The Tokyo Stock Exchange (TSE) is expanding the range of institutions eligible to settle trades in foreign stocks to include custodian banks, foreign securities companies and registration agencies that are not members of the exchange. The new regime will be effective from 1 October 2004.
Currently, settlement of foreign stocks listed on TSE is confined to securities companies that are members of the TSE, who can clear the trades through Japan Securities Settlement & Custody Inc. (JSCC). Under the new regime, custodian banks and others will be free to open accounts in JSCC, enabling book-entry transfer on behalf of their clients.
JSSC is a wholly owned subsidiary of TSE. Other than handling deposit, delivery and custody of domestic stocks on behalf of the CSD – the Japan Securities Depository Center (JASDEC) – it independently performs settlement and custody services for foreign stocks and publicly-issued bonds.
TSE says it believes the expansion of settlement participants will help expand participation of foreign institutional investors and increase foreign stock listings, especially by Asian issuers.
“BTM has started investigation on the requirements to open accounts at JSSC and other requirements to handle foreign stocks,” says a spokesman for Bank of Tokyo Mitsubishi in Tokyo. “It is important to note that simply establishing a BTM account at JSSC would not mean that custody services will be realized. Factors such as processing of corporate actions and other changes to the stock in the mother market, tax issues, need to be considered and prepared for.”