3 Organisering av verdipapirregistervirksomhet i andre land

Vedlegget gir en framstilling av organiseringen av verdipapirregistervirksomhet i enkelte andre land. Vedlegget er et utdrag fra håndboken til ISSA fra 1999. Utdraget er foretatt av VPS. Det nevnes at ISSA (International Securities Services Association) er en organisasjon for aktørene i verdipapirmarkedet, herunder banker, avregnings- og oppgjørssystemer, verdipapirregistre, børser og verdipapirforetak.

3.1 Austria

Oesterreichische Kontrollbank AG (OeKB) serves as the central clearing agency of the Vienna Stock Exchange.

SICS (Settlement Information Clearing System) is the system used to clear and settle transactions on the Vienna Stock Exchange within the Austrian Clearing and Settlement System (Arrangement). It was developed by OeKB on behalf of the Vienna Stock Exchange. Prices and transaction data are generated within the trading system EQOS and PATS on the basis of the orders placed. SICS uses the transaction data delivered by EQOS and PATS for fully electronic settlement.

Exchange transactions are collected and processed immediately after the trading hours. The final settlement takes place on the relevant payment day; within the clearing and settlement period in SICS it is the 3rd day after the date of the transaction (rolling settlement T+3). Only exchange members may become clearing participants. There are direct and indirect clearing participants.

SICS supports the two-tier structure of the clearing participants (direct clearing participant [clearing member], indirect clearing participant [non-clearing member]). Direct clearing participants must maintain a clearing collateral account as security for clearing transactions and a securities depository account for crediting and debiting the units traded.

Indirect clearing participants must provide a declaration of a direct clearing member stating that the direct participant assumes the obligation to settle all of the indirect member's transactions.

The SICS data generated for non-clearing members are sent to both the clearing member responsible (indicating its group of non-clearing members), as well as to the non-clearing member.

SICS provides an interface for clearing participants that allows exchange members to retrieve data electronically as follows:

• screen display on EQOS standard clients and PATS/DS PCs;

• file transfer to exchange member (APPC to host and/or PC file transfer, analogously to PATS); or

• printouts on local printers (analogously to PATS/DS at exchange members).

For cross-border transactions, the OeKB provides a service with foreign clearing organisations (e.g. Deutscher Kassenverein, Deutscher Auslandskassenverein, NECIGEF, SICOVAM, SEGA, Euroclear)

OeKB operates a direct settlement system for all trades by domestic banks which take place outside the Vienna Stock Exchange.

Central securities depository

WSB stands for Wertpapiersammelbank, the Austrian central securities depository. It is operated by Oesterreichische Kontrollbank AG. WSB takes care of the safekeeping and transfer of securities - usually by way of computerised book entries in WSB accounts - together with the necessary financial clearing procedures and the day-to-day administration of securities and deposits. SICS settlement data can be fed directly into the WSB system to update account balances.

The following have deposit and cash accounts with Oesterreichische Kontrollbank AG's WSB depository:

• Austrian banks and Austrian subsidiaries of foreign banks

• Official Stock Exchange Brokers (Sensale)

• Non-Official Brokers (Freie Makler)

• Foreign central securities depositories

• International clearing agencies

• EU financial institutions.

WSB defines which securities are admitted for collective deposit (Sammelverwahrung). As almost all Austrian shares are issued in bearer form and debt equities are mostly issued as global certificates, the majority of circulating securities are held in custody by WSB. WSB collects interest, dividends and bonds at maturity. Other administrative activities are carried out by the members.

3.2 Belgium

This section describes the Brussels Clearing House, the CIK settlement system and the BNB clearing system. CIK is also the central depository.

Brussels Clearing House Overview

Since September 15th 1998, settlement for the domestic forward and cash markets has been operated by the Brussels Clearing House - BCH (the Coop rative de liquidation des march s de la Société de la Bourse des Valeurs Mobilires de Bruxelles (SBVM)/Coöperatieve tot verreffening van de markten van de effectenbeursvennootschap van Brussel (EBVB).

Settlement of the forward market transactions takes place about every 14 days, according to a specific calendar. On this market, the BCH stands as counterparty to both the buyer and the seller. Transactions are now settled in the FMS system (Forward Market System) of CIK. This system will allow the participants to receive, earlier in the day, a final credit in securities or in cash, with BCH as guarantor of the finality of the settlement.

Transactions on the Stock Exchange Market are settled by CIK for the securities leg and by the National Bank of Belgium (BNB) for the cash leg. Settlement of transactions in registered or dematerialised linear obligations, treasury bills, treasury certificates and certificates of deposit is performed by BNB whereas CIK will be in charge of settlement operations for issues by the private sector (see below).

A recent Act of Parliament (August 6, 1993) contains special provisions on transactions in ordinary bonds. The National Bank and credit institutions will be able to act as clearing houses for these transactions, after having been authorised by the government.

A Decree of the Minister of Finance dated June 10, 1992 contains special provisions with reference to settlement of transactions in government bonds which are executed on a stock exchange (settlement on T+7; automatic lending of bonds or cash in case of default of one of the participating broker firms).

Members

Brokers who fulfil the necessary conditions can become members. Banks authorised to receive Stock Exchange orders can also be members.

The Coop rative de Liquidation/Coöperatieve tot verreffening is a private company, but its rules and regulations must be approved by the Stock Exchange Commission and the Ministry of Finance.

Management

A Board of seven Belgian members is elected by the General Meeting for three years.

Eligible securities

All domestic and foreign shares which can be traded on the forward market and on the cash market.

Services

Settlement on the forward market takes place in CIK's FMS. The Stock Exchange Data Centre supplies the BCH with the details of all transactions executed during the last 15 days. At the end of the 15 day period, BCH transfers the balance of the transactions to CIK for settlement.

Central securities depository

In Belgium, the central securities depository is CIK (Caisse Interprofessionnelle de D p ts et de Virements de Titres/Interprofessionele Effectendeposito-en Girokas; Interprofessional Organisation for Deposits and Transfers in Current Accounts of Securities).

CIK is a joint stock company (Société Anonyme/Naamloze Vennootschap). Capital is held by banks working in Belgium, public credit institutions, the National Bank and the Stock Exchange Committee (representing brokers).

CIK acts as the central depository of securities. With the status of a limited company of public law, it is the only authorised institution for central safekeeping of securities and book entry transfers between the securities accounts of participants. The competences of CIK are limited by the Royal Decree dated November 10, 1967.

The nature of the Belgian investment market means that CIK holds a disproportionately large amount of physical securities which turn over with unusual frequency. Market share is less important for CIK than in other countries; Belgian private investors prefer to hold their securities 'under the pillow' and institutional investors choose registered certificates with no coupons attached.

Bank customers are not required to give written authorisation for their securities to be redeposited with CIK since this is at the bank's discretion, provided that the customer accepted collective deposit.

Securities are fungible by issue in CIK and circulate by book entries. Withdrawal and physical delivery of securities is always possible. Payment (in money) of interest and dividends is made by CIK.

Since 1992, the Banque Générale de Luxembourg has acted as sub-custodian in order to facilitate settlements between Belgian and Luxembourg members. This enables Luxembourg members to settle operations on the Brussels Stock Exchange (cash and forward markets) by book entry transfer and can also make deposits and withdrawals of securities directly at the counters of the sub-custodian.

In collaboration with CIK, the country's two exchanges in Brussels and Antwerp offer counter services for brokers in their premises for most ordinary transactions.

Eligible members

Every Belgian professional authorised to handle stock exchange orders may become a member of CIK. Any foreign establishment with the same guarantees and characteristics may become a member with the authorisation of the Board of Directors. These regulations mean that the following participants are admitted:

• Belgian banks

• Belgian brokers

• Belgian savings banks

• Public credit organisations

• Foreign banks

• Foreign brokers.

Issuers or investment companies (i.e. participants in the primary market) are not admitted. Foreign clearing houses, however, can participate. Currently these are: SICOVAM, Paris (direct mutual link); AKV, Frankfurt; WSB, Düsseldorf; Necigef, Amsterdam (mutual cooperation); SEGA, Zurich, and the Banque Générale de Luxembourg (sub-custodian in Luxembourg).

Eligible securities

Fungible securities are:

• Bearer shares

• Registered shares

• Bearer bonds

• Bonds redeemable by drawing (provided drawings have not yet started)

• Foreign securities locally quoted

• Global certificates

• SICAV/SICAF/SICAFI.

