Settlement services – South Korea
Pre-matching service
The tables below summarise CBL’s pre-matching service for external settlement instructions, as well as the pre-matching method and start time in the market. For details of CBL’s pre-matching services, see Pre-matching services for external settlement instructions.
| Service offered | Method employed | Start (local time) |
| All securities | ||
Immediate Release Flag available | Automated matching | 10:30, SD-1 |
| Connectivity medium | Instruction format |
Xact Web Portal | Tick the box to enable the "Immediate Release" option. |
Xact via Swift and Xact File Transfer | Field :22F::STCO/CEDE/IREL |
Domestic allegement matching service
Where no pre-matching instruction has been sent to the market, CBL accepts allegements via its depository from domestic market counterparties. It will then use these allegement messages to search for the best matching client instruction.
If no matching client instruction is found, the allegement is reported to the client provided that its Clearstream Banking account number is present.
For details of CBL's domestic allegement service, see Pre-matching services for external settlement instructions.
Procedures for domestic counterparties
| Procedure for the domestic counterparty | Deadline | |
| KSD-eligible securities | ||
Clients delivering/receiving securities to/from the South Korean market must request their domestic counterparty to receive/deliver the securities from/to the account of the IRC holder or LEI holder with HSBC Seoul as follows:
| Market deadline | |
Note: Counterparties must quote the IRC number (6-digit IRC number) of the IRC holder, the LEI (20-character alpha-numeric code) of the LEI holder or the account number (002-nnnnnn-421, where nnnnnn is six digits) of the IRC/LEI holder with HSBC Seoul.
Allowed countervalue difference
A maximum difference in countervalue of USD 25 is allowed for matching and settlement of against payment transactions with domestic counterparties. In the event of a discrepancy within this limit, the amount to the delivering party will prevail.
Specific settlement rules / settlement restrictions
Against payment transactions with domestic counterparties in all eligible securities can only be effected in Korean Won (KRW). For eligible listed securities (excluding fixed income), against payment transactions with domestic counterparties can only be in amounts of up to KRW 10 billion. Such instructions that exceed the limit of KRW 10 billion shall be rejected by CBL. Impacted clients shall be informed of such rejections via Swift MT548 and expected to re-instruct in smaller amounts.
Note: For eligible listed securities (excluding fixed income), clients shall adhere to the above requirement to prevent potential compulsory partial settlement in the market. Clearstream Banking shall not be responsible for any loss, claim, liability and/or expense in relation to partial settlement in the market. Clients who do not adhere to the above requirement to prevent potential compulsory partial settlement in the market shall undertake to hold Clearstream Banking harmless and indemnify Clearstream Banking from any such loss, claim, liability and/or expense in relation to partial settlement in the market.
CBL clients must cover their receipt against payment instructions in USD as outlined in "Automatic conversion of KRW purchase and sale proceeds" (see below).
Clients are not allowed to instruct clean payments in KRW in favour of or from their CBL client account (that is, no instructions for the withdrawal, entry or transfer of funds in KRW are permitted).
Investor identification and account opening
To settle and safekeep South Korean securities, clients are requested to take note of the following requirements:
1. Obtention of a Legal Entity Identifier
Foreign investors (excluding individual investors) without an IRC number are required to obtain an LEI before investing in South Korean securities.
Exception: Foreign investors who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
2. Account opening requirements
Clients of Clearstream Banking who wish to hold South Korean securities must open the related sub-account in HSBC’s books. The LEI and underlying safekeeping account are used in all trading, settlement and reporting activities.
Note: Account opening for beneficial owners that are individuals will not be accepted. Clients should note that access to this market is subject to conditions and criteria which will be assessed on a case-by-case basis. Please contact your Relationship Manager to confirm or make the necessary arrangement, in case of doubt. Clearstream Banking reserves the right to revoke a client’s access to the market in the event that such conditions and criteria are not fulfilled.
Exception: Foreign investors who already have an IRC number must continue to use this number to open the related sub-account in HSBC’s books. In this case, the IRC number and underlying safekeeping account are used in all trading, settlement and reporting activities.
Documents must be submitted in English and all appendices to be completed must be printed on the applicant’s letterhead.
The following is required from the CBL client to open the related sub-account in HSBC’s books:
Note: For versions of the below-mentioned forms, see Forms for use in the South Korea market.
