Clearing and Settlement Services

Trade reporting & Clearing

When CDS operations commenced in November 2004, concluded trades at the Stock Exchange were recorded in CDS through a manual process. In September 2006, the CDS was linked to the trading system at the Stock Exchange. This eliminated the manual process of data capture. Trades executed in the Automated Trading System (ATS) are automatically fed into the CDS system and the relevant securities accounts are updated on a real-time basis (pending buy, pending sale). Transaction reports and settlement obligations are generated by CDSC and made available to Central Depository Agents (CDAs) on trade date (T+0).

Settlement

There are various internationally recognized operational models of Delivery vs Payment (DvP) settlement. CDSC employs DvP Model 2, where securities are settled in the CDS system on a gross basis (trade-for-trade processing) while funds are settled on a net basis through the settlement bank.

All settlement participants are required to open a settlement account with the Settlement Bank. On settlement date, funds transfer amongst participants takes place on a net basis at the Settlement bank. Simultaneously the seller's Securities Account is debited and the buyer's Securities Account is credited in the CDS. This ensures strict delivery versus payment.

By implementing strict delivery versus payment within a rolling T+4 settlement cycle, the CDSC significantly improved the efficiency of the settlement mechanism in the stock market. This simultaneous exchange of cash and securities, guarantees irrevocability of settlement and offers the high level of customer protection.

Guarantee Fund

To ensure financial integrity in the securities market, CDSC has put in place a fund which ensures that trades will be settled among CDAs (i.e. that the selling CDA will deliver the securities and that the buying CDA will effect payment)