KSD Overview December 14, 2001 Tashkent, Uzbekistan H.S. Yoo

Outline  Overview of Korean Securities Market  KSD Profile  Scope of Business

Overview of Korean Securities Market  Securities Market Infrastructure  Overview of Trade & Settlement in Korea  Market Statistics

4 Securities Market Structure : Audit & Inspection : Planning & Admission : Decision-Making Ministry of Finance & Economy Financial Supervisory Commission Financial Supervisory Service K S EKOSDAQK O F E XOTC Equity,Bond KOSPI 200 Equity Bond Equity Futures Options KOSCOMK S D Deposit Settlement Computer System Overview

5 Overview of Trade & Settlement in Korea Members Trade volume (year 2000) Clearing Settlement Delivery Payment Netting Settlement Cycle K S EI N A SOTC(Bond)KOFEXKOSDAQ Securities Companies Institutional Investors Institutional Investors Futures Companies Securities Companies USD blnUSD 58 blnUSD 1,416 blnUSD blnUSD bln K S EK S D K O F E XK S D K O F E XK S D Book-entry Transfer Book-entry Transfer Book-entry Transfer - Book-entry Transfer Designated Bank Designated Bank B O K Designated Bank Designated Bank MultilateralBilateralR T G SMultilateral T+2 TT+1T+2 Overview

6 Market Statistics Market Value KSE237 trillion KRW(182 billion USD) KOSDAQ45 trillion KRW(35 billion USD) Total Market Value282 trillion KRW(217 billion USD) Listed Shares KSE19 billion shares KOSDAQ7.2 billion shares Total Listed Shares26.2 billion shares Overview (as of June, 2001)

KSD Profile  Foundation  Participants  Financial Highlights

8 Foundation KSD Profile  December 1974  Commercial Code  Wholly-owned Subsidiary of KSE  December 1974  Commercial Code  Wholly-owned Subsidiary of KSE  April 1994  Securities & Exchange Act (SEA)  Over 100 shareholders  Non-Profit Seeking  Special Public Organization  Sole CSD under the SEA  April 1994  Securities & Exchange Act (SEA)  Over 100 shareholders  Non-Profit Seeking  Special Public Organization  Sole CSD under the SEA KSSCKSD

9 Participants  964 accounts for 456 participants (Oct. 2001) KSD Profile

10 Financial highlights (Dec. 31, 2000)  Total assets of 753 billion KRW (579 million USD)  Shareholder’s equity of 241 billion KRW (185 million USD)  Net income of 69 billion KRW (53 million USD) KSD Profile

Scope of Business  Centralized Deposit and Settlement  Eligible Securities  Account Book  KSE Settlement  KOSDAQ Settlement  Debt Settlement (OTC)  Institutional Settlement(INAS)  Corporate Actions  Cross-border Securities Settlement  Derivative Settlement Services

Deposit & Settlement  Eligible Securities  Account Book  KSE Settlement  KOSDAQ Settlement  Debt Settlement (OTC)  Institutional Settlement(INAS) Scope of business

13 Eligible Securities  Securities listed on the KSE;  Securities registered on the KOSDAQ;  Short-term monetary instruments including CDs and CPs; and  Securities deemed appropriate by KSD Deposit & SettlementScope of business

14 Account Book Participant Client Client A/C Book Participant A/C Book ProprietaryClient Deposit Redeposit Deposit & SettlementScope of business

15 KOSCOM KSE Market Settlement KSE Broker/Dealer 4. Settlement (T+2, 4 p.m.) 3. Settlement Statement (T+2 Morning) 2. Clearing Data (T+1) 1. Trade (T) / Confirmation (T) 3. Settlement Statement (T+2 Morning) 4. Settlement (T+2, 4 p.m.) Deposit & SettlementScope of business

