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Direct Account System in Mainland China ’ s Securities Market

This document from June 2006 provides an in-depth look at the Securities Account System in Mainland China, focusing on the role of SD&C, organizational structure, functions, and the operation of the system. It discusses the benefits such as reduced transaction costs, improved efficiency, and strengthened regulatory oversight for investors and issuers.

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Direct Account System in Mainland China ’ s Securities Market

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  1. Direct Account System inMainland China’s Securities Market June, 2006

  2. Topics • Introduction to SD&C • Securities Account System • Operation of the System • Conclusion

  3. Introduction to SD&C • Established in 2001 • Organizational Structure • Functions

  4. Organizational Structure Shanghai Stock Exchange Shenzhen Stock Exchange SD&C Shanghai Branch Shenzhen Branch

  5. Functions Settlement Clearing Depository Registration

  6. Securities Account System SD&C Participants’ Accounts Proprietary Shares +1000 Customers’ Shares +2000 Customer A +1000 shares Customer C +1200 shares Customer B -200 shares Customer’s accounts in participants’ custody (Securities Companies) Proprietary Shares +1000 Customer A +1000 shares Customer B -200 shares Customer C +1200 shares

  7. Operation of the System • Basic Conditions • Central Registration • Two-tier Securities Clearing and Settlement System

  8. Basic Conditions • Legal Supports Securities Law, Measures for Administration of Securities Registration and Settlement, … • Technology • Dematerialization

  9. Central Registration Issuer SD&C Investor A Investor B Investor C Investor…… register

  10. Two-tier Securities Clearing and Settlement System sell buy Participant A’s customer account -300 shares Participant A Clearing account SD&C as CCP Clearing account Participant B Clearing account Participant B’s customer account +300 shares Customer A’s securities account Customer C’s securities account 3 1 *** 100 4 *** 5 120 Customer B’s securities account Customer D’s securities account 2 *** 6 *** 200 180 1st tier: 2nd tier: 3 4 1 2 5 6

  11. Conclusion Investors’ interests are effectively protected. Costs of transactions are reduced and efficiency is raised. Issuers are able to communicate with investors directly, and thus investors can enjoy related services directly. The supervision of regulatory authorities is strengthened.

  12. Thank you Han WANG Senior Manager Registration Department hwang@chinaclear.com.cn

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