The pre-settlement matching system (PSMS) operated by Japanese CSD JASDEC for JGB transactions will cover only a quarter of transactions, says Citigroup Japan.
“The original aim of expanding eligible transactions of government debt securities to non-resident trades was to raise levels of automation,” explains a spokesman for Citigroup in Tokyo. “Presently, less than half of the major market players have decided to join, due to system development requirements with respect to the JGB central counter party (JGBCC) in the second quarter of this year and the JASDEC Fixed Income Book-Entry System scheduled for 2006. As a result, STP ratio gains are expected to be limited.”
The fourteen initial participants in PSMS for JGBs are Citibank, Barclays Capital, Nomura Securities, Bank of Tokyo-Mitsubishi, BNP Paribas Securities, Okasan Securities, Mizuho Corporate Bank, Daiwa Securities SMBC, SMBC Friend Securities, Standard Chartered Bank, Securities Agents Ltd, Tachibana Securities, UFJ Bank (to be merged to BTM) and Marusan Securities. Sumitomo Mitsui Banking Copmay (SMNBC ) and HSBC Japan are scheduled to be participants in the PSMS system, but will not join at the outset.
Only transactions settled between the initial fourteeen participants will benefit from PSMS. Other transactions will continue to be pre-matched manually over the telephone. Citibank estimates that just over a quarter of JGB transactions will be matched via the new system.
PSMS will be available for settlement of transactions in JGBs by non-resident investors from 14 February, following an expansion of the matching service to the JGB market by JASDEC. The change was reported to the JASDEC Board of Directors today.
PSMS will accept settlement instructions for non-resident transactions of Japanese Government Bonds (JGBs), Treasury Bills (TBs) and Financing Bills (FBs). To date, for government debt securities, the PSMS has only matched resident transactions.
Book-entry transfers will continue to be made via the BOJ-NET payments system.