Products/Services _ Settlement & Depository
Settlement and Depository
LSX depository was established by the PM(Prime Minister)'s decree and strongly supervised and regulated by SEC. The depository is in charge of wide range of securities related matters such as clearing, settlement, depository and transfer agent services. LSX is the sole central depository center in Lao PDR.
  • Clearing & settlement Regulation
  • Depository Regulation
  • Securities Transfer Agent Regulation
  • What is clearing?
    A series of processes that a Central Counter-party (CCP) performs to guarantee the settlement by netting the credits and liabilities between the sellers and the buyers and instruct the settlement agency to settle
    * Trade Comparison
    The comparison is a legal action in which traders compare trading conditions with trade details. It is done by Clearing Houses for an organized market and by Settlement Institutions for OTC.
       * Settled unless cancelled by trading parties
       * High credibility of market participants and reduction in costs & efforts

    * Netting
    Netting is the process of reducing multiple credit/ debit obligations among multiple traders to several credit/ debit obligations. Through netting, LSX fixes the final settlement size. After netting, original credit or debit obligations are replaced with a single credit or debit obligation.
  • What is settlement?
    • Settlement is the completion of a transaction, wherein the seller transfers securities or financial instruments to the buyer and the buyer transfers money to the seller.

      LSX Settlement Characteristics are:
      • Settlement Method : DVP/ DNS / Rolling Settlement
      • Settlement Time : 14:00 PM, T+2
      • Settlement Bank : BOL
      • Correspondent Bank : Commercial Bank
    • * Delivery and Acceptance of Securities
      Concerned securities company subtract respective investor’s sell from buy quantities among 1) securities company (sell side; investor) and LSX, 2) LSX and securities company (buy side; Investor) through account substitution process(book-entry)

      * Cash Delivery and Cash Acceptance
      Concerned securities company subtract respective investor’s buy and sell payment amount among 1) securities company (buy side; investor) and LSX, 2) LSX and securities company (sell side; Investor) through fund(money) transfer via settlement bank(BOL)
  • What is depository?
    • Depository acts as an organization holding securities either in certificated or uncertificated (dematerialized) form, to enable book-entry transfer of securities. LSX will provide a safe keeping in form of scripless as well as book-entry system where investors can enjoy their trading.
  • What is transfer agent service?
    • Public companies typically use transfer agents to keep track of the individuals and entities that own their stocks and bonds. They entrust transfer agent as an agency to handle with corporate actions. LSX provides transfer agent services to a corporation by three following categories:
    • Transfer of Title:
      • Manage shareholders’ book & bondholders’ book
      • Establish/Cancel pledge
      • Notify shareholders of corporate actions
      • Administer matters associated with destroyed, lost, or stolen securities
    • Paying Agent:
      • Calculate and Pay (dividends, bond principal, and interest)
      • Notify shareholders of new issues, dividends payments, and general meetings of shareholders
      • Other services accompanied by the above
    • Issuing Agent:
      • Consulting companies on securities issuance
      • Custody for securities certificate forms
  • What is corporate action?
    • An action or event decided by the issuer of securities which has an impact on the holders of that security. This may be optional, in which case those holders have a choice (for example, they may have the right to purchase more shares, subject to conditions specified by the issuer). Alternatively, it may be mandatory, whereby those holders have no choice (e.g. in the case of a dividend payment or stock split). Corporate actions can relate to cash payments (e.g. dividends or bonuses) or the registration of rights (subscription rights, partial rights, splits, mergers, etc.)

  * For issuers
  * For participants

  • Central counterparty (CCP): is an entity that interposes itself between counterparties to the contracts traded, in one or more markets, becoming the buyer to every seller and the seller to every buyer and thereby guaranteeing the performance of open contracts.
  • Clearing: is the process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and the establishment of final positions for settlement. Sometimes this term is also used (imprecisely) to cover settlement. For the clearing of futures and options, this term also refers to the daily balancing of profits and losses and the daily calculation of collateral requirements.
  • Netting: in the context of clearing or settlement systems means the agreed offsetting of mutual obligations by participants in a system. This process involves the calculation of net settlement positions and their legal reduction to a (bilateral or multilateral) net amount.

    • Netting may take several legal forms.
      • Multilateral netting: an arrangement among three or more parties for the netting of obligations and the settling of multilateral net settlement positions. Regular exchange market.
      • Bilateral netting: an arrangement whereby two parties net their bilateral obligations. OTC market. CCP vs. member
  • Delivery versus payment (DVP): A securities settlement mechanism which links a securities transfer and a funds transfer in such a way as to ensure that delivery occurs if - and only if - the corresponding payment occurs. No principal risk does not exist.
  • Book-entry system: A system which enables transfers of securities and other financial assets which do not involve the physical movement of paper documents or certificates (e.g. the electronic transfer of securities).
  • OTC (over-the-counter) trading: A method of trading that does not involve a regulated market. In OTC markets, participants trade directly with each other, typically through telephone or computer links.
  • Matching: The process used for comparing the trade or settlement details provided by parties in order to ensure that they agree on the terms of the transaction.
  • Settlement method
    Settlement can be gross or net, and conducted in real time or at designated times

    • Gross vs net settlement
      • In gross settlement, each payment instruction is passed on and settled individually across the accounts of the paying and receiving banks, resulting in a debit and credit entry for each and every payment instruction settled.
      • In net settlement, payment instructions are netted in accordance with the rules and procedures of the system, and the number of resulting bilateral or multilateralnet claims is smaller than the number of original payment instructions.
    • Real-time vs. designated-time settlement
      • Real-time settlement occurs on a continuous basis during the operational day.
      • Designated-time settlement occurs at pre-specified points in time, ranging from a single settlement cycle at the end of the day to frequent settlement cycles during the day.