Every domestic and foreign security listed on a Belgian Stock Exchange is eligible as long as it meets all requirements of fungibility. At the request of its members and upon agreement of the Board of Directors, securities traded off stock exchanges are also eligible.

Services

• Safekeeping in ordinary and pledge accounts. Physical securities are stored in vaults and are only accessible by members of staff. All deposited securities have to be of 'good delivery', i.e. they have to meet all legal prescriptions and regulations (not mutilated, have all current coupons attached). Securities which do not satisfy these conditions are refused.

• Checking of securities deposited against the list of lost, stolen or reportedly forged securities.

• Physical deliveries.

• Book transfers at the depository.

• Transfer to and from depository organisations in other countries on behalf of brokers or banks in those countries. CIK holds domestic securities for SICOVAM (France) and SEGA (Switzerland).

• Detachment of coupons and distribution of revenues as follows:

• For coupons of securities listed per piece (listed per unit of the securities: shares, representative certificates, depository receipts).

• Proceeds are transferred to a special bank account for collection or in general are settled by delivery of coupon certificates. If instructions are received to arrange delivery, physical coupons are returned to the participant.

For securities listed pro rata (listed in per cent of the value: bonds, etc.):

• The proceeds are transferred to a special cash account of the organisation and credited to the beneficial owner.

• Bonus share coupons are transferred to a special bank account or delivered in the form of coupon certificates or material coupon.

• At final redemption on the maturity date, bonds are returned to the issuer together with a list of all beneficial owners.

• On request, CIK issues certifications that shares are deposited and blocked, to enable the holder to execute voting rights.

• Book entry transfers are carried out on the instructions of the participant. Transactions, deliveries, withdrawals, and transfers are recorded in real time and are settled with the next batch (T). The new software implemented between CIK and its partners allows immediate settlement of operations.

• Automatic liquidation for the cash market as for the forward market.

• Members may use SWIFT, telex, fax or computer-to-computer to communicate with CIK. CIK's computer system allows the user to send their transfers and withdrawals and to receive their statements of accounts and balance. They can also consult their account status on-line and view stopped securities (oppositions) as the issued security numbers.

• Exchange of coupon certificates against physical coupons (split of coupon certificates, warrant detachment, destruction, transformation, stamping requests, etc.).

• Over-the-counter transactions via EMSS - Electronic Matching and Securities Settlement. EMSS enables professionals to access different settlement systems: cash market, forward market, Cedelbank, Euroclear, for back to back operations with standard messages (ISO7775 & 15022 standard - SWIFT messages).

• Under consideration:

• Nominee registration;

• Securities lending.

3.3 Denmark

Værdipapircentralen (VP - the Danish Securities Centre) is the central securities depository and clearing organisation for Denmark.

VP is a private, independent non-profit institution responsible for the computer book-entry of issues of dematerialised securities and rights thereto, as well as the clearing and settlement of securities transactions. See section 8.2 for contact details.

Eligible participants

Danish and foreign banks, savings banks, stockbroking companies, clearing centres, investment firms, mortgage credit institutions and Danmarks Nationalbank (the Danish central bank) may act on their own behalf and on behalf of customers. Other professional market participants, domestic as well as foreign major clients, may act only on their own behalf. VP is allowed to enter into linkage agreements with foreign depositories. Accounts in VP can only be opened by an account controller. The institution responsible for opening a given VP account is the only entity entitled to obtain information about this account and to effect book-entries on behalf of the account holder, or other holders of rights to the securities in question.

Eligible securities

All listed Danish bonds and shares are dematerialised, existing as computer book-entries on accounts in VP. Listed and unlisted securities (domestic as well as foreign) may be book-entered in VP.

The VP System has adopted the ISIN numbering system, and each security is identified by an ISIN assigned by VP (see 1.3). As the national numbering agency for Denmark, VP is a member of the Association of National Numbering Agencies (ANNA).

Services

An account holder is notified about additional deposits to and withdrawals from an account or other changes to the data entered on the account.

In January of each year, the account holder receives a statement of account specifying his or her portfolio at the end of the previous year. In addition, the account holder can demand a statement through his or her account controller.

Information provided by notifications:

Regarding bonds:

• Notification of interest payments

• Notification of drawing/redemption.

Regarding shares:

• Notification of dividend payments

• Notification of allocation of subscription rights

• Notification of corporate actions.

Most of these notifications are sent to the account holder by the account controller; some are sent directly by VP.

Domestic transactions

Domestic securities transactions are cleared through VP in its capacity as a clearing centre.

Cross-border transactions

A direct, automated link between VP and Euroclear was established to ensure delivery versus payment for trades in Danish securities made between Euroclear and VP participants.

Settlement restrictions

The maximum nominal value for a transaction in bonds is DKK 500 million. This limitation applies only to net settlement.

3.4 Finland

Finnish Central Securities Depository Ltd (APK):

• operates the central book entry system for equities and debt instruments; grants the right to be issuer in book entry system and to issue securities in book entry system;

• grants the right to be a clearing party and an account operator; settles and clears book entry trades in KATI system (equity) and RAMSES system (money market instruments and bonds);

• issues rules and regulations to issuers, clearing participants and book entry registers (banks and brokerage houses) covering Finnish book entry system;

• provides services to issuers i.e. shareholder information and movements, insider information, issuing services, yield payment, redemption and pay-backs services;

• provides information services to market participants and to market research;

• provides data processing services to three book entry registers;

• supervises the book entry system and the compliance of self-regulation;

• acts as the National Central Securities Depository of Finland in co-operation with other depositories and clearing organisations.

Legal basis: Act on the Book-Entry System (826/1991); Act on Book-Entry Accounts (827/1991); Securities Market Act, Chapter 4a (321/1998);

Companies Act (734/1978); Act on Certain Conditions of Securities and Currency Trading (588/1997).

KATI-system of APK

Transactions of listed book-entry shares are cleared through the KATI-system of Finnish Central Securities Depository, APK. At present there are no direct cross-border links.

Transactions of money market instruments issued as book-entries are cleared through the APK. A direct cross-border link for bonds and money market instruments to Germany was opened in January 1999.

HEX

HEX clears its derivative trades.

When delivery of book entry shares takes place due to exercised stock options and futures, HEX co-operates with APK and uses its clearing mechanism (KATI).

Clearing organisations and central securities depository

The book entry securities system Shares

In the book entry securities system, lists of owners of companies are kept by APK. However, the responsibility for keeping the accounts of book-entries lies with the registrars, normally a Finnish bank or a securities broker (licensed by the Ministry of Finance) appointed by the owner of the securities. APK acts also as a neutral registrar for investors who do not wish to appoint a bank to look after their shareholdings. APK does not, however, provide portfolio management services in the same way as banks and securities brokers.

The registrar guarantees that registration is done in accordance with the account holder's instructions. The legislation imposes severe and objective indemnity liability for possible damages caused by the registrar.

APK keeps lists of owners for each company based on daily information received from other book entry registers. The investor's right to receive dividends and bonus shares, and to subscribe to rights issues as well as to vote at general meetings is based on the list of owners kept by APK.

Money market instruments

The system for money market instruments is called RAMSES and is operated by APK. RAMSES offers centralised book entry register services and a clearing and settlement system. Account operators, most of which are Finnish banks, use the system provided by APK to keep accounts of book-entries. An account operator guarantees that registration is done in accordance with the account holder's instructions. The liability system is the same as with book entry shares (see above).

Investors may choose the account operator they want to use. Lists of owners of money market instruments are not public. Interest and redemptions on money market instruments are paid automatically according to the information in the book entry accounts.

The first book entry form bonds were issued in December 1995.

3.5 France

SICOVAM SA, central depository

SICOVAM SA was founded in 1949 and its first function was to ensure the book entry transfer of securities between financial agents. SICOVAM SA is an incorporated company (Société Anonyme) with a special legal status: its rules and regulations and by-laws were originally approved by the Ministry of Economy and Finance. Its capital is mainly owned by the Banque de France, the association of banks (AFECEI) and the SBF-Bourse de Paris.

Shareholders and elected members (20) of its Board of Directors are representatives of Banque de France and of the leading companies of the stock and financial markets (banks, financial intermediaries, broker firms or interprofessional associations).

SICOVAM SA operates two securities settlement systems: Relit for stock exchange operations and RGV for OTC trades and monetary policy operations.

Participants

SICOVAM SA provides its services to three kinds of participants:

• Members: membership status is granted after completion of a technical test.

• Securities issuers: All issuers whose securities are eligible for SICOVAM SA can have a current account in which only transactions in registered securities (nominatif pur) are entered.

