STP in Interbank bond market China Government Securities

STP in Inter-bank bond market , China Government Securities Depository Trust & Clearing CO. , LTD June, 2008 Indonesia 1

Contents 1. Introduction 2. STP in China 3. Development Objectives 2

1. Introduction 1. 1 The Business Scope of CDC 1. 2 The Inter-bank bond market of China consists “Trading System” of “China Foreign Exchange Trade System (CFETS)” and “Central Bond Book-entry System (CBBS)” of CDC. 3

1. 1 The Business Scope of CDC ● Registration, depository, settlement and principal redemption/interest payment agency services for government bonds, financial debentures, corporate bonds and other fixed-income securities ● Technical support for the Open Market Operation system and the bond issuing system of People's Bank of China. ● Registration, depository and settlement services for bond funds and money market funds. ● Information consultant and internet services for bond market and money market. ● Research, consultant service, training and media for bond market and money market. ● Depository and cross-border settlement for fixed-income securities of foreign currency, and services for related settlement and international business. ● Supervision over sub-depository of securities by approved of authorities. ● Other business approved by People's Bank of China and Ministry of Finance. 4

1. 2 CFETS and CBBS Trading System of China Foreign Exchange Trade System All client make their trading on this system. The trading data has been packed and then sent to booking system in every ten minutes. Central Bond Book-entry System Checked trading data on Booking system. Feedback from booking system. 5

2. STP in China 2. 1 In order to minimize settlement risk, the settlement and clearing to occur simultaneously, the straight-through processing of data processing (Straight Through Processing, STP) has been widely used in the financial markets. 2. 2 From 2004, PBOC start to cooperate between “trading system” and “booking system”. 2. 3 Oct 8, 2005, an union network has been implemented in Inter-bank bond market. 6

Flow Chart 7

• The advantage of STP in Chinese Inter-bank bond market —— The efficiency of clearing has been dynamically improved. —— lower cost —— higher operational speed —— The “end to end” transaction, it will minimize the entire trading risk and prevent technique and human-been mistakes. 8

Market Overview Year Spot trading Repo trading Collateral repo trading Forward Transactio ns Par Value (100, 000 RMB) Transaction s Par Value (100, 00 0 RMB) Transactio ns Par Value (100, 000, 000 RMB) 2005 13863 18300 10162 35300 480 800 21 60 2006 79780 102500 68217 268200 1745 2900 381 760 2007 80618 161800 89515 452400 3507 7300 1267 2530 9

3. Development Objectives 3. 1 Strengthen laws and regulations 3. 2 An union platform will be created between trading system and booking system without human been activities in middle ware. Eg. Currently, all client need to recheck on booking system. 3. 3 Some standard and global rules will be published for trading data. 3. 4 An universal system will be gradually established in Inter-bank bond market. 10

Thanks! 11

Contact us: Zhang WEI jessica 19810311@163. com 8610 88086310 Fu Ying fy@chinabond. com. cn 8610 8807975 12