KSD Signs Securities-Backed Loan Agreement with KSFC
On September 28, Korea Securities Depository (KSD) announced that it has entered into a securities-backed loan agreement with Korea Securities Finance Corporation (KSFC) to promptly provide liquidity in the event of settlement failures by stock settlement participants, with a facility size of up to KRW 1 trillion.
KSD acts as the clearing and settlement institution for the settlement process between securities companies and their clients (institutional investors and foreigners) arising from listed securities brokerage transactions. In the event of a participant's settlement failure, KSD provides settlement funds to complete the transaction. KSFC, as a capital supplier for the securities market, will supply liquidity of up to KRW 1 trillion to KSD by using participants’ deposited securities as collateral upon request in connection with settlement failures. In April, KSD had already taken technical measures to reduce the liquidity burden on foreign financial institutions and ease the requirements for settlement facilitation funds, in order to improve foreign investors’ access to Korea’s securities markets.
This agreement follows the government agencies’ joint ‘MSCI Developed Markets Index Inclusion Task Force Meeting’ held in August, and was promoted to expand the settlement fund as part of structural reforms to the settlement facilitation fund requirements. Beginning on September 29, the ‘securities payment system for settlement facilitation funds’ will be implemented to allow payment of the facilitation fund not only in cash but also in securities, with further structural reforms planned for the fourth quarter of this year.
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KSD stated, “Through the expansion of settlement funds and system improvements in partnership with KSFC, the liquidity burden for securities settlements will be alleviated, and foreign investors’ access to Korea’s securities markets is expected to be significantly improved.”
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