• Foreign clearing/depository organisations: all relations between SICOVAM SA and foreign clearing/depository organisations are fixed by particular agreements.

Eligible securities

SICOVAM SA acts as France's Central Securities Depository for all French securities (equities, domestic and euro-bonds, investment funds units, treasury notes and bills, commercial paper, certificates of deposit, medium-term notes) and can accept any other foreign security, either listed on the Bourse de Paris or not.

Services

• Custody with computerised book entries.

• Clearing and settlement of all transactions.

• Securities data base.

• Announcements of corporate actions.

• Repo services.

• Organisation of the payment of dividends, interest and redemptions of bonds.

• Primary and grey markets - closing.

• International deliveries.

• Numbering of French securities.

• Centralisation of all information about the procedure concerning 'Identifiable Bearer Securities' (TPi).

• Control over the procedure about registered shares and transfer to the issuers of shareholders' changes.

• Recording of securities lending.

As from February 1998, the implementation of new facilities of clearing and settlement through RGV, has widen the scope of services provided to include:

• Real-time processing.

• Irrevocable settlement with a direct link with the real-time gross settlement system of Banque de France (TBF).

• On line matching.

• Collateralisation of securities.

• Settlement of the cash-leg in central bank money.

The RGV system has received an assessment without reservation from the European Central Bank for the settlement of monetary policy operations.

Fees

A current detailed fee schedule may be obtained from SICOVAM SA (see 8.2 for contact details).

MONEP SA

As operator of the equity derivative market, MONEP SA draws up the organization and operating rules of the MONEP, approves applications for membership of the market and decides on the admission to listing of new contracts.

It is also responsible for market operations, market surveillance, and technical clearing procedures including recording and clearing of trades, exercises and assignments; control of margin requirements, calls and collateral.

Margin deposits are deposited with the SBF which is the market's financial guarantor of last resort.

MATIF SA, clearing house

The MATIF SA clearing house acts as the sole counterparty to all transactions and is responsible for the successful conclusion of all operations between the various parties involved, including customers who are contractually bound to exchange members.

3.6 Germany

The central securities depository (Deutsche Börse Clearing AG) also performs the clearing function.

Deutsche Börse Clearing AG (DBC), formerly Deutscher Kassenverein (DKV), is the central depository bank for securities in Germany (legal term: Wertpapiersammelbank). In 1996 former DKV was merged with the AKV (Deutscher Auslandskassenverein) and in 1997 the merged companies were renamed into DBC. DBC, as an independent company, is a 100% subsidiary of Deutsche Börse AG. Its core business is the safecustody and administration of securities and the settlement of securities transactions (including payment).

Participants in the DBC system are national and international banks and broker firms/securities trading companies which fulfil the prerequisites for admission. Foreign Central Securities Depositories (CSDs) are admitted to the system, if they meet the same legal requirements as DBC. Their large holdings of securities (market share approx. 90%) enable DBC to immobilise a great number of physical securities. Furthermore, substantial portions of physical securities are represented by 'global certificates'.

DBC, in its role as central depository bank, keeps securities in collective safecustody. An investor becomes a co-owner of the collective holding of his or her bank for the category of securities concerned. Participants are not entitled to request delivery of securities with specific numbers, but DBC may deliver securities with any numbers from its collective holding in the fungible securities category concerned. The introduction of the central custody holding facility for registered shares with restricted transferability meant that, at the start of 1997, business settlement methods for exchange and off-exchange transactions in this type of security were brought in line with the usual procedures for standard bearer shares.

Duties

Safekeeping of the securities deposited, whereby the liability in case of physical delivery begins and ends at the counter of DBC.

Services

• Safekeeping in its own vaults in ordinary accounts and/or in pledge accounts.

• Collection of dividends, interest and principal due from issuers or their paying agents. Customers are credited with the proceeds on the same day.

• Redemption by drawdowns for bonds which are partially redeemed.

• Collection of new coupon sheets, exchange of securities, processing of subscription rights and stock splits.

• Administration of variable global certificates.

• DBC assists in exercising or evaluating subscription rights, monitoring timely receipt by customers of instructions for conversion, compensation or takeover offers.

• DBC assists customers, upon application, to exercise voting rights. As interim custodian, DBC itself may not by law exercise any voting rights pertaining to securities entrusted to it.

• Electronic adjustment of entries in the share register of the issuer (online and via remote data transfer).

• Receipt and delivery of physical securities from/to participants concerned.

• Checking of securities deposited against list of lost or stolen securities.

• Transfer of securities by book entry between participants, free of or against payment. (For detailed information see 5.3.5.)

• Automated settlement of stock exchange trades (securities and payments).

• Securities lending and borrowing service.

• Collateral management.

• Communication/Reporting via SWIFT and/or own communication systems.

Cross-border clearing

Under German law, DBC may entrust a foreign central securities depository - and vice versa - with the collective safecustody of securities, provided that both CSDs have established a mutual account relationship which allows cross-border clearing of transactions in securities by book entry (Effektengiroverkehr).

However, certain preconditions must be fulfilled, the most important of which is that the legal position of the depositors is not adversely affected. That is why a mutual account relationship can only be established between central securities depositories which are subject to the supervision of a public or similar authority and if the legal position of the foreign CSD is equal to co-ownership under German law.

DBC has to examine and be accountable for deciding whether the respective foreign safekeeping entity fulfills the above mentioned requirements. This is done on the grounds of a legal expertise requested by DBC respectively.

Deutsche Börse Clearing AG - Global Services (former Deutscher Auslandskassenverein AG (AKV))

In order to link foreign and German securities markets, the Deutscher Auslandskassenverein AG (AKV: International Securities Clearing Center) was established in 1970 with the task of providing services similar to those of DBC with regard to foreign securities, German securities listed neither in the home nor in the host country and foreign central securities depositories which do not meet the conditions for a mutual account relationship. In 1996 AKV and DKV were merged and in 1997 renamed into Deutsche Börse Clearing AG (DBC).

Duties

DBC carries out transfers of foreign securities. These foreign securities are not held in safecustody by DBC. DBC holds them under its own name at one subcustodian in each country which is given a contractual claim to deliver the securities held in a different country.

Original shares of foreign registered securities listed on German stock exchanges, which are kept as cover for the collective bearer certificate, are held by and registered in the name of DBC as the trustee in the country of the home stock exchange. Transactions in such types of foreign securities can then be conducted precisely as if they were domestic securities.

Services

DBC offers its global services for about 40 markets worldwide.

• Processing of the settlement of securities transactions free of or against payment.

• Transfer of securities by book entry amongst its participants.

• Collection of dividends, interest and principal due.

• Conversion of cash amounts.

• DBC assists in exercising or evaluating subscription rights, monitoring timely receipt by customers of instructions for conversion, compensation or takeover offers.

• DBC assists customers, upon application, to exercise voting rights. As interim custodian, DBC itself may not by law exercise any voting rights pertaining to securities entrusted to it.

• Processing of corporate actions, stock splits, rights issues, etc.

• Nominee for registered foreign shares held by DBC and listed on German stock exchanges.

• Trustee and issuer of German depository receipts for foreign shares listed on German stock exchanges and held by DBC with foreign depositories abroad.

• Communication/Reporting via SWIFT and/or own communication systems.

3.7 Greece

The Central Securities Depository SA (CSD) was established in February, 1991 as a Société Anonyme with a share capital equal to GRD 1 billion. CSD is the only depository operating in the Greek Market.

The Athens Stock Exchange SA was initially the sole shareholder of the CSD but today holds 38.5% of CSD's share capital with the rest divided among:

• Banks listed on the ASE

• Mutual Funds Companies

• Portfolio Management Companies

• Members of the ASE (Brokerage Firms SA).

The shares of CSD are registered and can only be sold to the above mentioned entities. According to law 1892/1990 the share participation of the ASE is not permitted to fall below 25% of the total share capital. The remaining 75% of the share capital can be distributed among the other categories of shareholders under the term that none of them can possess more than 10% of CSD's share capital.

Central Securities Depository SA is responsible for:

• The clearance and settlement of all transactions relating to registered and bearer shares listed on the ASE. Settlement of bonds, rights issues and shares of Bank of Greece is done on a bilateral basis, between the counterparty brokers.

• The issuance, modification, cancellation and replacement of registered or bearer depository documents (apothetiria egrafa).

• The safekeeping of securities for which depository documents are being issued.

• Any other relevant to the above services.

