Hong Kong Securities Clearing Company Limited

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10th ACG Cross-Training Seminar
STP - CCASS Participant Gateway

• Hong Kong Securities Clearing Company Limited
• June 2008 - Bali

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Agenda

• Introduction
• Clearing House HKSCC
• CCASS
• Key features, Operations, Access channels
• CCASS Participant Gateway (PG)
• Benefits
• Overview
• System components, Key features
• Straight Through Processing
• C3T and PG
• Q A

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Introduction of Clearing House HKSCC

• HKSCC was incorporated on 5 May 1989 and was
  recognized as clearing house on 28 May 1992
• Merged with SEHK and HKFE, HKSCC became a wholly
  owned subsidiary of Hong Kong Exchanges and
  Clearing Limited (HKEx) on 6 Mar 2000
• What is CCASS ?
• Central Clearing And Settlement System
• It is a system providing book entry settlement
  for securities in cash market
• Ordinary shares, preference shares, registered
  warrants, PAL, unit trusts, funds, debt
  securities, structured products (e.g. derivative
  warrants, callable bull/bear contracts and listed
  equity linked instruments) listed on the Stock
  Exchange are eligible for admission into CCASS

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CCASS Key features

• Centralised
• A centralised system for all market
  intermediaries to transact business
• Electronic linkage
• All Participants must be electronically linked
  with CCASS
• Electronic Book Entry System
• Settlement is done on a book-entry basis where no
  physical movement of certificates and cash is
  involved
• Securities and cash are exchanged on a Delivery
  Versus Payment basis
• CCASS Participant
• Seven categories of Participants Custodian
  Participants, Direct Clearing Participants,
  General Clearing Participants, Investor
  Participants, Clearing Agency Participants, Stock
  Lender Participants and Stock Pledgee
  Participants.

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CCASS Operations
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Access to CCASS
Five channels for Participants to access CCASS
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Access to CCASS - C3T PG

• In the CCASS Architecture Upgrade Project, two
  Communication
• Channels were developed as part of technology
  upgrade
• CCASS/3 Terminal (C3T)
• Access to CCASS through a browser-based
  terminal
• C3T Functions Enquire portfolios, movements
  and transactions
• input data, upload files and download reports
• Participant Gateway (PG)
• A technical device installed at the
  Participants premises to provide an access
• point through which Participants back office
  systems can communicate with
• CCASS on a message basis
• Adoption of PG is optional to CCASS
  participants

Both C3T Functions and PG Messages were processed
by the mainframe in a similar fashion
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Network Connectivity- C3T PG

• C3T and PG are connected to the CCASS Host
  system via SDNet
• It uses the TCP/IP protocols with high security
  protection by means of
• firewall and intrusion detection systems

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C3T (Browser based interface)

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PG(Message based system)
Example Input Settlement Instruction (SI)
Input Message
Output Message
Wed Dec 19 170055 CST 2007 Send 0
1CMT1n009bsgxv000004462I540B01323X4 16R
GENL 20CSEME//123455004A00002 23GNEWM 98AP
REP//20071111 16SGENL 16RTRADDET 98ASETT//2
0071111 35B/HK/1 16STRADDET 16RFIAC 36BSE
TT//UNIT/2000, 97ASAFE//01 16SFIAC 16RSETDE
T 22FSTCO/CCAS/DINR 22FSETR/CCAS/RTRL 16RS
ETPRTY 95RDEAG/CCAS/H00001 16SSETPRTY 16RSE
TPRTY 95QBUYR//abc company 97ASAFE//12345678
90 16SSETPRTY 16RAMT 19ASETT//HKD0, 16SAM
T 16SSETDET -5CHK0000000062CA5359
Wed Dec 19 170100 CST2007Received
1CMT1n009bsgxv000001652O598B01323X4 20PG
87860000502805 12001 77E 20CPREV//123455004
A00002 20CSIIN//I16181312 25DPROC//SUCC 70E
ERRE//EMSG/RECORD ADDED SUCCESSFULLY /ENUM/-2003
-5CHK00000000D3611177
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Benefits of using PG

• 1. Straight-through-processing (STP)
• Using the PG access mode, CCASS/3 functions are
  performed by the
• transmission of standard messages. Transactions
  input to the PSS
• can be routed to CCASS/3 directly, without the
  need to re-input to
• CCASS via C3T
• 2. Real-time data feed to CCASS
• 3. No time constraint for instruction processing
• 4. Tightening up the internal control without
  manual
• intervention
• 5. Cost effectiveness
• Most suitable for high volume data exchange
  without the need to go
• through the input processing via CCASS/3

