JASDEC, the Japanese CSD, will introduce delivery-against-payment (DvP) for non-exchange transactions on 17 May 2004. It is astonishing to think that a major market such as Japan still lacks DvP in any areas of clearing and settlement, and the authorities in Tokyo have come under pressure from the G30 and ISSA to introduce DvP.
A DVP system for exchange transactions was launched in May 2001 and is already in operation. The new system will apply a so-called gross-net method $B!G (B where transfer of stock certificates will carried out by transaction by transaction, but pay will be made on a net basis.
Settlements between the participants will be assumed by JASDEC DVP Clearing Corporation, a subsidiary of the CSD that acts as central counterparty. It will net transactions on a daily basis, and the CSD will settle securities by electronic book-entry and cash through client accounts at the Bank of Japan once a day.
Bank of Tokyo Mitsubishi warns that dvP may not be extended to settlement of shares with foreign ownership limits. “Shareholder rights to owners of such stocks cannot be fully protected unless special measures are implemented,” says a spokesman for the Japanese custodian bank. “This means it is highly probable that the DVP system for non-exchange traded deliveries cannot be utilized with these stocks, and therefore the current system of safekeeping and settlement with physical certificates must be used even after the launch of the system.”