3.8 Italy

Clearing House

The Clearing House is a domestic service currently provided by the Banca d'Italia (the Italian Central Bank). The service clears the debit/credit balances arising from transactions between Clearing House participants on a multilateral net basis.

According to TUIF the net clearing and settlement service as well as the gross clearing and settlement service can be managed by a company authorised by the Bank of Italy in agreement with the CONSOB. Monte Titoli S.p.A. has applied for this authorisation as part of its implementation of a real-time delivery versus payment gross settlement system. Monte Titoli's DVP-RTGS is expected to be fully operational in the second half of 1999. The system will be supported by automated securities lending/borrowing facilities as requested by the European Central Bank standards for the use of EU securities.

Eligible members

Authorised intermediaries (investment firms, banks, stockbrokers etc.) can be members of the Clearing House.

Eligible securities

Any tradeable security can be settled through the Clearing House.

Services

• Settlement of purchase/sale of securities.

• Securities transfers free of payment.

Securities transactions executed on the Italian regulated markets (through authorised intermediaries) or over the counter have to be cleared through the Clearing House.

The local Clearing House systems are linked in a network to settle intercity transactions made between the participants.

Central securities depositories

Central securities management activity is regulated by the TUIF and by the Euro Decree.

The TUIF supplies the regulatory framework of the Italian CSDs' activities while the Euro Decree gives the regulatory rules regarding the dematerialisation of securities and their euro-redenomination.

Presently, there are two central securities depositories in Italy:

• Banca d'Italia

• Monte Titoli.

Banca d'Italia

The Banca d'Italia started operations as a central depository in February 1980. It manages procedures for the centralised administration and book-entry transfer of Government bills and bonds called Conti Accentrati in Titoli (CAT).

Eligible members

Presently, membership of its central depository system is mainly restricted to resident banks, stockbrokers and investment firms. The Banca d'Italia opened an account also in the name of Cedelbank and Euroclear but these accounts can operate only through resident banks appointed by the two ICSDs.

Eligible securities

Government bills and bonds.

Services

• Administration of securities in ordinary accounts.

• Administration of securities in pledgee accounts.

• Collection of principal and interest at maturity.

• Book transfers in the system free of or against payment.

• DVP facilities only for central bank operations.

Monte Titoli S.p.A.

Monte Titoli was created in 1978 as a joint stock company to operate as a central depository. Its ownership is restricted to Banca d'Italia, banks, stockbrokers, SIMs and other members. Banks are the main participants of the Monte Titoli central depository system.

In June 1986, Monte Titoli became a service company.

Since 1994 Monte Titoli has been utilising a disaster recovery system to guarantee continuous operation of electronic data processing.

From October 1998 all bearer or registered securities, whether traded or to be traded upon request on Italian Regulated Markets, are fully dematerialised as well as:

• shares, bonds and warrants issued by companies having other securities listed on Italian Regulated Markets;

• bonds issued for an amount over ITL 300 billion;

• shares, bonds and warrants issued by companies having a net assets of at least ten billion Lira and more than two hundreds of shareholders or bondholders. This category of issuers are included in a special list edited quarterly by the CONSOB.

All the other securities not included in the above mentioned categories can be paper-based or dematerialized upon the issuer's request.

Eligible members

Membership is open to:

• Italian, EU and non-EU banks

• Italian, EU and non-EU investment firms

• Savings management companies for the portfolio management activity regarding their customers

• Authorised stockbrokers

• Issuing companies for their issued securities and for securities issued by their subsidiary companies

• The Banca d'Italia

• EU and non EU central securities depositories

• The clearing and guarantee systems of derivatives and non-derivatives regulated markets; Financial companies for their securities placement activities

• The Italian Post company, Poste Italiane S.p.A.

• The Italian Bank for Deposits and Loans, (Cassa Depositi e Prestiti).

Eligible securities

The following securities are eligible for the system managed by Monte Titoli:

• Shares and all the other risk capital securities tradeable on the capital market; bonds and all the other debt securities tradeable on the capital market

• Units of undertakings for collective investments in transferable securities (UCITS)

• Securities normally traded on the money market

• Any other security normally traded which allows the purchase of the securities indicated in the previous letters as well as Government securities and their relative indexes.

Services

• Centralised administration of securities

• Real time book-entry transfers on a free of payment basis

• Control of securities at the time of deposit to detect forgotten, lost or stolen securities (only for paper-based securities)

• Collection of dividends and other revenues

• Any type of corporate action

• Supervision regarding bond redemptions (through reduction of nominal value of certificates, premature redemptions) and - according to clients' instructions - convertibility periods (for conversion of convertible bonds or warrants into shares)

• Supervision regarding share subscriptions: exercise of rights relevant to capital increases, carrying out of tenders, supervision of convertibility periods.

Monte Titoli is establishing a real-time delivery versus payment gross settlement system (DVP-RTGS) for the domestic markets which is expected to be ready for the second half of 1999. The system will be able to settle cross-border transactions on any type of european security.

Monte Titoli has also planned the implementation of an automatic securities lending/borrowing procedure for the end of 1999.

3.9 Japan

Clearing organisation and central securities depository.

The Tokyo Stock Exchange (TSE), located in Tokyo nine hours ahead of GMT, is also a clearing organization. The TSE deals with settlements of funds and securities for its own transactions.

For settlements of domestic shares, the TSE opens a settlements account at the Japan Securities Depository Center (JASDEC, the central securities depository of Japan) to make use of its Central Depository and Book Entry Transfer System.

The TSE administers settlements and payments of transactions and entrusts the Japan Securities Clearing Corporation (JSCC, a wholly owned subsidiary of the TSE), with practical aspects of securities settlement.

The TSE is a non-profit organization whose regular members are the securities firms. The TSE is licensed and supervised by the Ministry of Finance and was founded under the provisions of the Japanese Securities and Exchange Law. Its board of directors consists of a president and 27 board members.

Central securities depository Japan Securities Depository Center (JASDEC)

JASDEC, located in Tokyo, is a non-profit organization with funds contributed by domestic and foreign securities companies, banks, trust banks, stock exchanges, securities finance companies, insurance companies etc.

Established in 1984, with the enactment of the 'Law Concerning Central Depository and Book Entry Delivery of Share Certificates and Other Securities', JASDEC was designated as the official agency of custody and transfer of securities under the law by the Ministry of Finance (MOF) and the Ministry of Justice (MOJ) in May 1985. It is supervised by both Ministries and its business plans and budgets must be approved by them in advance.

JASDEC started its custody and transfer services for domestic share certificates in October 1991. The system consists of the shareholders (investors), the participants in JASDEC (securities companies, banks, and etc.), issuing companies, and JASDEC. It has a board of 11 governors. They are representatives of the securities companies, the banks, the trust banks, the regular members of the TSE, other regional stock exchanges, and the issuing companies, as well as a scholar and a lawyer.

Participants

Participants are securities companies, securities finance companies, banks, trust banks, insurance companies, stock exchanges, and JSCC.

Eligibility

Eligible securities are those approved by both MOF and MOJ among corporate securities listed on a stock exchange or registered with the Japan Securities Dealers Association (the self-regulator of the organized OTC market) or the equivalents. In order to handle those securities, JASDEC must receive the consent of the relevant issuing companies.

Services

• Setup and maintenance of ordinary accounts

• Setup and maintenance of pledgee accounts

• Custody

• Settlement and book entry transfers.

Collective custody

The eligible share certificates, which the shareholder entrusts to a participant for custody, are deposited at JASDEC with the consent or request of the shareholder. Upon registration under the name of JASDEC, such share certificates are then held collectively. By request to the participant, the shareholder may withdraw share certificates of the same amount as deposited.

Beneficial shareholders lists

Based on reports received from participants, JASDEC notifies the issuing company of the name, address and number of shares held by each beneficial owner under the system, as of record date.

The issuing company prepares its list of real owners based on this report as well as the conventional register of shareholders, including 'real' shareholders who are not in the JASDEC system. It is, therefore, not necessary for each beneficial shareholder under the system to carry out name registration procedures.

Exercise of shareholders rights

All shareholder rights, such as the receipt of dividends, are exercised according to the real owners list.

Settlement of securities transactions

When shares held in custody are traded or pledged as collateral, such transactions are completed through book entry transfer of ownership of such shares between the concerned participants' accounts at JASDEC, and/or between the customers' accounts maintained by the participants. JASDEC does not deal with payment of funds.

