Collateral / Settlement / Custody / InvestmentSettlement
Settlement
(As of July 1, 2021)
In JSCC's clearing products, for cash products, listed JGBs, and OTC JGBs, cash settlement is conducted in addition to fund settlement. For physical delivery futures, settlement by delivery is conducted in addition to fund settlement. For the other clearing products, only fund settlement is conducted.
Fund Settlement
- For each of its Clearing Businesses, JSCC uses an account with the BOJ, the central bank, whenever possible. Specifically, all JPY settlements for the CDS, IRS, and OTC JGB Clearing Businesses are conducted through a BOJ account. For the Listed Products Clearing Business, due to the diversity of Clearing Participants, settlement is possible through either a BOJ account or an account at one of six commercial banks designated by JSCC as Fund Settlement Banks for fund settlement in Japanese yen, based on the choice of each Clearing Participant.
- For Japanese yen fund settlement, JSCC holds a settlement account in its own name at the six aforementioned Fund Settlement Banks and BOJ. Settlement between each Clearing Participant and JSCC is conducted via book-entry transfer between the accounts of the Clearing Participant and JSCC, at the bank designated by the Clearing Participant. This book-entry transfer is conducted between accounts at the same bank, either with BOJ or any of the Fund Settlement Banks, and is not performed between different banks.
- JSCC only designates commercial banks which satisfy its “Policies for Designation of Japanese Yen Fund Settlement Banks” as Fund Settlement Banks. Fund Settlement Banks approved by JSCC are those with a presence in Japan, with sufficient capitalization and high credit. Furthermore, all Fund Settlement Banks are subject to supervision by the JFSA and monitoring by BOJ.
Securities Settlement
- JSCC conducts most of the securities settlement via the book-entry transfer system of the CSD. Currently, the only product subject to physical delivery between JSCC and Clearing Participants are Investment Securities issued by the BOJ.
- JSCC uses a DVP settlement framework which links the delivery of securities with payment for the settlement of listed cash securities (excluding Investment Securities issued by the BOJ), listed JGBs, and OTC JGBs, between JSCC and Clearing Participants. This framework eliminates principal risk associated with the settlement of cash securities.
- 1. DVP Settlement of Listed Cash Securities (Net-Net)
- JSCC uses Net-Net DVP settlement for listed cash securities. Under this scheme, the value of securities JSCC delivers to a Clearing Participant is limited to the value of funds and securities received by JSCC from such Clearing Participant. This prevents JSCC from fulfilling obligations to the Clearing Participant in excess of that which the Clearing Participant fulfills toward JSCC, thereby eliminating the principal risk of a Clearing Participant default.
- 2. DVP Settlement of JGBs (Gross-Gross)
- For settlement of listed JGBs and OTC JGBs, JSCC uses the Gross-Gross DVP settlement (RTGS (Real-Time Gross Settlement)) provided by BOJ, in its role as the CSD for JGBs, as a BOJ participant. Under this scheme, settlement of cash and securities between a Clearing Participant and JSCC is fulfilled simultaneously on a gross basis and is final at the time of transfer.
Settlement by Delivery
- Settlement of Physical Delivery Futures Transactions by delivery shall be deemed to have been performed between JSCC and Clearing Participant when the delivery between a Clearing Participant taking delivery and a Clearing Participant making delivery is conducted.
