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Clearing and settlement

Summary

The operational flow of securities trading is composed of three functions; 'market,' 'clearing' and 'settlement.'

In Japan, six stock exchanges, including FSE, fulfill the major role of market function. The clearing operation, formerly conducted by each exchange, is now integrated into the Japan Securities Clearing Corporation (JSCC), to which clearing of trading by the six exchanges is entrusted, for securities traded in these markets.

The settlement operation of JSCC-cleared trading is managed by the following organizations.

  • Stocks and CBs: Japan Securities Depository Center, Inc. (JASDEC)
  • Japanese government bonds: The Bank of Japan
  • Funds: The Bank of Japan or JSCC-designated commercial banks as fund settling banks
Relationship among trading, clearing and settlement organizations
Dematerialization of book-entry settlement
The Japan Securities Depository Center, Inc., or JASDEC, is the official organization for book-entry settlement, established pursuant to the "Act on Book-Entry Transfer of Company Bonds, Shares, etc." This organization facilitates the handling of a wide range of securities in electronic form, including all domestic listed stocks, and manages occurrence, changes and extinction of shareholders rights in JASDEC accounts held by clearing participants.
JASDEC electronically handles stocks listed on Japanese financial instrument exchanges, warrants, CBs, preferred subscription certificates, investment certificates, investment trust certificates and other equivalent securities, in accordance with the consent of issuers.