Fees

There is a standardised fee schedule for book entry and safekeeping

Japan Securities Clearing Corporation (JSCC)

JSCC, located in Tokyo, is a wholly owned subsidiary of the TSE. Its operation is entrusted by the TSE. It is directly supervised by the TSE and, therefore, indirectly by MOF. JSCC had been operating as the central depository for the settlement of the transactions of securities listed on the TSE until the Central Depository and Book Entry Transfer System of JASDEC was introduced for domestic shares in October 1991. From that time JASDEC took on settling transactions in the TSE, and also transactions in domestic shares on regional stock exchanges and on the OTC market, which had formerly been cleared by physical deliveries. However, JSCC continues to provide the TSE and some regional stock exchanges with book entry transfer services for the certain securities (See Eligibility).

Since JASDEC is only an administrative body and does not have its own custodial facilities, JSCC has been entrusted by JASDEC with certain operational services such as handling of physical deposits and withdrawals of share certificates deposited by participants in JASDEC. JSCC keeps such domestic shares in its vaults and administers them in trust for JASDEC.

JSCC functions as the agent for the TSE in terms of clearing processing and, at the same time the agent for JASDEC in terms of receiving and delivering physical certificates and for collective safekeeping. JSCC is also a participant in JASDEC and functions as a custodian of foreign central securities depositories/clearing organizations for Japanese shares listed on overseas stock exchanges such as SICOVAM in France, NASE in the Netherlands, and CDP in Singapore.

Participants

Participants are securities companies and securities finance companies.

Eligibility

• Foreign shares listed on the TSE and Osaka Securities Exchange (OSE)

• Certificates of subscription rights listed on the TSE, OSE or the Nagoya Stock Exchange

• Government bonds listed on the TSE

• Convertible bonds listed on the TSE

• Convertible bonds registered on OTC.

Services

• Safekeeping in ordinary accounts

• Safekeeping in pledgee accounts for Japan Securities Finance Co.

• Physical deliveries

• Book entry transfers at deposit

• Transfers to and from depository organisations in other countries (e.g. SICOVAM in France)

• Nominee function for foreign shares listed on the TSE

• Standing proxy services for foreign central securities depositories and clearing organisations.

Fees

There is a standardised fee schedule for book entry and safekeeping

Bank of Japan (BOJ)

Three forms of Japanese Government bonds are in circulation; bearer certificate form, book entry form and registered form, upon choice of the bondholder.

BOJ operates the clearing and settling system for book entry bonds. BOJ, as central depository, registers the deposited bonds in its name and dematerializes the certificates. As for registered government bonds, the registrar is BOJ itself. BOJ registers the name of the holder or the designated person on the ledger upon request of the bondholder.

In May 1990, the BOJ-NET Delivery System was introduced for the electronic registration and book entry processing of Japanese Government Bonds.

In April 1994, BOJ introduced a delivery versus payment system for registered and book entry government bonds by upgrading BOJ-NET.

Participants

Banks, securities companies, and other financial institutions that maintain accounts with BOJ.

Eligibility

All government bonds and bills.

Services

• Safekeeping

• Book transfer at depository

• Registrar function

• Payment of interest and principal

• Issuance of certificate of ownership.

Fees

There is a standardized fee schedule for book entry or registration on the BOJ-NET System.

3.10 Luxembourg

Domestic business

• Most trades are settled via Cedelbank.

• Some trades may be settled, subject to agreement between parties or in accordance with the regulations (mesures d'exécution) of the Luxembourg Stock Exchange, at another financial centre.

Cross-border business

Settled via Cedelbank through its links with international depositories and clearing organisations.

Central securities depository: Cedelbank

Cedelbank is a central securities depository which acts through its depository banks. For a full description of Cedelbank see chapter on the International Securities Market.

3.11 The Netherlands

AEX-Effectenclearing BV

AEX-Effectenclearing, a wholly owned subsidiary of AEX Clearing & Depository NV, is the Dutch entity responsible for clearing transactions on behalf of AEX-Effectenbeurs seatholders.

AEX-Optieclearing BV

AEX-Optieclearing, a wholly owned subsidiary of AEX Clearing & Depository, is the Dutch entity responsible for clearing transactions on behalf of AEX-Optiebeurs seatholders.

Necigef

Necigef, the Netherlands Central Institute for the Giro Transfer of Securities (Nederlands Centraal Instituut voor Giraal Effectenverkeer BV), is the settlement organisation and Central Securities Depository (CSD) in The Netherlands for all Necigef-eligible securities. It is a wholly owned subsidiary of AEX Clearing & Depository and operates in accordance with the Securities Giro Transfer Act under the supervision of the Minister of Finance.

Its primary role is to operate a securities transfer (book-entry) system for its participants and to handle safekeeping and administration of securities. It also operates the settlement system for the money market and MTNs.

Organisations admitted to Necigef as participants are banks and brokers registered as credit institutions under the Act on the Supervision of Credit Institutions 1992 (and therefore supervised by the central bank). Special participants are the Dutch central bank, the Agency of the Ministry of Finance, Kas-Associatie, AEX-Effectenclearing and AEX-Optieclearing. Several foreign central securities depositories, who have similar objectives and operate under similar legal systems as Necigef, have been admitted with the approval of the Minister of Finance.

Necigef's services include:

• Safekeeping in professional accounts.

• Operating giro securities accounts.

• Operating pledge accounts.

• On-line book-entry transfers, free of payment or against payment in central bank money.

• Continuous on-line inquiry into transaction status.

• On-line statements of movements and positions.

• Collection and distribution of income and principal (in the appropriate currency).

• Random allocation of drawing rights on bonds to participants.

• Other miscellaneous services (including conversions) on behalf of its participants.

NIEC

Netherlands' Inter-professional Securities Centre NIEC (Nederlands Interprofessioneel Effectencentrum NIEC BV), a sister company to Necigef, supplements the services provided by Necigef by operating settlement and custody systems for securities that are not eligible for Necigef.

Kas-Associatie NV

Kas-Associatie is a bank registered as a credit institution under the Act on the Supervision of Credit Institutions 1992. Kas-Associatie settles the cash side of netted AEX-Effectenbeurs transactions (in non-euro currencies). It acts as a Necigef participant on behalf of those AEX-Effectenbeurs seatholders who are not themselves Necigef participants. Besides offering custody services, Kas-Associatie carries out securities settlement for these seatholders. All AEX-Effectenbeurs seatholders have a money account with Kas-Associatie to handle non-euro currency cash movements.

De Nederlandsche Bank NV

De Nederlandsche Bank NV, the Dutch central bank, settles the cash side of all netted AEX-Effectenbeurs transactions in euro. De Nederlandsche Bank NV also settles the cash side of Necigef's DVP (Delivery Versus Payment) service. Payments of income and repayments of principal are also effected through the Dutch central bank.

ASAS Nominee NV

ASAS Servicing Company NV

These two wholly owned AEX-Effectenbeurs subsidiaries provide services for the Amsterdam Security Account System (ASAS).

ASAS Nominee administers a number of foreign shares that are traded on AEX-Effectenbeurs on the same terms as apply in their home countries.

ASAS Servicing Company operates the system for clearing and settling ASAS transactions.

3.12 Spain

Security clearing and money clearing resulting from all Spanish stock exchange transactions is handled by the Servicio de Compensación y Liquidación de Valores, a centralised securities clearing organisation.

Eligible members

All Sociedades and Agencias de Valores y Bolsa, banks, savings banks, financial intermediaries, Bank of Spain (Central Bank) and Caja General de Depósitos (official entity for the custody of state securities); and those foreign entities that carry out similar functions to the SCL.

Central securities depositories

The Spanish central securities depository is the Servicio de Compensación y Liquidación de Valores (SCLV), regulated in paragraph 54 of the Spanish Stock Exchange Market Law of July 1988, and by the Royal Decree 116, of February 14, 1992.

The custodian services provided by SCL, in addition to safecustody and clearing, include:

• Corporate actions

• Stock lending.

All the reports and interchange of instructions with clients are backed up by any of the communication means chosen by them, including SWIFT.

Deliveries

Delivery of securities takes place in the electronic balances of the SCLV and in the custodian entities' records.

Settlement of funds is managed by the SCLV, which submits a list of debits and credits to the Central Bank (Banco de España) to be charged against participants' funds accounts on settlement day.

Delivery of securities and payment of funds take place three working days after the trade day.

3.13 Switzerland

On May 20, 1999, the shareholders of SEGA (the central clearing and depository organisation for domestic securities and foreign issues listed at the Swiss Exchange) and INTERSETTLE (Swiss Corporation for International Securities Settlements, whose major shareholder was SEGA) approved a merger into SIS SEGAINTERSETTLE AG.

