cl ea ri ng ser vi c es st rateg i es · 2019-07-05 · cl ea ri ng ser vi c es st rateg i es jpx...

© 2019 Japan Securities Clearing Corporation

Total smart exchange

Clearing Services Strategies

JPX IR Day 2019

Hironaga Miyama,President & CEOJapan Securities Clearing Corporation

July 3, 2019

(Reference Translation)


1. Outline of JSCC Business

© 2019 Japan Securities Clearing Corporation 3

(1) JSCC Business Scope Started clearing services related to Listed Products in 2003, and expanded its clearing

coverage to OTC Derivatives (CDS and IRS) and JGB Transactions.

Listed Products OTC Transactions

TSE

OSE

Trading

Clearing

Settlement Securities Settlement

Assumption of Obligation

Commenced CDS Clearing(Jul. 2011)

Fund Settlement

Japan Securities Depository Center / Bank of Japan

Bank of Japan / Fund settlement banks

Equities / CBs /REITs / ETFs

(Jan. 2003)

Credit Default Swaps (CDS)

Netting

Merged with Japan Government Bond Clearing Corporation(Oct. 2013)

Securities Companies, Banks, etc.

Commenced IRS Clearing(Oct. 2012)

NSE, SSE, FSE

PTS (July 2010)

Futures/OptionsTSE Feb. 2004OSE July. 2013

Interest Rate Swaps (IRS) OTC JGB

(Est. July 2002)


45.9% 45.7% 42.4% 42.9% 40.2%

11.5% 11.5% 12.0% 12.1% 11.6%

15.4% 15.4% 16.8% 16.5% 17.4%

8.3% 7.2% 9.0% 9.1% 10.4%

18.9% 20.2% 19.9% 19.4% 20.5%

0%

20%

40%

60%

80%

100%

2014 2015 2016 2017 2018

Trading Services Listing Servicesd Information Services

Other Clearing Services

17.219.5

17.5 19.2 18.8

2.3

2.73.1

3.1 3.41.5

1.41.5

1.6 3.0

0

5

10

15

20

25

30

2014 2015 2016 2017 2018

Listed Products OTC Derivatives OTC JGB

(2) Status of JSCC Revenue

4

JSCC’s operating revenue is showing moderate expansion trend mainly from improvement of market conditions after start of Abe administration and expansion of clearing of OTC transactions.

Share of OTC transactions (OTC Derivatives and OTC JGB) in operating revenue gradually increased, and reached approx. 26% in FY 2018.

Share of revenue from clearing services in operating revenue of entire JPX steadily shifted at approx. 20%.

Breakdown of JPX Operating RevenueBreakdown of JPX Operating Revenue

(FY)

JSCC Operating RevenueJSCC Operating Revenue

(FY)

(in bil. yen)

21.023.8

22.224.0

25.3

18.1%

17.8%21.3%

19.8% 25.8%


(3) JSCC Management Policy

Sail to the future.Keep the market secure.

I Pursue “the shape of the market” toward the next generation⇒Shorten stock settlement cycle & improve

clearing services for better global competitiveness

II Launch and develop a comprehensive exchange⇒Adopt measures for clearing commodity

derivatives to raise reliability

III Diversify and propel data services into the next generation

IV Develop a foundation to support the future of our business and the society

JSCC Management PolicyManagement Policy and Core Strategies under JPX 3rd Medium-Term Management Plan

1. Reinforcement of Basic Functions as CCP

2. Offering Clearing Services Responsive to New Needs


2. Future Business Strategies in each Clearing Service


Providing Clearing Services to exchanges (Tokyo, Osaka, Nagoya, Fukuoka, Sapporo) and 2 PTSs (SBI Japannext PTS / Chi-X PTS). Clearing volume trend links to trading volume at exchanges.

Reinforcement of basic functions and refinement of services contribute to vitalization of the market.

(1) Listed Products Clearing Service



7

Cut down on settlement risk through shortening of stock settlement cycle (T+2) (implementation scheduled on July 16).

Sophisticate margin calculation method for Listed Derivatives to reinforce risk management.

As to application for ETF creation/redemption, CCP stands between investor side (securities companies, etc.) and issuer side (fund managers, etc.), thereby integrating and facilitating entire process of ETF creation/redemption from application to settlement (implementation targeted in Jan. 2021).

Benefit of introduction of clearing services related to ETF creation/redemption① Reduce operation cost / risk② Shorten period from cash equities procurement to ETF

acquisition: T+４ or more ⇒ T+2③ Simultaneous ETF sale and cash equity basket purchase

becomes possible (currently ETF sale is not allowed until completion of settlement (T+4 or more))

Boost Activity

in the ETF Market


0

20

40

60

80

100

2014/3 2015/3 2016/3 2017/3 2018/3 2019/3

The number of clearing service users is steadily increasing since clearing launch, and the number of clients using JSCC’s clearing service increased from 71 to 90 in FY 2018.

FY 2018 operating revenue for OTC Derivatives increased approx. 10% comparing to the previous FY.

(2) OTC Derivatives Clearing Service



8

To deal with interest rate benchmark reform, including discontinuation of calculation of LIBOR, that is the major benchmark for IRS, having discussion with market stakeholders on smooth transition to alternative benchmark for JSCC cleared trades (fallbacks).

