Research On The Assets Depository And Settlement Model Of The Stock Market

China's stock market is currently in an emerging and transitional stage where assets depository and settlement model, as a basic system of stock market, face the urgent need for change. This essay takes the assets depository and settlement model of the stock market as the research objects. It not only comparatively analyzes the characteristics of assets depository and settlement model in major international stock markets but also discuss the influences of them on stock markets'operational safety and efficiency in a macro-level. It therefore comes up with the assets depository and settlement model which are suitable for the development features of the China's stock market. This study not only builds an analytical framework of assets depository and settlement model evaluation, but also provides the relevant reference for follow-up studies of related aspects. Full-text is divided into six chapters and a total of more than 140,000 words.Chapter 1 The economic-relation analysis of Security Holding System (SHS)。This chapter addresses the meaning, attribute and types of SHS from its economic characteristic, and analyze from the economic and regulatory points of views the fundamental economic-relation among stock markets'participants under different SHS. The main content includes the following 4 aspects:(1) The analysis of the types of the SHS. SHS can be divided through different angles. From the security registration point of view, it can be classified as direct and indirect security holding; from the security depository point of view, it can be classified as transparent and non-transparent security holding. (2) The comparison of economic characteristics of SHS. Under the direct security holding circumstance, stock holder's security is registered under his/her personal nominal account. The ownership is clear and the interest of the security is complete and traceable; while under the indirect security holding circumstance, the security held by the stock owner is registered under the nominal holder and thus the rights entitled are indirect. Compared to direct security holding, indirect security holding has considerable advantage in reducing market operating cost and improving market efficiency, but has the shortage of asset safety for the investors. (3) The analysis of economic-relation of SHS. The stock market is a collection of complex relations and the straightest way to analyze the aspects of economic-relation from stock market's participatory parties is to look at the contractual relationship during transaction. The most important relation is the relation among investors, security intermediaries, and depository and settlement agencies as well as the security intermediaries and depository and settlement agencies. There is no direct economic relationship between investors and depository and settlement agencies. The relationship between investors and security intermediaries is depository relationship, but the relation between security intermediaries and depository and settlement agencies is only acting settlement relation. (4) The international legislation progress of SHS. In order to unify the substantive legal norms of SHS, reduce the legal risk of cross-border security transactions, improve the expected degree of investors'transaction, protect the interest of market participants and ensure the safety operation of financial system as well as improve the efficiency of cross-border security transactions, the international organization are actively advocating the establishment of unified legal norms for international SHS. The most representative one is the"substantive legal Convention of intermediary holding securities", which is constituted by International Unification and Private Legal Association.Chapter 2 Research on Client Fund Depository Model (CFDM).This chapter studies the concrete form, depository method and management model of the client fund in foreign stock markets and analyzes the basic characteristics of the CFDM. From the safety and operating efficiency point of view, it also analyzes the history, mechanism and problems of CFDM. The content includes the following 4 aspects: (1) The CFDM in foreign major stock markets has three types: security intermediary depository, third-party depository and mixed depository. CFDM has inherent logical relation with the security intermediary's financing direction, and has close relation with security depository and settlement model. The depository and settlement model of security intermediary is the development direction of CFDM. CFDM is executed in the countries and regions under the precondition that fund safety and market efficiency are balanced, market credit system is relatively sound, market efficiency is emphasized and client need is satisfied. On the other hand, in the countries and regions where market credit system is not sound and client fund safety is emphasized, third-party depository model is implemented. (2) The client fund depository system in China experienced three models, i.e. mixed depository model, three orders depository model and independent depository model. These three models are all security intermediary depository. They aim to strengthen the governance structure of the security intermediaries, protect client fund safety through internal control and keep the market operating in the relatively high efficient manner, but it cannot radically solve the problem of those security intermediary with lack of credit that maliciously invade client funds. (3) China's stock market currently uses the third-party depository model for client funds. However, it is different from Taiwan's model and it is not the third-party depository model in strict sense, but security intermediaries still have obligation and responsibility of depository for client funds and introduce commercial bank supervision mechanism. This choice is made based on the trade-off of protection of client fund safety and maintenance of market efficiency. (4) China's existing third-party depository model of client funds has some problems, such as the function of total client funds balance calibration is not yet realized, the close operation of client funds is not yet achieved, and the responsibility positioning between depository bank and security intermediary is not accurate. These issues have many adverse effects on the long-term stable development of stock market.Chapter 3 Study on Security Depository Model (SDM).This chapter compares the SDM in major international stock market and indicates the trend of it. It also analyze the characteristic of SDM in China's stock market and the main issues. The content includes the following 4 aspects:(1) From the development process aspect, SDM of the major advanced international stock market experienced three different development stages: i.e. distributed depository, centralized depository and internationalized depository. These three stages of development reflect the evolution process of security from mobile to non-mobile, from paper-based to paperless, from regional to central depository institutions. (2) The analysis of SDM in the countries like US, Britain, Japan and Taiwan shows that with the trend of capital internationalized and in the situation of strengthened market efficiency and enhanced risk control, the depository and settlement organizational system of stock markets in various countries in the world demonstrates the tendency of centralization, internationalization, bank-like and diversification. SDM and