At the same time a new holding company (Swiss Financial Services Group AG, domiciled in Zurich) was created which provides an umbrella structure for the reorganised activities and services of the former SEGA and INTERSETTLE. The holding company currently comprises three distinct legal entities:

• SIS SEGAINTERSETTLE AG, the clearing and depository corporation

• SECOM AG, whose purpose is to sell operating licences for the SIS processing system SECOM to interested foreign clearing and depository organisations.

• SAG Aktienregister AG which maintains share registers, offers stock transfer services and organises shareholder meetings for Swiss companies wishing to outsource those administrative tasks.

Clearing organisation and central securities depository.

SIS SEGAINTERSETTLE AG

SIS SEGAINTERSETTLE AG (SIS) is the core operating company wholly owned by Swiss Financial Services Group AG whose shareholders are approximately 160 domestic and foreign financial institutions located in Switzerland. Participation in SIS is open to banks, brokers and financial institutions domiciled in Switzerland or abroad.

SIS is a core component of the highly integrated Swiss financial market infrastructure. It is linked in an online-realtime mode to the Swiss Exchange SWX and to the Swiss National Bank's money transfer systems SIC (Swiss Interbank Clearing). A clone of the SIC payment system (EuroSIC) connects the Swiss banking community via the Swiss Euro Clearing Bank GmbH in Frankfurt to the pan-European money transfer system TARGET. Clean payments in EUR as well as settlement of securities traded against EUR are thus possible in the same efficiency as for transactions in CHF.

Investment instruments eligible for settlement and custody in SIS include a global range of listed and non-listed equities in both bearer and registered form, fixed income securities, mutual funds and derivatives.

SIS provides services in three core areas:

• centralised clearing of securities transactions on a domestic and cross-border level

• centralised safekeeping of domestic and foreign securities and other investment instruments

• custody and asset administration on all investment instruments held.

• The core services are complemented by a range of auxiliary services:

• maintenance of money accounts for its participants in all freely convertible currencies

• collateralised short term credit lines to facilitate securities settlement

• tripartite financing

• collateral management support

• foreign exchange services for transactions connected to the core services

• securities lending and borrowing, with SIS acting as principal

• acting as processing agent for repurchase agreements concluded between the Swiss National Bank and SIS participants

• nominee share registration

• tax reclaims

• automatic dividend compensations/market claims (in house cross-ex compensation)

• dealing in mutual funds, rights, fractional shares and odd-lots on behalf of participants

• various cash projections, planning and reporting facilities

• online-realtime information on the status of pending and settled transactions, account positions, participant and security master file data.

In connection with EUREX (the joint Swiss-German derivatives exchange) SIS maintains special subaccounts to satisfy EUREX margin requirements and to enable delivery against payment transactions in securities underlying EUREX options.

SECOM

SECOM is the securities clearing and settlement system developed, owned and operated by SIS. It has served since 1993 as a common platform for both domestic and international securities transactions.

SECOM is a true multicurrency, RTGS system. The G30/ISSA definition of Delivery Versus Payment is met in all respects. Funds posted to participant accounts are available immediately. SIS participants connect to SECOM either via their own computer to computer link or via MAX (Maximal Access to extended Settlement Services, a PC-based software package developed by SIS). To ensure the security of communication in SECOM, all data transfer is always in authenticated mode with optional data encryption.

3.14 Sweden

Värdepapperscentralen VPC AB (The Swedish Central Securities Depository).

VPC was started in 1971 as a service institution for central share registration. The company is owned by the state (50%), by Swedish banks and brokers (25%) and by issuers (25%).

The legal monopoly of the VPC to maintain a central register for dematerialised securities was abolished on January 1 1999. The new order, based upon a new act on registration of financial instruments, means that VPC from now on will act as a Central Securities Depository (CSD) due to an authorisation granted by Finansinspektionen (the Financial Supervisory Authority). In 1996 VPC was also authorised as a clearing house under the Act governing Securities Exchanges and Clearing Operations.

Today VPC performs the matching, clearing, settlement and registration of Swedish and foreign dematerialised securities registered in the VPC-system. That includes shares for some 650 companies including all those quoted on the Stockholm Stock Exchange. VPC has the same registration responsibility for more than 1500 bond issues, discount notes, commercial papers, options, warrants and Swedish Depository Receipts (SDR). In addition, some foreign companies have their shares directly registered with VPC.

The VPC-system, for clearing and settlement as well as registration of securities in book-entries, is a real-time system that came into operation in 1989. Legally it is primarily based on the act on registration of financial instruments, which entered into force in January 1999, and the Act governing Securities Exchanges and Clearing Operations as well as agreements drawn up between those actively involved with it, such as banks, securities firms and investors. The act on registration of financial instruments gives a registration on an account the same legal capacity as a holding of corresponding physical securities would have done. The act and agreements between investors, banks and securities firms regulate the right to represent investors in the VPC-system.

Securities issued under the Swedish legislation and registered in the VPC-system are totally dematerialised and no certificates can be issued. The new legislation facilitates registration of foreign immobilised securities, if VPC is convinced that the global note cannot be circulated.

The system is based on registration of investors and their holdings in VPC's registers. The holder's name and address are recorded together with instructions on how dividends are to be transferred etc. The investor's right to receive dividends and bonus shares, to subscribe rights issues and to vote at general meetings is based on registered information.

Since 1993, the VPC-system has been extended with the addition of functions for handling money market instruments and transactions. Money market instruments such as treasury notes, treasury bills and mortgage bonds are now handled in the system.

As a consequence the VPC-system is now divided into two sections: the money market section for the institutional trading of money market instruments and the equity market section for all other trades, including trades in some debt instruments on the SOX market at OM Stockholm Stock Exchange.

VPC does not act as a central counterparty in its capacity as a clearing house. Nor does VPC itself provide any guarantees for the settlement. VPC only administers the clearing and settlement between direct and indirect clearing members.

Registration in the VPC-system is undertaken by 'account operators' for their own account, or on behalf for investors. VPC determines which entities should have the right to act as account operators. Investors can hold accounts with VPC directly or indirectly through a nominee approved by VPC. In the latter case, the actual registration takes place in the nominees own register and not in the VPC-system. A nominee is however required to hold an account with VPC in street name and to supply VPC with information regarding the beneficial owners of the securities.

A direct participant at VPC can be either an account operator or a clearing member or both. Pursuant to VPC's rules and regulations, a clearing member that participates in the money market clearing is required to be an account operator.

Transfer of ownership is carried out by book entry. Allocation of bonus shares and rights issues is done in the same way. The account holder is notified of any changes.

An annual statement at the end of the year shows the balance, dividends, interest and rights received during the year.

Both account operators and VPC are liable under the Swedish legislation for errors in the VPC-system, i.e. an investor can claim damages in case of a loss due to such an error.

3.15 United Kingdom

The three depositories in the United Kingdom are:

CREST (which has a unique role as depository for corporate securities in both the United Kingdom and Ireland); the Central Gilts Office (CGO - for British Government bonds - known as 'gilts' - and certain other bonds denominated in GB pounds); and the Central Money Markets Office (CMO - for money market instruments).

During 1999, the three securities depositories in the United Kingdom will be brought under the management of CRESTCo Ltd, the operator of CREST, with the objective of merging them into a single system. CRESTCo is constituted so as to operate as an industry utility. All participants are eligible to acquire shares in CRESTCo (but are not obliged to do so). CRESTCo carries out a biennial rebalancing exercise to maintain shareholdings in line with usage of the system. The return to shareholders is fixed, with any financial surplus returned to users by way of a rebate on transaction charges. The current shareholders represent a broad cross-section of the securities industry, including banks, broker-dealers, registrars and investing institutions. CRESTCo maintains regular contact with its customers through board committees, liaison groups and individual liaison visits.

CREST

CREST provides dematerialised book entry holdings and real-time gross settlement for transfers of United Kingdom and Irish corporate securities (equities and corporate bonds). It settles trades entered into on the London Stock Exchange, Irish Stock Exchange and Tradepoint Stock Exchange, as well as over-the-counter and off-market transactions. CREST started operating in July 1996. CREST provides all the services conventionally associated with a depository, providing the means of holding securities and transferring them against payment, receiving benefits and executing optional corporate actions. However, it is not a depository in the traditional sense, since securities within CREST are registered in the names of participants. CRESTCo itself never has any form of ownership of the securities or cash in the system.

