Settlement services – South Korea – KGBs and MSBs
Pre-matching service
Pre-matching is not offered on the South Korean market for Korean government bonds (KGBs) and monetary stabilisation bonds (MSBs). However, clients may select the Immediate Release flag as shown in the tables below:
| Service offered | Method employed | Start (local time) |
| KGBs and MSBs | ||
Immediate Release Flag available | Automated matching | On receipt of instructions |
| 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 matching instruction has been sent to the market, Clearstream accepts allegements via the Korea Securities Depository (KSD) 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 account number is present.
For details of Clearstream's domestic allegement service, see Pre-matching services for external settlement instructions.
Procedures for domestic counterparties
Clients receiving/delivering KGBs and MSBs from/to the Korean market must request their domestic counterparty to deliver/receive the KGBs and MSBs to/from Clearstream’s account with the KSD by referring to the following Standard Settlement Instruction (SSI):
Field | Value |
KSD BIC | KSDCKRSE |
Clearstream securities account number with KSD | 6930-0000-02 |
Clearstream BIC | CEDELULL |
IRC number (IRC number that ranges from 1-digit to 5-digits) of the Clearstream client (beneficial owner holding proprietary assets) or underlying investor going through the Clearstream client (intermediary custodian foreign financial institution – CFI – holding third party assets) | For example, 1, 12, 123, 1234 or 12345 |
LEI (20-character alpha-numeric code) of the Clearstream client (beneficial owner holding proprietary assets) or underlying investor going through the Clearstream client (CFI holding third party assets) | For example, 123456AB789CD1EFH01 |
Clearstream client account number (5-digit number) | For example, 12345 |
Note: Clearstream clients (beneficial owners holding proprietary assets) who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method. Underlying investors, going through Clearstream clients (CFIs holding third party assets), who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
Allowed countervalue difference
A maximum difference in countervalue of KRW 30,000 is allowed for matching and settlement of against payment transactions with domestic counterparties. In the event of a discrepancy within this limit, the amount specified by the domestic counterparty will prevail.
Specific settlement rules / settlement restrictions
Domestic free of payment settlement
Domestic free of payment settlement in KGBs and MSBs:
- is limited to no change of beneficial owner (NCBO) portfolio transfers.
- is not allowed from payment date-2 business days to payment date of entitlements.
- is not allowed from redemption date-2 business days to redemption date.
The KSD also requires the domestic free of payment (FOP) instructions related to KGBs and MSBs indicate the IRC/LEI and name of the investor.
Clients are therefore required to indicate these details in the first two rows of field :70E::SPRO// in Xact via Swift and Xact File Transfer (Settlement instruction processing additional details in Xact Web Portal) as follows:
Investor Code | Investor Identifier |
1 | IRC number |
2 | LEI |
:70E::SPRO//BO/investor code/investor identifier
Investor name
Example:
:70E::SPRO//BO/1/12345
ABC Bank
Or
:70E::SPRO//BO/2/123456ABCDEFG1A2BC34
DEF Bank
Note i: The details provided in the first two rows of field :70E::SPRO// (Settlement instruction processing additional details in Xact Web Portal) must match with the details at the domestic counterparty. As such, clients are strongly advised to align on these details between themselves and their domestic counterparty before putting in their settlement instructions.
Note ii: When the Clearstream client is the beneficial owner holding proprietary assets, then the IRC/LEI and name of the Clearstream client are required and these need to align with the details used in the market with the domestic counterparty (local custodian).
Note iii: When the Clearstream client is a CFI holding third party assets, then the IRC/LEI and name of the underlying investor to include need to align with the details used in the market with the domestic counterparty (local custodian).
Note iv: Clearstream clients (beneficial owners holding proprietary assets) who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method. Underlying investors, going through Clearstream clients (CFIs holding third party assets), who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
Clearstream shall bear no responsibility for any illegitimate or erroneous use and/or omission – for any trading or other purpose – of such investor IRC/LEI and investor name. Clearstream does not validate whether the investor IRC/LEI and investor name that clients use in their settlement instructions sent to Clearstream represent the legitimate investor who ordered the underlying transaction. Clearstream shall therefore not be responsible if a client uses an investor IRC/LEI and investor name belonging to an investor other than the investor on whose behalf the relating transaction has been or was deemed to be executed or settled.