the form of securities are closely related and security indirect holding is the mainstream direction of the SDM in the international stock markets. SDM is seeking balance between assets safety and market efficiency. In the developed stock market, market operating efficiency is the focus and SDM adopts security indirect and non-transparent holding. In contrast, in the less developed stock market, more emphasis is on the protection of client assets safety and SDM adopts security direct/indirect holding as well as transparent holding. (3) In judging the security holding types of China's stock market, different perspectives may lead to different conclusions. From the existing regulation point of view, China's stock market possesses more features of security indirect holding and second-type transparent holding. From the security depository and settlement regulation point of view, on the other hand, China's stock market has more features of security direct holding and first-type transparent holding. In the practical operation of the security account maintenance, the registration and settlement company bears the primary responsibility while the responsibility of security intermediary is weakened.(4) China's SDM plays an important role in the development of China's stock market. However, through the analysis of its characteristic, there are still issues to be solved and areas to be improved, e.g. non-unitary of SDM and unclear relation of the rights and obligations of the principal part of security depository.Chapter 4 Study on Security Settlement Model (SSM).From the perspective of normative analysis, this chapter shows the meaning and function of security settlement and comparison of our SSM with the one in the foreign stock markets. Meanwhile, it provides the specific analysis of the characteristics and issues of China's SSM. The main content includes the following 5 aspects: (1) In the study of SSM, market operating efficiency should be considered, but more importantly the market operational safety needs to be ensured. According to different risk origin, security settlement risk can be roughly divided into three types, i.e. counterparty risk, operational risk and systematic risk. (2) The function and service of security settlement vary in different stock markets, but it normally includes the main function such as security trading platform, central clearing counterparty, security transaction clearing and security settlement. (3) The analysis of SSM in foreign stock market demonstrates that although SSM in different countries and regions vary, the developments are all towards the tendency of unified financial markets. In the process of building SSM that suit its own features, we mainly adopt the systems and risk control measures such as distinction of security settlement function and security registration function, central clearing counterparty, DVP system, security settlement guarantee system, settlement participant administration system, non-mobile and paperless security as well as financing system and other related systems. (4) As the emerging stock market in the late 20th century, China's security settlement system has advantage in technology system. Using the rapid development of information technology, we have established national centralized security settlement system. In order to prevent and control security settlement risk and maintain orderly operation of stock market, China's security settlement system gradually builds several risk management systems and control measures, e.g. the establishment of CCP settlement mechanism, settlement participant access system and settlement margin system.(5) Although China's stock market has formulated a few risk control measure and system for security settlement risk, it is found through comparative analysis with international standard that our SSM is not perfect and the ability of managing and controlling security settlement risk is relatively weak.Chapter 5 The choice of China's Asset Depository and Settlement Model (ADSM).This Chapter analyzes the characteristics of China's stock market at present from the perspective of the changes of our stock market in recent years. Using the example of national debt buy-back, it specifically analyzes the function of ADSM to the operational safety and efficiency of the stock market. It also puts forward the direction for improvement of ADSM aiming at the problem of ADSM of China's stock market and taking consideration of the characteristic of our stock market that is in the emerging and transitional stage. The main content includes the following 3 aspects: (1) The favorable factors that promote the China's stock market's stable and sound development are accumulating. Although the internal and external environment of market's reform and development is gradually improving, it has not completely changed for the stock market's long-term healthy development. China's stock market is still in the emerging and transactional stage.(2) China's bond market has undergone three key development process, i.e. physical vouchers counter market, stock exchange floor internal bond market and the inter-bank external bond market. The different bond repurchase system design and business process result in different functional mechanism for the bond market's operational safety and efficiency. (3) We need to carry out insititutional innovation by learning from the foreign experience in order to set up independent security company and financial institution, and therefore establish third-party depository model of client fund trust. In order to fundamentally solve the prominent problems of current security depository system, we need to carry out reform of current security holding system in the way that client asset safety is ensured and market operating efficiency is improved. The core reform is to establish second-type transparent security holding model. The focus of the reform of China's security settlement model is to further improve system and risk control measures and the key to that is to implement DVP (model 3) security settlement system and further set up security settlement risk management system and control measures.Chapter 6 Conclusion and outlook.This chapter summaries the study on asset depository and settlement model of stock market and points out the direction for further research. Innovation for this essay as follows:Firstly, this essay is based on the theories of institutional change, transaction costs, financial security, Nash equilibrium etc. and uses the methods of historical research, comparative study, system analysis and economic analysis. Through the comparative analysis of the characteristics for the various kinds of ADSM in major international stock markets, this essay summaries the inherent patterns and international experiences of ADSM and provides the guiding direction of reform for asset depository and settlement system.Secondly, this essay first ever provides the systematic research on ADSM of stock market and attempts to broaden the space for theoretical research in this regard. It adopts comparative analysis research method not the current dominant empirical analysis. Considering the special nature of the stock market operation, it analyzes in-depth the functional mechanism of ADSM to the safety and high efficient operation of stock market. The study to some extent has certain degree of originality as it applies the theory of financial security and efficiency to the analysis on ADSM and integrates the characteristics of the stock market in present stage to improve ADSM.