There are two levels of participation in CREST:

A user is the entity that sends and receives electronic communications to or from CREST. All communication with CREST must be made across one of the two accredited CREST networks, operated by SWIFT and Syntegra (a division of British Telecommunications). These networks must meet the high standards for security and resilience set by CRESTCo. (The SWIFT network used for CREST communications is distinct from the standard FIN network, though it can operate through the same gateway.) All messages are required to be authenticcated to the high standard of security specified by CRESTCo. A member is the entity that holds and transfers securities within the system and makes and receives payments. The member is the legal owner of the securities, whose name appears on the register maintained by or for the issuer. The name of the beneficial owner of a security appears on the issuer's register only where the beneficial owner is itself a CREST member. There is no restriction on the type or nationality of entity that may be a member of CREST. Members include custodian banks, broker-dealers, nominee companies, investing institutions and private individuals.

A member can operate any number of member accounts, which are reflected on the register. Member accounts may be used to segregate holdings in whatever way the member chooses, for example, to segregate client and principal positions, taxable and tax-exempt clients or to segregate individual clients' positions.

A user can send and receive messages on behalf of any number of members. Where the member and user are different entities, the member is described as being 'sponsored' by the user.

CREST provides facilities for delivering securities against or free of payment. Payment can be made in British pounds, US dollars and euros through the assured payment mechanism. CREST also provides facilities for stock lending and repos (including daily revaluation of outstanding loans, daily adjustment of collateral and return of the stock), movement of collateral and the processing of corporate events. Through the CREST Courier and Sorting Service (CCSS) it is possible for certificated holdings of securities to be delivered into CREST for electronic settlement or for securities received as the result of electronic settlement to be withdrawn in certificated form.

CREST calculates and collects any Stamp Duty Reserve Tax liabilities, enabling participants to obtain any reliefs from the tax for which they are eligible. CREST also passes transaction reporting data to exchanges and regulatory bodies on behalf of its participants.

Central Gilts Office (CGO)

CGO was established in 1986 when the gilt-edged market was restructured. It provides dematerialised book entry holdings and transfers of gilt-edged securities and certain bulldog bonds in real time against assured payments. The system was modernised in 1997 using a copy of the CREST software. Its operation and functionality is therefore very similar to that of CREST, described above. In addition, CGO provides facilities for stripping and reconstituting bonds. Electronic communication with CGO uses the two CREST network providers. Physical deposits and withdrawals of securities use the CCSS (see above).

In the first half of 1999 responsibility for the management of CGO will be transferred from the Bank of England to CRESTCo. CGO will, however, continue to operated by the Bank of England as a separate system under CRESTCo's management. In the second quarter of 2000 the settlement of the securities currently settled in CGO will be transferred into CREST, creating a unified system for all United Kingdom securities.

Central Moneymarkets Office (CMO)

CMO provides two discrete (but operationally identical) book entry transfer systems: one for the settlement of short dated GBP instruments against payment in GBP and the other for the settlement of short dated euro instruments against payment in euro. Instruments include:

• Treasury bills

• Certificates of deposit

• Commercial paper

• Bank-accepted bills

• Local authority bills

• Trade bills.

With the exception of certificates of deposit, instruments transferred through CMO must be evidenced by physical paper, for which CMO provides a central depository. Another difference between instruments in CMO and those in CGO and CREST is that CMO instruments are negotiable, bearer instruments and, as such, are non-fungible. In other words, each instrument is separately identifiable from others with identical economic characteristics.

Responsibility for the management of CMO will be transferred from the Bank of England to CRESTCo during 1999. The intention over time to is to transfer settlement of the instruments settled in CMO into CREST. The depository for CMO instruments will continue to be provided by the Bank of England for the foreseeable future.

Members of CMO input their deliveries to terminals linked to a central computer system via the London Stock Exchange's integrated data network. This network will be replaced with a proprietary network in 1999.

Accepted instructions result in the book entry transfer of stock between members' accounts. Each member must use a settlement bank who will (subject to credit approval) issue an end of day net payment in respect of that member's net cash obligation to the market.

The CMO also provides facilities for the pledging of stock as collateral in respect of both stock lending and secured bank lending.

Members include:

• Settlement banks

• Custodians

• Discount brokers

• Money brokers

• International banks.

Many institutions and international banks are indirect participants, accessing the CMO through a direct member.

London Clearing House (LCH)

LCH acts as central counterparty for contracts traded on LIFFE, IPE, the LME and Tradepoint. Its role in the derivatives markets is described in sections 4.3 and 4.4.

3.16 United States

There are several key market rules relating to clearance and settlement through qualified clearing agencies:

NYSE Rule 132

This rule defines the requirement of every NYSE member which becomes party to a contract to compare and settle through a fully-interfaced qualified clearing agency (i.e. in practice, the National Securities Clearing Corporation).

Amex Constitution Article X.2

This rule requires that in every exchange contract, delivery and payment must be made through NSCC, except those involving options, which clear through the Options Clearing Corporation.

NASD Schedule D Part VI, Sec. 7

This rule requires all Nasdaq market makers within 25 miles of a registered clearing agency to clear and settle transactions through such an agency. The rule further requires transactions from the Small Order Execution System (SOES) and SelectNet electronic trading system to be cleared through a registered clearing agency using Continuous Net Settlement (CNS), a centralised, automated processing system for clearance and settlement of security transactions.

MSRB Rule G-12

Similar to NYSE Rule 132, this rule requires municipal bond brokers and dealers to compare and settle their contracts through a qualified clearing agency.

NYSE Rule 387, Amex Rule 423, NASD Uniform Practice Code Sec. 64, and MSRB Rule G-15

These rules require their broker members, as a condition of accepting a client's order and agreeing to allow the Cash-on-Delivery privilege, to use the facilities of a securities depository for electronic trade confirmation to the client or the client's agent and book-entry settlement.

Clearing corporations act as a medium through which brokers, dealers and other financial intermediaries account for their transactions with each other and through which settlements may take place.

The central clearing corporation in the US handling corporate securities is the National Securities Clearing Corporation (NSCC).

Other specialised clearing agencies are:

• International Securities Clearing Corporation (ISCC)

• Government Securities Clearing Corporation (GSCC)

• Mortgage-Backed Securities Clearing Corporation (MBSCC)

• Emerging Markets Clearing Corporation (EMCC)

• The Options Clearing Corporation (OCC).

National Securities Clearing Corporation (NSCC)

The NSCC was established in 1976, and provides centralised clearance, settlement and information services to brokers, dealers, dealer and clearing banks, mutual funds, and other financial institutions.

The NSCC complex also includes: Government Securities Clearing Corporation (GSCC), an NSCC affiliate, provides clearance, settlement and information services to brokers, dealers and banks trading in government securities. Mortgage-Backed Securities Clearing Corporation (MBSCC), an NSCC affiliate, is the market's sole provider of trade comparison and settlement services for mortgage-backed securities. Emerging Markets Clearing Corporation (EMCC), an NSCC affiliate, provides trade matching, clearance, settlement and risk management services for global dealers, interdealer brokers and correspondent clearing firms involved in emerging markets debt instruments. International Securities Clearing Corporation (ISCC), a wholly-owned subsidiary of NSCC, provides clearance, settlement and information services to US brokers trading in overseas markets.

NSCC is a registered clearing agency with the SEC and owned jointly by the NYSE and Amex, and the National Association of Securities Dealers, Inc. (NASD).

Any registered broker, dealer, bank or trust company, registered investment company, insurance carrier, or other entity whose business would benefit directly from NSCC's services is qualified to become a member provided that it meets certain financial and operational requirements. Prospective participants are presented to NSCC's Membership Committee of the Board of Directors for approval.

Eligible securities

• NYSE and Amex equities and corporate bonds

• Nasdaq and over-the-counter equities

• Over-the-counter corporate bonds

• American Depositary Receipts (ADRs)

• Municipal bonds

• Unit Investment Trusts (UITs)

• Mutual funds

• Index warrants

• Country Funds and other closed-end funds.

Services

NSCC provides a wide range of services, including the following:

• Equity and fixed income trade comparison and recording services

• Automated clearance and settlement

• Linkage to depository book-entry delivery systems

• Data transmission facilities and software

• Physical security, processing and delivery

• Corporate action processing

• Mutual fund transaction processing

• And ancillary services as well as annuity processing services (APS).

