Clearing / Settlement
Procedure
Confirming and Correcting Trading
A characteristic of the Korean market is that activities ranging from the order phase to the conclusion and confirmation of trading are not done manually (this characteristic is called ‘locked-in trade’ and entails for inquiries to be forwarded to the clearing system after they have all been completed in the trading system). Instead, trading confirmation is computerized. However, regarding misguided trading that occurs due to errors at the time the order is placed, members must submit an application for correction by the day following the day traded. If members do not apply for corrections with regard to trading, the KRX considers the trading details to be confirmed and calculates the settlement data.
Debt Assumption, Netting, and Ordering Settlements
By means of KRX debt assumption without responsibilities, multilateral trading in Korea’s market shifts to a bilateral trading relationship between the KRX and members. This guarantees the legal validity of multilateral netting. Netting is a process that confirms the securities and charges to be delivered by members to the KRX (CCP) on the settlement date. For securities, the quantity of securities to be delivered is found by finding the balance (net) between the selling and buying quantities per issues and members. For charges, the net single position is calculated by finding the net between buying and selling charges per members. In order for settlements to be accomplished according to the calculated settlement positions, the KRX gives settlement orders to member firms and the Korea Securities Depository.
Settlements (Transfer of Securities and Receipt of Charges)
Member firms must pay the settlement securities and charges to the KRX as directed by the KRX by the settlement deadline (4PM as of the present). The KRX pays the settlement securities and charges to the member firms after the settlement deadline. Settlements of securities are accomplished according to the exchange method between settlement member accounts and the settlement account established at the Korea Securities Depository. Settlements of charges are accomplished according to the transfer method between settlement accounts and settlement member accounts established by 2 commercial banks (Shin-Han and Woori) and the central bank. Stocks and general bonds are settled through the commercial banks while government bonds and the repo market are settled through the central bank. However, according to KRX regulations (Article 75-2 of the KOSPI Market Business Regulation, Article 31-2 of the KOSDAQ Market Business Regulation), the Korea Securities Depository is commissioned with the administration of transfers for settlement securities and charges. The settlement account is open under the name of Korea Securities Depository on behalf of Korea Exchange as the practical holder of the account. The receipt of the amount and securities through the settlement account has the same effect as direct receipt by Korea Exchange and members.
- Contents Manager :
- Derivatives Market Division/Clearing & Settlement Rules & Regulations/Ju Mi Choi(051-662-2825)
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