting 7. Updating New ISIN ISIN Database ANNA

ISIN

Database CBM - Central Bank of Myanmar MSEC - Myanmar Securities Exchange Centre ANNA - Association of National Numbering Agencies

MM: (Government Bond) Possible Example of Bonds Numbering

1. MOF sends issuance information to CBM. 2. CBM tentatively allocates new ISIN. 3. CBM requests to assign new ISIN to MSEC. 4. MSEC assigns ISIN within 24 hours. 5. MSEC announces new ISIN to market participants. 6. MSEC reports new ISIN to ANNA. 7. MSEC updates ISIN database.

ISIN = International Securities Identification Number, MM = Myanmar. Typical Flow and Possible Example of Bonds Numbering 105

MM: (Corporate Bond ) Possible Example of Bonds Numbering

National Numbering Agency (NNA)

Issuers It is not intended to force this flow as a typical flow of bonds within 24 hours numbering in your market. It is one example of the possible flows.

Issuing Agents

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market MSEC Participants

4. Reporting 5. Updating New ISIN ISIN Database ANNA

ISIN

Database MSEC - Myanmar Securities Exchange Centre ANNA - Association of National Numbering Agencies

MM: (Corporate Bond ) Possible Example of Bonds Numbering

1. Issuance agent sends issuance information to MSEC. 2. MSEC allocates ISIN within 24 hours. 3. MSEC announces new ISIN to market participants. 4. MSEC reports new ISIN to ANNA. 5. MSEC updates ISIN database.

ISIN = International Securities Identification Number, MM = Myanmar. 106 Attachment

MY: (Government Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA)

within 24 hours

MOF

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market BNM Participants 4. Reporting New ISIN ANNA 5. Updating ISIN Database ISIN Database

BNM - Bank Negara Malaysia ANNA - Association of National Numbering Agencies

MY: (Government Bond) Typical Flow of Bonds Numbering

1. MOF sends issuance information to BNM. 2. BNM allocates ISIN within 24 hours. 3. BNM announces new ISIN to market participants. 4. BNM reports new ISIN to ANNA. 5. BNM updates ISIN database.

ISIN = International Securities Identification Number, MOF = Ministry of Finance, MY = Malaysia. Typical Flow and Possible Example of Bonds Numbering 107

MY: (Corporate Bond ) Typical Flow of Bonds Numbering

National Numbering Agency (NNA) Issuers

within 24 hours Issuing Agents

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market BNM Participants 4. Reporting New ISIN ANNA 5. Updating ISIN Database ISIN Database

BNM - Bank Negara Malaysia ANNA - Association of National Numbering Agencies

MY: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuing agent sends issuance information to BNM. 2. BNM allocates ISIN within 24 hours. 3. BNM announces new ISIN to market participants. 4. BNM reports new ISIN to ANNA. 5. BNM updates ISIN database.

ISIN = International Securities Identification Number, MY = Malaysia. 108 Attachment

PH: (Government Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA)

within 24 hours

BTr

Market 1. Issuance 2. Allocation Participants Information of New ISIN 3. Publication of New ISIN

SEC ANNA 4. Reporting New ISIN

5. Updating ISIN Database ISIN BTr - Bureau of Treasury Database SEC - Securities and Exchange Commission ANNA - Association of National Numbering Agencies

PH: (Government Bond) Typical Flow of Bonds Numbering

1. BTr sends issuance information to SEC. 2. SEC as NNA allocates ISIN within 24 hours. 3. SEC announces new ISIN to market participants through exchange and SEC website. 4. SEC reports new ISIN to ANNA. 5. SEC updates ISIN database.

Note • For registered securities, ISIN shall be allocated once registration is approved. • For exempt securities/ transactions, prior ISIN allocation shall be a requirement for listing in an exchange.

ISIN = International Securities Identification Number, PH = Philippines. Typical Flow and Possible Example of Bonds Numbering 109

PH: (Corporate Bond ) Typical Flow of Bonds Numbering

Issuers National Numbering Agency (NNA)

within 24 hours

Issuing Agents

1. Issuance 2. Allocation Information of New ISIN Market Participants

3. Publication SEC of New ISIN

ANNA 4. Reporting New ISIN

5. Updating ISIN Database ISIN SEC - Securities and Exchange Commission Database ANNA - Association of National Numbering Agencies

PH: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuing agent sends issuance information to SEC. 2. SEC as NNA allocates ISIN within 24 hours. 3. SEC announces new ISIN to market participants through exchange and SEC website. 4. SEC reports new ISIN to ANNA. 5. SEC updates ISIN database.

