Partner KPEI Securities Borrowing & Lending 8 th Asia-Pacific Central Securities Depository Group...
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Transcript of Partner KPEI Securities Borrowing & Lending 8 th Asia-Pacific Central Securities Depository Group...
Partner
KPEI Securities Borrowing & KPEI Securities Borrowing & LendingLending
88thth Asia-Pacific Central Securities Depository Asia-Pacific Central Securities Depository Group Group Cross Training Seminar Cross Training Seminar
June 27June 27thth – 28 – 28th,th, 2006, Bangkok 2006, Bangkok
Antonius H. Antonius H. AzwarAzwar
Role of KPEIRole of KPEI KPEI SBLKPEI SBL Tax ImplicationTax Implication StatisticsStatistics IssuesIssues
ObjectivesObjectives
88thth ACG Cross Training Seminar ACG Cross Training Seminar
June 27June 27thth – 28 – 28th,th, 2006, Bangkok 2006, Bangkok
Performs Clearing and Performs Clearing and Guarantee of securities Guarantee of securities transaction settlement:transaction settlement:• As Central CounterpartyAs Central Counterparty
• Central SBL ServiceCentral SBL Service• Managing the Managing the
Guarantee Guarantee FundFund
EXCHANGES
KPEI/CCPKPEI/CCP
KSEI/CD
Performs Securities Transactions
Performs Central Custodian & Depository
The Functional Relationship & The Functional Relationship & The Role of KPEI
KPEI SBLKPEI SBL
To avoid settlement failure
To cover or to settle a short trading position/margin trading (Strategic Trading)
Clearing Member financing of stock exchange trade settlement for its Client (Securities Financing)
PurposesPurposes
Market PlayersMarket Players
KPEI KPEI as Intermediary/Principal and Guarantor
Lenders:Lenders: Institutional or individual investors through Clearing Member and Custodian Bank.
Borrowers:Borrowers: All investors participating through Clearing Member only.
Client
Client
Client
LenderCM/CB
LenderCM/CB
BorrowerCM
Client
BorrowerCM
BorrowerCM
Client
Client
KPEI
KPEI SLB SchemeKPEI SLB Scheme
--------------Scope of KPEI SLB Scope of KPEI SLB Agreement-Agreement-----------
Borrower
NOVATIENOVATIE
Borrower Lender
WHY?
WHY
Lender
KPEI
KPEI
Orderly function Guaranteed intermediation Management service:
System supportCollateral managementDefault HandlingEntitlement processingFee management
Why Why KPEI ?KPEI ?
4 days (Exchange Day)Recall Period
125 %NRC (Non Reimbursement Compensation)
12% p.aLending Revenue rate
IDR 20.000 Borrowing Instruction Fees
Borrowing fee x 1 dayMin Borrowing fee
15% p.aBorrowing Fee rate
1 day (Exchange Day)Min Loan Period
Cash, Stocks, Bank Guarantee, Deposit, Bonds
Type of Collateral
125 %Collateral
Parameter
Max Loan Period 90 days (Exchange Day)
ParameterParameter
Tax ImplicationTax Implication Approved by tax authority Jan ‘06Approved by tax authority Jan ‘06
FeeFee
Borrower KPEI
Fee = Y
KPEI SBL System
Lender
Borrowing Fee = X%
LenderFee = Z
No income tax Income tax
Lending revenue = X% - ZNo income tax
Investor
“No levy of Income Tax as intended under Chapter 23 is imposed upon remuneration for Securities Lending and Borrowing receivables paid by the Borrower to KPEI, part of which is intended for pass-through to the Lender”.
“Upon remuneration for lending and borrowing service paid to the ultimate lender client investor by a Stock Exchange Member and/or a Custodian Bank acting as mediator of Lender, which is deemed to be the equivalent of lease, and other income originating from sources pertaining to the utilization of wealth, Income Tax Deduction as intended under Chapter 23 of 15% (fifteen percent) against the projected net income of 40% of bruto income is imposed or as intended under Chapter 26 Income Tax a tariff of 20% is imposed or deducted in accordance with provisions under the Multiple Taxation Avoidance Agreement”.