Domestic against payment settlement
Domestic against payment settlement in KGBs and MSBs:
- can only be effected in Korean Won (KRW).
- is allowed from payment date-2 business days to payment date of entitlements.
- is not allowed on redemption date.
- may be impacted when settlement date is also a Bank of Korea (BOK) Reserve Day.
Note: BOK Reserve Day occurs on the 2nd Wednesday of each month and clients should take note that cash transfer activities related to settlement will be limited in South Korea on these days.
The KSD also requires the domestic against payment (AP) instructions related to KGBs and MSBs indicate the IRC/LEI and name of the investor.
Clients are therefore required to indicate these details in the first two rows of field :70E::SPRO// in Xact via Swift and Xact File Transfer (Settlement instruction processing additional details in Xact Web Portal) as follows:
Investor Code | Investor Identifier |
1 | IRC number |
2 | LEI |
:70E::SPRO//BO/investor code/investor identifier
Investor name
Example:
:70E::SPRO//BO/1/12345
ABC Bank
Or
:70E::SPRO//BO/2/123456ABCDEFG1A2BC34
DEF Bank
Note i: The details provided in the first two rows of field :70E::SPRO// (Settlement instruction processing additional details in Xact Web Portal) must match with the details at the domestic counterparty. As such, clients are strongly advised to align on these details between themselves and their domestic counterparty before putting in their settlement instructions.
Note ii: When the Clearstream client is the beneficial owner holding proprietary assets, then the IRC/LEI and name of the Clearstream client are required and these need to align with the details used in the market with the domestic counterparty (local broker/local dealer).
Note iii: When the Clearstream client is a CFI holding third party assets, then the IRC/LEI and name of the underlying investor to include need to align with the details used in the market with the domestic counterparty (local broker/local dealer).
Note iv: Clearstream clients (beneficial owners holding proprietary assets)who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method. Underlying investors, going through Clearstream clients (CFIs holding third party assets), who already have an IRC number must continue to use this number and cannot substitute it with the LEI or any other identification method.
Clearstream shall bear no responsibility for any illegitimate or erroneous use and/or omission – for any trading or other purpose – of such investor IRC/LEI and investor name. Clearstream does not validate whether the investor IRC/LEI and investor name that clients use in their settlement instructions sent to Clearstream represent the legitimate investor who ordered the underlying transaction. Clearstream shall therefore not be responsible if a client uses an investor IRC/LEI and investor name belonging to an investor other than the investor on whose behalf the relating transaction has been or was deemed to be executed or settled.
Bridge settlement
Bridge settlement in KGBs and MSBs as well as in KRW is not possible.
Internal settlement
Internal settlement of KGBs and MSBs is possible against any Clearstream-eligible currency, including KRW.
Investor identification and account opening
To settle and safekeep KGBs and MSBs with Clearstream, clients are requested to take note of the following:
1. Investor eligibility requirements
Clients (beneficial owners holding proprietary assets and CFIs holding third party assets) and the underlying investors of clients, who are CFIs, may only settle and safekeep KGBs and MSBs with Clearstream if they comply with the following eligibility criteria:
a. Clients and their underlying investors must be considered as foreign investors, and therefore, not South Korean residents (including residents in South Korea for tax purposes).
b. Clients and their underlying investors cannot be individuals.
c. Clients and their underlying investors must not have a permanent establishment or be a branch in South Korea for tax purposes.
d. Underlying investors who are holding third party assets must also be a CFI.
Note i: Per Article 132-3(1) of the Enforcement Decree of the Corporate Tax Act, an intermediary custodian foreign financial institution (CFI) refers to a foreign financial institution that is engaged in the custody of securities issued in countries other than its own.
Note ii: Overseas Investment Vehicles (OIVs), both public and private are deemed as beneficial owners.
2. Obtaining a Legal Entity Identifier
Foreign investors (excluding individual investors) without an IRC number are required to obtain an LEI before investing in KGBs and MSBs.