ISIN = International Securities Identification Number, PH = Philippines. 110 Attachment

SG: (Government Bond) Typical Flow of Bonds Numbering

National Numbering Agency (NNA)

within 24 hours MOF

4. Updating 1. Issuance Information ISIN Database 5. Publication of New ISIN Market ISIN MAS Database Participants 2. Allocation of New ISIN and Reporting 3. Confirmation of New ISIN 6. Reporting New ISIN SGX ANNA

MAS - Monetary Authority of Singapore SGX - Singapore Exchange Ltd., ANNA - Association of National Numbering Agencies

SG: (Government Bond) Typical Flow of Bonds Numbering

1. MOF sends issuance information to MAS. 2. MAS allocates new ISIN and report to SGX within 24 hours. 3. SGX confirms ISIN. 4. MAS updates ISIN database. 5. MAS posts a daily ISIN file on the MAS website. 6. SGX submits to ANNA a monthly report about ISIN.

Note • ISIN (ISO 6166) is used in conjunction with place of trade and country to uniquely identify an instrument. BIC (ISO 9362) will be made compulsory. SGX plans to improve this further to add CFI (Classification of Financial Instruments: ISO 10962) to supplement ISIN.

ISIN = International Securities Identification Number, MOF = Ministry of Finance, SG = Singapore. Typical Flow and Possible Example of Bonds Numbering 111

SG: (Corporate Bond ) Typical Flow of Bonds Numbering

National Numbering Agency (NNA) Issuers within 24 hours Issuing Agents

1. Issuance 2. Tentative Information Allocation of New ISIN ISIN CDP ANNA Database 5. Updating 6. Reporting ISIN Database New ISIN

3. Requirement 4. Approval for New ISIN of New ISIN

7. Publication of New ISIN Market SGX Participants

CDP - Central Depository (Pte.) Ltd, SGX - Singapore Exchange Ltd., ANNA - Association of National Numbering Agencies

SG: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuing agent sends issuance information to CDP. 2. CDP tentatively allocates new ISIN. 3. CDP requests new ISIN to SGX. 4. SGX approves ISIN within 24 hours. 5. CDP updates ISIN database. 6. CDP submits to ANNA a monthly report about ISIN. 7. SGX posts a daily ISIN file on the SGX website.

ISIN = International Securities Identification Number, SG = Singapore. 112 Attachment

TH: (Government Bond) Typical Flow of Allocation of ISIN

National Numbering Agency (NNA) Issuers 2. Bond Feature Information from Issuer 1. Submitting Bond Offering Request to SEC and BOT 3. Thai BMA Verify the Feature and Assign Local Code (Symbol) BOT and Thai BMA 7. SEC and BOT Inform New ISIN (SEC* ) to Thai BMA

4. Issuance 6. Report New ISIN 8. Publication of Information New ISIN

5. Allocation of New ISIN Market TSD Real time Participants & within 24 hours Investors

6. Updating 9. Publication of 9. Reporting New ISIN TSD’s ISIN Database New ISIN once a week once a week as soon as ISIN is allocated TSD’s website ANNA ISIN Database TSD - Thailand Securities Depository Co., Ltd ANNA - Association of National Numbering Agencies * SEC takes a role as an ISIN requester for both equity and bonds

TH: (Government Bond) Typical Flow of Bonds Numbering

1. Issuer submits bond offering request form to SEC and BOT. 2. Issuer submits bond feature information to Thai BMA. 3. After verifying the information, Thai BMA assigns local bond code (symbol) and informs it to SEC and BOT. 4. SEC and BOT forward bond issuance information to TSD. 5. TSD allocates ISIN as soon as it receives bond feature information from SEC or BOT. 6. TSD reports new ISIN to SEC and BOT and updates TSD’s ISIN database. 7. SEC and BOT inform new ISIN to Thai BMA. 8. Thai BMA publishes new ISIN including bond feature information to its website as well as informs it to market participants and investors. 9. TSD reports new ISIN to ANNA and publishes on its website once a week.