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Overview of PG

• An alternative access channel to CCASS
• PG is a Windows 2000-based device installed at
  the participants premises
• It is designed to support participant back office
  system (Participant Supplied System or PSS)
• It facilitates a direct electronic interface
  between PSS and CCASS with the aim to achieve
  data straight through processing eventually
• PG is a message-based gateway. All
  communications between PSS and PG are done
  through messages
• Messages follow the SWIFT ISO15022 as possible.
• In general, each message sent from and received
  at PSS can represent a business transaction in
  CCASS

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Overview of PG

• PG acts as a router to route requests and
  responses between PSS and CCASS
• Example Input Settlement Instruction (SI)

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Aim of developing PG

• To meet international standards in providing open
  access and connectivity for CCASS Participants to
  access CCASS
• It will bring Hong Kong into line with prevailing
  as well as emerging industry standards and will
  prepare the Hong Kong market to meet the
  challenges of increasing globalization of
  financial markets

• ISO 15022 Securities Messaging Standard (ISO
  Standard) is adopted as the messaging standard
  which pave the road for Straight Through
  Processing

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PG System components

• There are mainly 3 components in a PG system
• PG Administrator Main Window
• - It is a front-end GUI interface
• - A participant can perform login/logout
  from C/3, check the communication status between
  PSS and C/3 etc.
• PG Engine
• - It serves as a common architecture
  component in PG that provides the technical
  services
• - It allows an integration of different
  electronic exchange platforms, information
  providers
• PG Application Programming Interface (API)
• - It provides an open system that
  participants can attach their own applications.

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PG Key features

• Message Routing
• - route requests and responses between PSS
  and CCASS
• Support for concurrent transactions
• - support multiple transactions sent from PSS
  concurrently by using PG-API
• Message encryption and authentication
• - ensure secured transmission between PSS and
  C/3
• - smart card for its authentication to C/3
• - PSSs authentication to PG via PG-API PSS
  ID and Password
• Asynchronous message processing
• - distribute CCASS broadcast message and
  notification to PSS

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Straight through processing - C3T

• Terminal input
• Participants input instructions via C3T and print
  out CCASS
• reports in text format
• STP - Batch File Upload
• Instead of inputting instruction one at a time
  by on-line data entry, Participant may use batch
  file containing a number of instructions and
  upload to the HKSCC host computer to save effort
• The batch file is a DOS file created according
  to a certain format stipulated by HKSCC.
• After uploading, CCASS will validate and
  processed the uploaded batch files upon receipt
  or at scheduled times

CCASS/3Terminal
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Straight through processing - C3T

• Input control report will be generated to
  indicate which records are rejected and give a
  summary of result for each validated batch file
• Batch upload function is suitable for
  participant with a high volume of instructions.
  Subscription to this service is not required.
• STP - Report Data Download
• Participant can download the CCASS reports in
  data file format and process the downloaded
  report files according to their own internal
  processing requirements
• Data file format are available for most of CCASS
  reports
• Participants may develop back office system to
  capture and process the data files to streamline
  their internal processing and avoid duplicating
  efforts in manually rekeying instructions into
  CCASS

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Straight through processing - PG

• Participants can connect their own back-office
  systems (Participant Supplied
• System, PSS) to CCASS through PG
• By integrating PSS to PG (via PG-API),
  participants can design their clearing
• and settlement back-end process and front-end
  user interface to meet their
• business and operational requirement
• PG is responsible for communicating with PSS but
  not further down to
• the other backend system

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Straight through processing - PG
Daily operation flow in PSS
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Straight through processing - PG

• PSS is the main initiator for both online and
  batch transactions. PSS can initiate
• business transaction, file upload, report /
  file download and receive broadcast message
• notification
• All transactions are based on the
  Request-Response processing, PSS will have to
  wait
• for the response from C/3 for every
  transaction sent. An end-to-end transaction is
• considered complete once the Txn-Response is
  received.
• Transactions input to the PSS can be routed to
  CCASS/3 directly, without the need to
• re-input to CCASS via C3T
• This facilitates straight through processing
  for improved operational efficiency and
• reduced risk

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CCASS Functions supported by PG
All functions supported by CCASS/3 via PG can be
categorised into 3 groups
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CCASS Functions supported by PG
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Q A