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.
3. Account opening requirements
a. Clients of Clearstream who wish to act as third party assets no longer need to obtain from the Korean National Tax Service (NTS):
- A Qualified Foreign Intermediary (QFI) status; and
- A QFI tax exemption, on interest income and capital gains on KGBs and MSBs.
The tax process for such clients have been simplified. Please refer to the Market Taxation Guide – South Korea – KGBs and MSBs (Securities deposited with KSD) for further details.
Clients should take note that Clearstream Banking S.A. and Clearstream Europe A.G. have been approved as Qualified Foreign Intermediaries (QFIs) by the Korean National Tax Service (NTS) on 28 March 2023 and 15 April 2024 respectively.
Note i: Account opening requests for clients that are South Korean nationals, residents of South Korea and 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 arrangements, in case of doubt. Clearstream reserves the right to revoke a client’s access to the market in the event that such conditions and criteria are not fulfilled.
Note ii: Clients (beneficial owners holding proprietary assets and CFIs holding third party assets) who already have an IRC number in the South Korean market must provide this number when opening the related client account in Clearstream’s books. In this case, the client’s IRC number will be mentioned in all trading, settlement and reporting activities. Otherwise, clients with no existing IRC number must provide their LEI when opening the related client account in Clearstream’s books. In this case, the beneficial owner’s LEI will be mentioned in all trading, settlement and reporting activities.
Note iii: Clearstream segregated client accounts are not required for those clients who wish to settle and safekeep KGBs and MSBs as beneficial owners holding proprietary assets or as CFIs holding third party assets.
Please refer to the CBL Client Handbook (Section 2.2 - “Account opening and maintenance”) for further details on how to open a CBL account.
b. The Clearstream client, who is a CFI holding third party assets, no longer need to file for BO tax exemption for each underlying investor. Likewise, the Clearstream client who is a beneficial owner holding proprietary assets no longer need to file for BO tax exemption for themselves.
Please refer to the Market Taxation Guide – South Korea – KGBs and MSBs (Securities deposited with KSD) for further details.
Note: There is no requirement to open segregated cash or securities accounts for each client and underlying investor in the local market.
4. Submission of client details
a. Clients with a CBL account should send the following Swift MT599 to Clearstream Account Admin Singapore
Clients with a 6-series account should send the following Swift MT599 to the Clearstream Client Data Management Team at DAKVDEFFXXX.
QUOTE
Attn: Clearstream Account Admin Singapore (CBL accounts) or Clearstream Client Data Management Team (6-series accounts)
Please take this MT599 as our submission of the following client details:
CBL Account Number: <insert account number of the client>
Client Name: <insert name of the client exactly as per existing IRC or registered LEI>
IRC Number: <insert existing IRC number, if applicable. The IRC number here must also match the IRC number submitted on the One Time Certificate>
Legal Entity Identifier: <insert client LEI regardless of whether the client has an IRC number or not. If the client does not have an existing IRC number then the LEI here must also exactly match the LEI submitted on the One Time Certificate>
UNQUOTE
b. The client details submitted in the MT599 mentioned above must match exactly those submitted on the One Time Certificate and vice versa.
Note i: The client’s account in Clearstream will not be made eligible to invest in KGBs and MSBs until the requirements mentioned above in points 2, 3 and 4 are met.
Note ii: Clients are responsible to pro-actively update these client details with their Relationship Manager, as well as renew the relevant tax forms whenever there are changes to the client details.
Clients are liable for the usage of any safekeeping accounts obtained through Clearstream. Clearstream shall bear no responsibility for any illegitimate or erroneous use – for any trading or other purpose – of such safekeeping accounts. Clearstream does not validate whether the safekeeping accounts that clients use in their settlement instructions sent to Clearstream represent the legitimate investor who ordered the underlying transaction. Clearstream 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.
Management of failed instructions
Domestic against payment settlement instructions that are unmatched and/or fail to settle on the requested settlement date (SD) are automatically cancelled by the KSD.
For domestic free of payment settlement instructions, the KSD shall automatically cancel the instructions which remain unmatched at the end of the 30th calendar day after the first attempted settlement date.