- The required Information/Acknowledgment of the foreign investor for account opening;
- A Power of Attorney signed by the investor (or by its mandated representative) appointing HSBC as Standing Proxy. If the Power of Attorney is signed by a mandated representative, it must be accompanied by a copy of the document that authorises the representative to sign the Power of Attorney on behalf of the investor. The Power of Attorney must be notarised by a public notary;
- A Consent to Provision of Financial Transaction Information signed by the investor;
- An Identification of Beneficial Owner signed by the investor.
Note: The Information/Acknowledgement of the foreign investor for the account opening, Power of Attorney, Consent letter and Identification of Beneficial Owner must be signed by the same person(s).
- A copy of the supporting document – e.g. certificate of incorporation (COI), trade registry extract or official filing – submitted at the time of LEI application or official documents (e.g. COI and/or equivalent documents) issued within one year by government institutions, which prove the legal existence of the investor, exact name of the LEI, establishment date and business classification of the investor. The copy of the document must be a certified true copy and notarised by a notary public in the same jurisdiction that the document is issued.
Note: No supporting document is required when using an existing IRC number to open the related sub-account in HSBC’s books.
If the investor is not a direct Clearstream Banking client, the client must provide the duly signed “Contact Confirmation Letter”.
Clients must submit the above-mentioned forms and supporting documents via Clearstream Banking and address them to:
Clearstream Banking S.A. Singapore Branch
Settlement Operations
9, Raffles Place
#55-01 Republic Plaza
Singapore 048619
Additionally, clients must send a Swift MT599 free-format message with the following details to:
QUOTE
Attn: Settlement Singapore
Kindly assist to open securities and KRW/USD cash accounts with HSBC Limited, Seoul Branch for the below client:
CBL Account Number:
UBO Name:<insert name of UBO as per existing IRC or registered LEI>
IRC Number: <insert existing IRC number, if applicable>; or
Legal Entity Identifier: <insert UBO LEI, if there is no existing IRC number>
UNQUOTE
The account opening process will generally take up to six business days after the CBL client has provided the relevant information.
If the application is satisfactory, HSBC will open in their books one Korean Won (KRW) cash account exclusively for securities investment, one USD cash account exclusively for securities investment and one safekeeping account in the name of the applicant. CBL will communicate the underlying accounts to the CBL client. The client’s account in CBL will not be eligible to invest in South Korean securities before opening the relevant cash and safekeeping accounts exclusively for securities investment with HSBC.
The safekeeping account must always be mentioned in the client settlement instructions so that it can be transmitted to HSBC.
Clients are liable for the usage of any safekeeping accounts obtained through CBL and HSBC. Clearstream Banking shall bear no responsibility for any illegitimate or erroneous use – for any trading or other purpose – of such safekeeping accounts. CBL does not validate whether the safekeeping accounts that clients use in their settlement instructions sent to CBL represent the legitimate investor who ordered the underlying transaction. Clearstream Banking shall therefore not be responsible if a client uses a safekeeping account belonging to an investor other than the investor on whose behalf the relating transaction has been or was deemed to be executed or settled.
Settlement restrictions
Against payment transactions in all eligible South Korean securities with domestic counterparties can only be effected in KRW.
Prefunding for purchase of stocks that are designated as "investment warning issue / investment danger issue"
Clients that intend to purchase equities that are categorised by the Korea Exchange (KRX) as "investment warning issue" or " investment danger issue" have to follow special processing rules. Prior to placing the purchase order for such shares, the complete settlement amount must be 100% prefunded in the same way as an "entrusted guarantee fund" with the broker. Such transactions cannot be settled in the DVP environment.
The settlement process is as follows:
- Cash
Clients are requested to provide a payment and foreign exchange order via MT599 or other authenticated communications medium, marked "Attn. PPC". The payment order must state the following:- “The payment is related to the entrusted guarantee fund monies for PURCHASE of xxx” (where xxx is the name of the security);
- Name of the broker;
- Payment date;
- KRW amount to be paid to the broker;
- Number of the client account with HSBC Seoul;
- “FX order: Purchase KRW against USD”.
- Settlement
To receive the purchased stock, clients are requested to send an RFOP (receipt free of payment) instruction and include in the narrative field: "Entrusted guarantee funds have been paid".
The deadline is 20:30 (CET) on SD-1.
