10 th ACG Cross-Training Seminar

1. 10th ACG Cross-Training Seminar Automated Settlement System of Kazakhstan Central Securities Depository of Kazakhstan June 1th-5th, 2008, Jimbaran Bay, Bali, Indonesia

2. Agenda 1. Settlement system 2. Participants of the settlement system 3. Used software 3.1. Transportation of messages 3.2. Settlement system participants’ software 4. Process of Settlement

3. 1. Settlement system The process of settlement in Kazakhstan is almost automated on the principle as Straight Through Processing. The settlement system of the Central Securities Depository (CSD) is real time gross settlement system. The most of deals are settled in the period of T+0. The deals are settled during about 10 minutes, including securities and cash movements. Human elements are decreased from settlement process to the minimum.

4. 2. Participants of settlement system 4 KISC DialUp ISMT BMES Frame-relay 2 1 Internet Customer 1 CSD Ethernet 2 3 CustomerN KASE

5. 2. Participants of the settlement system • Central Securities Depository of Kazakhstan (CSD). • Customers of CSD. • Kazakhstan Stock Exchange (KASE). • Republican state enterprise Kazakhstan Interbank Settlement Centre of the National Bank of Kazakhstan (KISC). KISC is a payment system operator that consists of Interbank System of Money Transfers (ISMT) and Banking Messages Exchange System (BMES). BMES receives and processes both financial information for the payment system and private participants’ information. ISMT is the real time gross payment system for banks.

6. 3. Used software 3.1. Transportation of messages. The messages between CSD and CSD’s customers are passed through BMES. CSD can use three communications channels to connect with KISC. The primary ones is Frame-relay. If this channel is problem, CSD can use DailUp or Internet. The messages between CSD and KASE are passed directly. CSD uses Ethernet to connect with KASE. If this channel is problem, CSD connects with KASE through BMES. 3.2. Settlement system participants’ software. KASE is working on a paperless basis and processes electronic messages based on SWIFT-similar formats, developing, modernizing and ratifying by KASE. ISMT is working on a paperless basis and processes electronic messages based on SWIFT-similar formats, developing, modernizing and ratifying by KISC. CSD’s customers have possibility to link to CSD’s software that is working on a paperless basis and processes electronic messages based on SWIFT-similar formats, developing, modernizing and ratifying by CSD. The networked customers have a remote-data terminal that allows to send messages from customer’s working place. The both networked and non networked customers have possibility to send paper settlement instructions. In this case CSD’s employee creates the SWIFT-similar format in CSD’s software and sends it to automated settlement system. The productivity of CSD software is 2 processed instructions per 3 seconds, including both securities and cash movements.

7. 4. Process of settlement KASE KISC Terminal of KASE 4) Settlement confirmation 1) KASE message 3) Payment confirmation Terminal of KISC File-router of CSD 4) Settlement confirmation 1) KASE message 2) Payment order 3) Payment confirmation CSD 2) Payment order

8. 4. Process of settlement 1. KASE sends a message to CSD. 2. CSD’s software: - identifies participant, - checks-up the message structure, - blocks securities on the seller’s account, - sends payment order to ISMT. 3. ISMT transfers money from buyer’s account to seller’s account and sends payment confirmation to CSD. 4. CSD’s software: - identifies participant, - checks-up the message structure, - transfers securities from seller’s account to buyer’s account - sends settlement confirmation to KASE and both seller and buyer. All messages are transported through CSD’s file-router that identifies receiver of the message. If deals are arranged not on KASE, customers of CSD send messages to CSD directly. In this case the settlement process is the same.

9. Thank You