Core services are:

• Automated Customer Account Transfer Service (ACATS)

• Archival Microfiche

• Collateral Management Service (CMS)

• Continuous Net Settlement (CNS) System

• Correspondent Clearing Service

• Fixed Income Transaction System (FITS)

• The Fully-Paid-For Account

• ID/CNS Interface for Prime Broker

• PC Web Direct

• Reconfirmation and Pricing Service (RECAPS)

• Stock Borrow Program

• Commission Billing for Listed Equities

• Dividend Settlement Service (DSS)

• Envelope Settlement Service/Intercity Envelope Settlement Service (ESS/IESS)

• Funds Only Settlement Service (FOSS)

• Same-Day Funds Settlement.

Mutual Fund services are:

• ACATS-Fund/SERV Interface

• Commission Settlement and Global Update Service

• Defined Contribution Clearance & Settlement (DCC+S)

• Fund/SERV

• Mutual Fund Profile Service

• Networking

• Transfer of Retirement Assets Service (ToRA)

• Underwriting and Tender Offers Through Fund/SERV.

Annuity service:

• Annuity Processing Service (APS).

Government Securities Clearing Corporation (GSCC)

Government Securities Clearing Corporation (GSCC), established in 1986, is a participant-owned organisation that ensures the orderly and efficient settlement of trades in the US Government securities marketplace.

An affiliate of National Securities Clearing Corporation (NSCC), GSCC provides centralised, automated trade comparison, netting and settlement services for Treasury bills, bonds and notes, as well as for zero-coupon and non-mortgage-backed agency securities.

Guided by a user-nominated and user-elected board, GSCC brings operational and risk management benefits and protection to the market's most active and influential participants.

Eligible participants

Those eligible to participate as members of GSCC include dealers in government securities, primary dealers, inter-dealer Government brokers, insurance companies, registered investment companies and banks.

Services

GSCC provides highly automated comparison and multilateral netting services for participants trading in the US Government securities marketplace.

The Executing Firm process allows non-member firms that clear through GSCC participants to access GSCC comparison and netting services.

Yield-to-Price is a service that provides one-step processing of when-issued Treasury notes and bonds, converting yield trades into priced trades on submission.

GSCC extended its reach by instituting rule changes that have established various new membership categories for netting including a recent rule filing to admit foreign members.

GSCC's Trade Comparison and Netting and Settlement Service have been enhanced to accommodate repurchase and reverse repurchase agreements (repos). The comparison service reduces the uncertainty and inefficiency associated with the manual confirmation procedures of repos, through the substitution of electronic confirmations for physical paper. Confirmations generated by comparison processing constitute binding and enforceable contracts for compared repo transactions.

The Netting and Settlement Service provides participants with a centralised, automated netting and settlement for the maturity of the repos (close legs) overnight and term repos, moreover GSCC can net and settle the initiation of the repos (start legs), if a participant submits all transaction details prior to start date.

The netting and settlement system nets repos along with each participant's other trading activity, including buy/sell and auction purchases. GSCC guarantees settlement for all transactions that are netted. In addition to its existing risk management strategy, GSCC has developed specific policies and procedures to mitigate the risk associated with repo transactions.

Mortgage-Backed Securities Clearing Corporation (MBSCC)

MBSCC was established in 1979 as the sole provider, in the US, of trade clearing services to the MBS primary and secondary markets. Rules and policies are established by a Board of Directors selected from the industry. The focus of MBSCC is directed by the needs of its participants and the ever-changing marketplace. As a result of changes experienced in 1995, MBSCC is now owned by its participants as well as affiliated with National Securities Clearing Corporation (NSCC).

Eligible participants

Participants are dealers, interdealer brokers, investment companies, insurance companies and MBS originators. Participants are active in the mortgage-backed securities primary and secondary forward markets for various mortgage-backed securities programmes of Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC).

Services

MBSCC provides a full range of Clearing and Pool Notification Services to the mortgage-backed securities industry. Through its clearing system, MBSCC provides centralised automated trade comparison, risk management and settlement services for mortgage-backed securities. The Electronic Pool Notification (EPN) system offers an automated solution to the manually intensive fax and phone pool notification process.

Trade comparison

MBSCC provides two-sided comparison matching of trade details between participants, eliminating the need for contra-sides to exchange confirms and commitment letters. The resulting Purchase and Sale Report, generated by the MBSCC, is a recognised and accepted confirmation among all participants. Once a trade is compared, it receives margin protection and becomes eligible for settlement services.

Risk management

MBSCC has proven safeguards and controls to minimise contra-side non-performance risk which qualify and conform to established recognised guidelines. The basis for all safeguards is MBSCC's participant fund, comprised of approved forms of collateral equal to a uniform minimum and 130% of each participant's accumulated mark-to-market net losses. Each participant may satisfy daily margin requirements with a letter of credit issued by an approved bank or trust company, cash, certain securities, or any combination of these.

Settlement

Two separate settlement systems are maintained by MBSCC, that is, the Settlement Balance Order (SBO) and Trade-for-Trade (T/T). The SBO system nets like trade terms, buys against sells, to the least possible number of settlement obligations regardless of original contra-side identity. SBO is available for most mortgage-backed securities that are subject to the Bond Market Association Good Delivery Guidelines. For those exceptional trades not eligible for SBO processing, the T/T option requires trades to settle individually, as contracted, between buyer and seller. For both settlement procedures, comparison and margin protection are available.

Electronic pool notification (EPN)

EPN was introduced in 1995 for the purpose of replacing the manually intensive and error-prone phone and fax method of pool notification. With the advent of EPN, users may now send electronic messages and effect delivery upon recipients.

Unlike the phone and fax methods of communication, whereby billions of dollars in fails have been incurred as a result of staffing and other limitations of this methodology, EPN standardises 'good delivery' procedures independent of the recipient's retrieval of the message. As a result, historically high fail costs are dramatically reduced.

Emerging Markets Clearing Corporation (EMCC)

The EMCC was established in 1997, and is owned by firms active in emerging markets debt instruments. EMCC is a US-registered clearing agency and is also a recognised clearing house by the Securities and Futures Authority (SFA) in the UK.

An affiliate of NSCC, EMCC provides provides trade matching, clearance, settlement and risk management services to global dealers, interdealer brokers and correspondent clearing firms involved in emerging markets debt instruments. EMCC provides post-trade services for USD denominated Brady Bonds, as well as, a number of emerging market Sovereign bonds. The clearing corporation plans to eventually clear a broader range of emerging markets sovereign Eurobond instruments, possibly including repurchase agreement transactions. Initially set up to settle transactions on a trade-for-trade basis, EMCC plans to provide settlement netting in late 1998.

EMCC membership is open to global dealers, interdealer brokers, and correspondent clearing firms involved in emerging markets debt instruments that meet eligibility requirements.

EMCC offers participants dealing in emerging markets debt instruments a range of operational and risk-related benefits:

• Guarantees on trade date the ultimate settlement of accepted transactions, reducing counterparty risk.

• Calculates exposures and collects collateral to secure those exposures.

• Strengthens the post trade settlement chain by linking trade matching to settlement.

• Insulates the clearing process from an over-dependence on commercial clearers.

• Reduces costs and increases efficiency through standardisation and centralisation.

Emerging markets debt trades executed by EMCC participants are compared by a designated trade matching system and transmitted to EMCC. Trades are then evaluated for eligibility, which is determined based on various criteria. Accepted transactions are guaranteed by the clearing corporation and reported to members on an Accepted Trade Report. EMCC then calculates appropriate margin requirements daily, based upon existing positions as well as new trades, issues margin calls as appropriate and collects and manages the resulting collateral. EMCC also transmits settlement instructions to Euroclear or Cedel, which complete the settlement process on behalf of all EMCC member firms.

EMCC is guided by a board of directors who represent shareholders in the clearing corporation.

International Securities Clearing Corporation (ISCC) The Options Clearing Corporation (OCC)

In April 1973, the OCC was founded as a clearing organisation for the Chicago Board of Options Exchange. In 1975, OCC adopted its current name and structure. It is the common clearing facility for all US exchanges' trading negotiable options.

OCC is the largest clearing corporation in the world for financial derivative instruments. OCC issues and clears options on several types of underlying common stocks, foreign exchange, stock indexes, US Treasury securities and interest rate composites. OCC's clearing membership consists of approximately 150 of the largest US broker/dealers and non-US securities firms, representing both professional traders and public customers.

OCC stands behind every trade in listed securities options in the United States and is the only clearing house worldwide to have received an 'AAA' credit rating from Standard & Poor's Corporation. The 'AAA' rating relates to OCC's capacity to fulfil its obligations as counterparty for options trades.