Straight Through Processing Straight Through Processing (STP)(STP)

Development Concept & RoadmapDevelopment Concept & Roadmap

Indonesian Central Securities Depository (KSEI)Indonesian Central Securities Depository (KSEI)

Indonesian Central Counterparty (KPEI)Indonesian Central Counterparty (KPEI)

2

AGENDAAGENDA

STP Background1

Business Process Identification2

KSEI & KPEI Initiatives 3

3

Ready to HandleMarket Growth

Ready to HandleMarket Growth

BACKGROUNDBACKGROUND

IncreaseTransaction

(Volume, Value, Frequency)

Various Products:Equity, Fixed Income,

DerivativesSocialization/

Education

Global Trend :- Floor to remote to online trading-Direct Market Access (DMA) through Securities Companies-Cross border (cross listing, cross member, cross trading, cross clearing, cross settlement)

Volume Increase:Scripless

Complexity of Trade/Settlement

Processing

Issuer Growth

• Capacity Building •Market Infrastructure

STP Development

Business process improvement :- Business orientation & efficiency- Trading, clearing, & settlement mechanismRisk Management Improvement :- Effective Surveillance/Monitoring- Excellent/prudent business operation

Funding Issues- Funding cost (turn around transaction) Inefficiency

Risk Issues :- Operational Risk- Back office processing (confirmation /affirmation & Trade Allocation)- Surveillance/Monitoring

Challenges :

InvestorGrowth

BENEFITBENEFIT

1. Improve process capacity.

2. Reduce input redundancies and manual intervention.

3. Improve transparency.

4. Provide better management with systematic audit trail.

5. Minimize risk and reduce errors.

6. Increase speed of data processing, withdrawal and generating reports.

7. Improve overall efficiency such as funding cash.

5

S T PRegistration,AdministrationOf Investor

Order MatchingConfirmation/Affirmation

Validation Clearing Settlement

Registration/administration of Client Investor is conducted by each EM

Client Investor Identity distributed to every EM

Implementation of ‘Master Client ID’

Manual Transaction Order

Development of Remote & On Line Trading

Trading Limit (batch, upload/download, multiproduct yet).

Risk Management System Enhancement

Order Pre-validation (gross).

Integrated & Multiproduct Trading System.

Different Trading platforms

Automatic allocation, confirmation/ affirmation

Existing manual confirmation/ affirmation

CB as settlement agent & CM Stratification.

Existing Funding Cost

OTC Transaction /instruction still difficult to monitor

Real-time interface for EM & CB

manual entry/ upload for settlement instruction

‘Investor Area’ Development

Business Process IdentificationBusiness Process Identification

Note: CM = Clearing MemberEM = Exchange MemberCB = Custodian Bank

6

BUILDING BLOCKSBUILDING BLOCKS

STPSTPSTPSTP

Client IDInvestor Area

Client IDInvestor Area

Integrated Network &

BCP

Integrated Network &

BCP

Information & Corporate

Action

Information & Corporate

Action

Membership StratificationMembership Stratification

EnhancementRisk MgtSystem

EnhancementRisk MgtSystem

Real-time Interface

Real-time Interface

Single TradingPlatform

Single TradingPlatform

Settlement Agent

Settlement Agent

OTCPre-matching

OTCPre-matching

10

Master Client ID & Client IDMaster Client ID & Client ID

K

P

E

I

1

2

Client ID

Settlement Account

Collateral Account

5

6

Client ID

Stock Exchange

7

8K

S

E

I

Master Client ID

Client ID

Settlement Account

Collateral Account

3

4

Sub Account

Client Investor Client ID

SX Member

Client ID

11

Custodian Bank as Custodian Bank as Settlement AgentSettlement Agent

SX Member

Client Investor

K

P

E

I

K

S

E

I

1

Master Client ID

Client ID

2

Settlement Account

Risk Mng. Account

3Client ID

Settlement Account

Risk Mng. Account

4

5

6

Client ID

7 8

Custodian Bank

Settl. Agent Account

Settl. Agent Account

9

10

11

Sub Account

Client ID

Stock Exchange

12

ExExampleample of of STP Impact STP Impact –– Reduce Funding CashReduce Funding Cash

Funding CashFunding Cash

KPEI

CB

bCash a Securities

Custodian Bank asSettlement Agent

Custodian Bank asSettlement Agent

CM

KPEI

CB

BANK 1

2

bFundingCash

a Collateral

cCash

d Securities

3

e Securities

fCash

OTC