The Bank of Japan (BoJ) has published on its website a document entitled 2009 Payment and Settlement Systems Report, which gives an outline of trends relating to the settlement system in Japan and considers what the important issues will be from now. The report largely focuses on the period between autumn 2008 and autumn 2009.
Please refer to the below for a summary of the main points in the report that are relevant to progress in securities settlement reform.
Improvement in safety of system
The report summarizes the effect on the system of the bankruptcy of Lehman Brothers in September 2008 and singles out the following three actions that are being initiated to apply the lessons learnt from the experience:
1.Improvement in the capabilities of clearing institutions.
2.Shortening of settlement interval for JGBs: The report describes the working group that has been set up to look into the situation (headed by the Japan Securities Dealers Association [JSDA]) and states that the group is currently making progress with its studies. It also states that the BOJ aims to do what it can to support such efforts. The report includes a diagram illustrating how settlement risk for JGBs could be mitigated by switching to a T+1 cycle from the current T+3 cycle.
3.A review of market practice with regard to fails: The report describes the working group that has been set up to look into matters such as the introduction of a fail charge and states that it is currently making progress in its studies.
D.C.