Borrowing Fee = X%
Borrower
KPEI
Cash Dividen= X%
KPEI SLB System
Lender
Cash Dividen= X%
Issuer viaPayment Agent
Investor
Cash Dividen = X%
Cash Dividen= X%,
(income tax)
No Income tax No Income taxNo Income
tax
Manufactured Dividend
Cash Dividen= X%
No levy of Income Tax as intended under Chapter 23 is imposed upon Dividend Replacement paid by the Borrower, whether originating from the Issuer or its own account, to KPEI for further pass-through to the Lender.
Borrower KPEI
Pass-through
KPEI SLB System
LenderFail to reimburse Penalty = NRC NRC
Investor
No Income taxNo income tax
Exchange trade
Final Income tax = 0,1% NRC value
NRC
NRC
NRC (Non Reimbursement Compensation)
“KPEI, in its capacity as organizer of the stock exchange, is obligated to deduct Income Tax that is final in the amount of 0.1% (zero point one percent) against the value of Non Reimbursement Compensation paid to the Lender due to the inability of the Borrower to make reimbursement for borrowed Securities. This is due to the consideration that a default in a Securities Lending and Borrowing Transaction is deemed to be the equivalent of a Shares Buying Transaction”.
KPEI SLB Transaction 2004-2006
05,000,000
10,000,00015,000,000
20,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,00055,000,00060,000,00065,000,00070,000,00075,000,00080,000,00085,000,00090,000,00095,000,000
1st Q2nd Q3rd Q 1st Q2nd Q3rd Q Jan Feb Mar Apr May
2004
Volume Unit
0
25,000,000,000
50,000,000,000
75,000,000,000
100,000,000,000
125,000,000,000
150,000,000,000
175,000,000,000
200,000,000,000
225,000,000,000
250,000,000,000
275,000,000,000
300,000,000,000
325,000,000,000
350,000,000,000
2005 2006
Value IDR
Volume
value
S t a t i s t i cS t a t i s t i c
Updated to June 22th, 2006
06’ Total Loan value: Rp. 988,190,617,500 .- Daily average: Rp. 5,551,632,682.-Total Volume: 330, 555,500 unit shares
S t a t i s t i cS t a t i s t i c
Eligible Stock and Membership
05
1015
20253035404550556065707580859095
100
2001-03 2004 2005 2006
Members
05101520253035404550556065707580859095100
Stocks
Member Stock
Eligible Stocks Eligible Stocks
: 84Active Eligible Stock: 70
Members Members : 83 (Brokers + Custodian Bank)Active Members : 39
Improve regulated short selling• Improve the regulation of short selling• Lift ban on regulation of selected shares for regulated short selling• Coordinate with SX and Bapepam (SEC) for surveillance and
enforcement of regulated short selling transaction
Implementation new module:• Substitution Loan, Automatic SBL, Automatic Roll over• Develop different market for SLB (Fixed Term)
Sustainability & stability of supply and demand (Visit directly to member/”marketing program”)
Develop comprehensive KPEI SBL Website for information and order facility
Market education
On Progress AgendaOn Progress Agenda
Current Issues & ObstaclesCurrent Issues & Obstacles
Insufficient pool of Lendable Stocks Membership only consists of brokers (Securities company)Bapepam/SEC has recently permitted Custodian Bank only as a
Lender
Pension and Mutual Funds lending prohibition
Grey area of Short Selling Regulation
Product knowledge = Additional Education Is RequiredAdditional Education Is Required :
Product it self Myths & Misconceptions:
SBL Creates Negative Market Conditions Conflict of Interest for Fund Managers Stock Lending and Short Selling are Bad for the Market
Thank YouThank YouContact:Contact:[email protected]@kpei.co.idP: 62-21-52995631P: 62-21-52995631