BMA = Bond Market Association, BOT = Ban of Thailand, SEC = Security and Exchange Commission, ISIN = International Securities Identification Number, TH = Thailand. Typical Flow and Possible Example of Bonds Numbering 113

TH: (Corporate Bond ) Typical Flow of Allocation of ISIN

National Numbering Agency (NNA) Issuers

1. Submitting Bond Issuance Information to SEC 2. Bond Feature Information from SEC within 24 hours 3. Thai BMA Verify the Feature and 7. Publication SEC Assign Local Code (Symbol) Thai BMA of New ISIN 7. SEC Inform the New ISIN to Thai BMA (next day) 4. Bond 8. Publication of SEC’s 6. Report new ISIN feature New ISIN website Information (at registration date) 5. Allocation of New ISIN TSD Market (real time) Participants & 6. Updating Investors TSD’s ISIN Database 9. Publication of 9. Reporting New ISIN (as soon as New ISIN (once a week) (once a week) ISIN is allocated) TSD’s website ANNA ISIN Database TSD - Thailand Securities Depository Co., Ltd * SEC takes a role as an ISIN requester for both equity ANNA - Association of National Numbering Agencies and bonds (with maturity greater than 270 days)

TH: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuer submits bond issuance information to SEC. 2. SEC sends bond feature information to Thai BMA. 3. After verifying the information, Thai BMA assigns local bond code (symbol) and informs it to SEC. 4. SEC forwards bond feature to TSD. 5. TSD allocates ISIN as soon as receiving bond feature information from SEC. 6. TSD reports new ISIN to SEC and updates TSD’s ISIN database as soon as new ISIN is allocated. 7. SEC informs new ISIN to Thai BMA and publishes it on SEC’s website (next day after receiving new ISIN). 8. Thai BMA publishes new ISIN (at registration date) including bond feature information to its website as well as informs it to market participants and investors. 9. TSD reports new ISIN to ANNA and publishes it on its website once a week.

BMA = Bond Market Association, BOT = Ban of Thailand, SEC = Security and Exchange Commission, ISIN = International Securities Identification Number, TH = Thailand. 114 Attachment

VN: (Government Bond) Typical Flow of Bonds Numbering within 24 hours National Numbering Agency (NNA) State Treasury Ministry of Finance

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market VSD Participants

4. Reporting New ISIN 5. Updating ISIN Database ANNA

ISIN Database

VSD - Vietnam Securities Depository ANNA - Association of National Numbering Agencies

VN: (Government Bond) Typical Flow of Bonds Numbering

1. State Treasury Ministry of Finance sends issuance information to VSD. 2. VSD allocates ISIN within 24 hours. 3. VSD sends a written notice to the two exchanges and VSD’s members and posts ISIN on VSD website. 4. VSD reports new ISIN to ANNA. 5. VSD updates ISIN database.

Notes • It takes 1 day for issuing new bond code from issuance information to updating code database. Detailed information: T day: day of bond offering T+1: VSD registers, allocates bond codes (local code and ISIN) and updates into the database T+2: day of bond issuance • Information of ISIN is uploaded onto VSD website for investors and market participants’ reference. For specific information on ISIN allocation, investors could refer to the guideline on securities code allocation issued with Decision 149/QD-VSD dated 21 August 2012 by VSD.

ISIN = International Securities Identification Number, VN = Viet Nam. Typical Flow and Possible Example of Bonds Numbering 115

VN: (Corporate Bond ) Typical Flow of Bonds Numbering

within 24 hours National Numbering Agency (NNA) Issuers

1. Issuance 2. Allocation Information of New ISIN

3. Publication of New ISIN Market VSD Participants

4. Reporting New ISIN 5. Updating ISIN Database ANNA

ISIN Database

VSD - Vietnam Securities Depository ANNA - Association of National Numbering Agencies

VN: (Corporate Bond ) Typical Flow of Bonds Numbering

1. Issuer sends issuance information to VSD. 2. VSD allocates ISIN within 24 hours. 3. VSD sends a written notice to the two exchanges and VSD’s members and posts ISIN on VSD website. 4. VSD reports new ISIN to ANNA. 5. VSD updates ISIN database.

ISIN = International Securities Identification Number, VN = Viet Nam. Harmonization and Standardization of Bond Market Infrastructures in ASEAN+3 ASEAN+3 Bond Market Forum Sub-Forum 2 Phase 3 Report

About the Asian Development Bank

ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to the majority of the world’s poor. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration.

HARMONIZATION AND STANDARDIZATION OF BOND MARKET INFRASTRUCTURES IN ASEAN+3 ASEAN+3 BOND MARKET FORUM SUB-FORUM 2 PHASE 3 REPORT

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