NCBO transfers
Clients that want to make NCBO transfers between their own accounts, either internally or externally, on the South Korean market should include the words “Account Transfer” in the Settlement Processing Narrative field of their settlement instructions.
Automatic conversion of KRW purchase and sale proceeds
KRW can be purchased without any restriction. The following process will apply as indicated below with regard to client instructions for purchase and sale of securities.
Note: For more details on the related Swift reporting mentioned in the table below, please refer to the Xact via Swift User Guide.
Purchase of securities – receipt versus payment (funding/provisioning) | |
SD-2: | Client instructions sent to CBL (please refer to Settlement times – South Korea). |
SD-2 or SD-1: | Funding/provisioning Clients must ensure that their account is provisioned with the requested amount in USD, that is, the equivalent to the KRW amount in USD plus a 5% buffer and an additional amount of USD 25 representing the allowed countervalue difference, that is, the market cash tolerance. Example: If the settlement amount is KRW 10,000,000 and the exchange rate is KRW 1 = USD 0.00086, the client must ensure that their account is provisioned for USD 8,600 + 5% (USD 430) + USD 25 = USD 9,055. Alternatively, the credit line is used if available. Successful reservation in USD, which is based on a temporary foreign exchange (FX) rate, is notified via a payment free of delivery instruction (MT545 – :22F::STCO/CEDE/RESA) and a simultaneous credit in KRW is posted on the client’s account via a payment free of delivery instruction (MT547 – :22F::STCO/CEDE/RESA). Note: CBL reserves the right to amend and update the buffer from time to time, to reflect market conditions. It is also the responsibility of clients to ensure the timely availability and coverage of their accounts with USD, as appropriate. |
SD: | Upon receipt of the settlement confirmation (MT545) from the depository, CBL will:
|
Sale of securities – delivery versus payment (repatriation) | |
SD-2: | Client instructions sent to CBL (please refer to Settlement times – South Korea). |
SD:a | The depository:
CBL:
|
a. If SD is a business day in New York, sales proceeds will be converted and remitted on SD; otherwise, the funds will be remitted on the next available New York business day.
Management of failed instructions
Under FSS regulations, trades must be settled in the appropriate market (KRX or KOSDAQ) by SD on T+2.
The FSS has stated that foreign investors that have not settled trades, including any buy-in/sell-out requirements, by SD+4 (T+6) may be suspended or have their investment registration cancelled.
New issues settlement
Settlement of shares that are received from an Initial Public Offering (IPO) does not occur in an RVP environment, because the cash payment date usually comes after the subscription date (i.e. 3-5 days after the subscription date). Therefore, clients that intend to subscribe for such shares and settle the transaction via Clearstream Banking must take the following steps:
- Securities settlement
Clients shall send a MT540 (receive free of payment settlement instruction) with “Immediate Release” flag by 19:00 CET by subscription date -2. - Cash settlement
Clients shall send the Swift MT599 FX order below, where VD = FX value date. This is to ensure that cash payment to the broker can be executed on VD+1.
ATTN: PPC
FX ORDER: PURCHASE KRW AGAINST USD
FX VALUE DATE:
STOCK NAME AND ISIN:
NUMBER OF CLIENT’S SECURITY ACCOUNT WITH HSBC SEOUL:
NUMBER OF SUBSCRIBED SHARES:
CASH AMOUNT IN KRW:
NAME OF THE DESIGNATED LOCAL BROKER:
BIC (if available) OF FINAL BENEFICIARY (BROKER):
ACCOUNT NUMBER OF FINAL BENEFICIARY (BROKER) (if available):
VALUE DATE FOR CASH PAYMENT:
PLEASE PROCESS THE FX AND MAKE THE CASH PAYMENT TO THE BROKER WITH THE ABOVE DETAILS.
Note: Clients must ensure that their account is provisioned with the requested amount in USD, that is, the equivalent to the KRW amount in USD plus a 5% buffer and an additional amount of USD 25 representing the allowed countervalue difference, that is, the market cash tolerance. For example, if the settlement amount is KRW 10,000,000 and the exchange rate is KRW 1 = USD 0.00086, the client must ensure that their account is provisioned for USD 8,600 + 5% (USD 430) + USD 25 = USD 9,055.
CBL reserves the right to amend and update the buffer from time to time, to reflect market conditions. It is also the responsibility of clients to ensure the timely availability and coverage of their cash account with USD, as appropriate.