Electronic Securities System (or securities dematerialization system) can be defined as a system by which the rights and the holder of rights can be administered by book entry, or registration, without involving physical certificates. The entity that is in charge of keeping the book, or register, can generally be referred to as central registrar (or central securities depository).
The rapidly evolving financial environment has motivated markets to focus their energy on developing more effective ways of securities administration and settlement. An Electronic Securities System is one of the most important elements in realizing STP.
KSD has recognized the importance of securities dematerialization, and has been making constant efforts to introduce the Electronic Securities System. KSD has taken steps to remove obstacles in moving towards dematerialization, and has achieved considerable level of collective deposit and immobilization of securities.
As a part of its efforts to create a certificate-less environment, the Securities Certificate Non-Bearing system which is based on Korean Commercial Code (1984) has been fully enforced through the KSD system.
In addition, the Public and Corporate Bond Registration system, which was introduced by the Public and Corporate Bond Registration Act in 1993, enables scripless issuance of debt instruments. Most bonds are currently issued without certificates, another step in the way towards the Electronic Securities System.
Electronic Short-Term Securities System
An electronic short-term securities is an instrument with a maturity of one year or less issued by corporations for the purpose of short-term funding, for which the issuance, circulation and corporate actions are processed electronically.
The Electronic Short-Term Securities System went live on January 15, 2013 with the issuance of Korea’s first electronic security (Korea Securities Finance Corporation CP KRW 10 billion). The system has its legal basis in the Act on the Issuance and Circulation of Electronic Short-Term Securities promulgated on July 14, 2011.
Issuance by electronic registration, circulation, and redemption can be processed on a delivery versus payment (DVP) basis, enabling intra-day funding and enhancing investor protection by blanket disclosure of issuance and circulation information through the registrar. Physical CPs will exist concurrently for the time being, but will be phased out in the future.
The Electronic Short-term Securities System marks an important step towards the realization of the Electronic Securities System, the full dematerialization of securities.