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Straight Through Processing (STP)

Straight Through Processing (STP). Development Concept & Roadmap Indonesian Central Securities Depository (KSEI) Indonesian Central Counterparty (KPEI). STP Background. 1. Business Process Identification. 2. KSEI & KPEI Initiatives. 3. AGENDA. Challenges :. Funding Issues

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Straight Through Processing (STP)

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  1. Straight Through Processing (STP) Development Concept & Roadmap Indonesian Central Securities Depository (KSEI) Indonesian Central Counterparty (KPEI)

  2. STP Background 1 Business Process Identification 2 KSEI & KPEI Initiatives 3 AGENDA

  3. Challenges : • Funding Issues • Funding cost (turn around transaction) •  Inefficiency Various Products: Equity, Fixed Income, Derivatives Socialization/ Education • Risk Issues : • Operational Risk • Back office processing (confirmation /affirmation & Trade Allocation) • Surveillance/Monitoring Complexity of Trade/Settlement Processing Investor Growth Increase Transaction (Volume, Value, Frequency) Issuer Growth STP Development • Business process improvement : • Business orientation & efficiency • Trading, clearing, & settlement mechanism • Risk Management Improvement : • Effective Surveillance/Monitoring • Excellent/prudent business operation • Global Trend : • Floor to remote to online trading • Direct Market Access (DMA) through Securities Companies • Cross border (cross listing, cross member, cross trading, cross clearing, cross settlement) Volume Increase: Scripless BACKGROUND • Capacity Building • Market Infrastructure Ready to Handle Market Growth

  4. BENEFIT • Improve process capacity. • Reduce input redundancies and manual intervention. • Improve transparency. • Provide better management with systematic audit trail. • Minimize risk and reduce errors. • Increase speed of data processing, withdrawal and generating reports. • Improve overall efficiency such as funding cash.

  5. Business Process Identification Manual Transaction Order Different Trading platforms Existing Funding Cost Development of Remote & On Line Trading Integrated & Multiproduct Trading System. CB as settlement agent & CM Stratification. S T P Registration, Administration Of Investor Order Validation Matching Confirmation/ Affirmation Clearing Settlement Implementation of ‘Master Client ID’ Automatic allocation, confirmation/ affirmation Real-time interface for EM & CB Risk Management System Enhancement Client Investor Identity distributed to every EM Order Pre-validation (gross). ‘Investor Area’ Development Existing manual confirmation/ affirmation Registration/administration of Client Investor is conducted by each EM Trading Limit (batch, upload/download, multiproduct yet). manual entry/ upload for settlement instruction Note: CM = Clearing Member EM = Exchange Member CB = Custodian Bank OTC Transaction /instruction still difficult to monitor

  6. BUILDING BLOCKS STP Client ID Investor Area Real-time Interface Enhancement Risk Mgt System Membership Stratification Information & Corporate Action Integrated Network & BCP OTC Pre-matching Single Trading Platform Settlement Agent

  7. Client Investor SX Member Client ID Client ID Master Client ID & Client ID 1 6 2 5 Master Client ID Stock Exchange Client ID Client ID Client ID 3 K S E I K P E I 7 Sub Account 8 Settlement Account Settlement Account 4 Collateral Account Collateral Account

  8. SX Member Client Investor Custodian Bank Custodian Bank as Settlement Agent 6 1 Client ID 2 5 Master Client ID Client ID Client ID Client ID 3 Stock Exchange 7 Sub Account 8 11 K S E I Settlement Account Settlement Account K P E I 4 Risk Mng. Account Risk Mng. Account 10 Settl. Agent Account Settl. Agent Account 9

  9. CB Cash Cash b c CB Funding Cash d a Securities Securities b OTC 2 e Securities BANK CM 1 a Collateral KPEI f 3 Cash KPEI Exampleof STP Impact – Reduce Funding Cash Custodian Bank as Settlement Agent Funding Cash

  10. THANK YOU

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