Further expand clearing service users through various measures for enhancement of Clearing Participants’ convenience.

7.8%

LIBOR-related TIBOR, etc.

Open Interest of IRS cleared at JSCC* (as of end of March 2019)Open Interest of IRS cleared at JSCC* (as of end of March 2019)

LIBOR-related92.2％

Number of Clients using JSCC’s IRS Clearing Service through Clearing ParticipantsNumber of Clients using JSCC’s IRS Clearing Service through Clearing Participants

90

JPY1,315tril.

* Volume on one-way basis


0102030405060708090

100 銘柄後決め現先取引銘柄先決め現先取引現金担保付債券貸借取引売買(兆円)

T+1

Subsequent Collateral Allocation Repo

Standard Repo

(in tri. yen)Cash-secured Bond Lending Buying/Selling

2018/1 2 3 4 5 6 7 8 9 10 11 12 2019/1 2 3

Through effect of shortening of settlement cycle (T+1) in May 2018 and increase in new users of clearing service since Dec. 2018, clearing volume in FY 2018 increased approx. 7% from the previous FY and JSCC’s share in BOJ JGB DVP settlement reached 80%.

Operating revenue increased approx. 90% comparing to the previous FY partly from fee structure revision implemented in May 2018.

Expansion of clearing volume started from the latter half of FY 2018 is still continuing in this FY, and increase comparing to the previous FY can be expected.

(3) OTC JGB Clearing Service

9

Change in Clearing Volume by Trade Type(daily average)

* Value on one-way basis.


For realization of comprehensive exchange targeted in FY2020, integrate clearing function of Japan Commodity Clearing House (JCCH) to JSCC, and launch Commodities clearing in JSCC.

JSCC clears commodity transactions in an integrated fashion and reinforces risk management, thereby facilitate entry by financial sectors and pursue vitalization of commodity market through enhancement of reliability

(4) New Service (Launch Commodities Clearing)2. Offering Clearing Services Responsive to New Needs

Clearing Japan Securities Clearing Corporation (JSCC)

Precious MetalRubberAgricultural

Osaka Exchange Tokyo Commodity Exchange

Oil

Precious Metal Rubber Agricultural

Trading

Osaka DojimaCommodity Exchange

Agricultural Sugar

Transfer Products

Integrate Clearing Function

Japan Commodity Clearing House (JCCH)

Commodity Derivatives

Financial Derivatives

Commodity Derivatives Commodity Derivatives

Commodity Derivatives

Financial Derivatives (Osaka Exchange)

Precious Metal ◆Rubber Agricultural

(Osaka Dojima Commodity Exchange) Agricultural ◆Sugar

Commodity Derivatives(Tokyo Commodity Exchange) Oil


Supplementary Information


Roles of JSCC

10

1020

Sec. Co. B

10

10 2020

Assumption of Obligation(Clearing)

(Seller) (Buyer)

Securities Co. A

Securities Co. B

Securities

Payment

A Central Counterparty(CCP) acts as a counterparty to the seller and the buyer of a transaction.

CCP

Clearing of Transactions

Netting

Securities Co. A

Securities Co. B

(Seller) (Buyer)

Netting allows for reduced settlement amount by offsetting the amounts to be paid and received to arrive at a single amount for each counterparty.

Sec. Co. A Sec. Co. C

Sec. Co. B

10

2020


Sec. Co. B


CCP20 10

10CCP

10

Netting

Benefits of CCP Clearing

Reduced Credit Risk Removes concerns over a transaction counterparty’s credit risk

Reduced Systemic Risk Reduces the possibility of a spillover of systemic risk from a participant default to other participants

Improved Efficiency Allows efficient use of securities/funds through nettingStreamlines settlement operations

Reliability in Participant Default Management

Reliable management for a participant default based on clear processes(Reliability demonstrated in handling of the past participant default)

Payment

Securities

Payment

Securities


Disclaimer- This English version is not an official translation of the original Japanese materials. In cases

where any differences occur between the English version and the original Japanese version, the Japanese version shall prevail. Japan Exchange Group, Inc. (“JPX”) and its subsidiaries, including Tokyo Stock Exchange, Inc., accept no responsibility or liability for damage or loss caused by any error, inaccuracy or misunderstanding with regard to this translation. This translation may be used for reference purposes only. JPX and its subsidiaries maintain the right to claim compensation for any damage or loss it may suffer from the violation of these conditions.

- This document is prepared solely for the purpose of providing information regarding JPX and its subsidiaries, and as such, it is not intended as an offer or sale of securities or other similar action whether inside or outside Japan. Our securities have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

- This document contains forward-looking statements. These statements are based on our assumptions and beliefs in light of the information currently available to us and are subject to risks and uncertainties. These statements, including those on our business strategies, also reflect our current views or expectations, and thus they consider certain risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those we currently anticipate. As such, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of these materials. We disclaim any obligation to update the forward-looking statements contained in this material to reflect future events or developments.

cl ea ri ng ser vi c es st rateg i es · 2019-07-05 · cl ea ri ng ser vi c es st rateg i es jpx...

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