16 KOSCOM KOSDAQ Settlement KOSDAQ Broker/Dealer 4. Settlement (T+2, 4 p.m.) 3. Settlement Statement (T+2 Morning) 2. Trade Data (T) 1. Trade (T) / Confirmation(T) 3. Settlement Statement (T+2 Morning) 4. Settlement (T+2, 4 p.m.) Deposit & SettlementScope of business

17 1. IDB and participants enter the trade details into the SAFE KSD matches the trade details from each trade counterpart and sends matching report to them. 3-1 KSD checks if the seller’s account has enough securities to settle the trade. If yes, KSD restricts the securities from disposal. 3-2 KSD transmits the fund transfer instruction to BOK.(KSD a/c→Seller a/c) 4. The buyer transfers the settlement fund into KSD’s a/c 5. Simultaneously BOK-wire transfers the settlement fund into the seller’s a/c 6. BOK-wire transmits the message that the settlement fund is credited into seller’s a/c. Simultaneously, KSD transfers the securities into the buyer’s a/c. Buyer`s a/c KSD’s a/c [BOK] ④ Fund ransfer Seller`s a/c ③ Transmission ⑤ Fund Transfer Participants Matching System enough securities ? Queue system [KSD] no Restriction of Bonds yes Bonds Transfer  Trade details ② Matching report Fund Transfer Instruction (KSD→Seller) Transfer Results (Simultaneously) [Interface] ⑥ Transmission Debt Settlement (OTC) Deposit & SettlementScope of business

18 INAS System Deposit & SettlementScope of business Institutional Investor Securities Company Order Execution KSE 4. Settlement(Book-Entry:T+2) 2. Confirmation & Affirmation(T+1) 3. Preliminary Settlement Data (T+1) 3. Preliminary Settlement Data (T+1) 1. Trade Data (T)

19 Beneficial Owner’s Book Corporate Actions : Beneficial Owner System  Beneficial Owner : The persons whose stocks are deposited with KSD and registered in KSD’s name  Streamlined procedure for rights exercising by beneficial owners  Efficient way of securities management for issuers & participants Issuer(Transfer Agent) Client a/c Book Participants Participant a/c Book Beneficial Owner KSD Right Exercising(Direct) Request for Right Exercising Beneficial Owners’ Statement Right Exercising(Indirect) Notification Request for rights exercising Redeposit Beneficial Owners’ Statement Deposit ClientProprietary Scope of business

Cross-border Securities Settlement  Outbound Settlement System - Settlement system for Korean investors who invest in foreign securities market  Inbound Settlement System - Settlement system for foreign investors who invest in Korean securities market Scope of business

21 Outbound Settlement System  Global Custody - General Investors : Mandatory - Institutional Investors : Optional  Cross-border Clearing Network(CCN) - 42 Countries covered - Sub-Custodian : Euroclear, Clearstream, State Street Bank, BNY - Communication : SAFE21, SWIFT, Sub-Custodian’s proprietary S/W CSD A(Or Global Custodian) KSD Participant 1Participant 2 KSD Participant 5Participant 4 Participant 3 Cross-border Securities SettlementScope of business

22 Inbound Settlement System (Local Custody Services)  Agent Services (Investment Registration)  Custody & Settlement of Securities  Cash Management / Corporate Actions Services  Linkage with Foreign CSDs : HKMA, JSCC  Total Assets under Custody (Oct. 30, 2000)  Equity : 3.5 trillion KRW (2.7 billion USD)  Debt Securities :28.5 billion KRW (22.5 million USD) CSD A(or Global Custodian) KSD CSD A(or LC) Participant 1Participant 2Participant3 Participant 5Participant 4 Cross-border Securities SettlementScope of business

23 Securities Lending / Repo  Securities Lending & Settlement Services  Lender : Fee  Borrower –Arbitrage trading –Settlement Coverage  Triparty Repo Services  Lending and Borrowing of funds by collateralizing securities  Settlement and collateral management on behalf of participants Scope of business

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