Settlement services – South Korea – KGBs and MSBs
Pre-matching service
Pre-matching is not offered on the South Korean market for Korean government bonds 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) |
| Korean government bonds 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 Banking accepts allegements via the Korea Securites Despository (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 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
Clients receiving/delivering Korean government bonds and MSBs from/to the Korean market must request their domestic counterparty to deliver/receive the Korean government bonds and MSBs to/from Clearstream Banking’s account with the KSD by referring to the following Standard Settlement Instruction (SSI):
Field | Value |
KSD BIC | KSDCKRSE |
Clearstream Banking securities account number with KSD | 6930-0000-02 |
Clearstream Banking BIC | CEDELULL |
IRC number (IRC number that ranges from 1-digit to 5-digits) of the beneficial owner at Clearstream Banking | For example, 1, 12, 123, 1234 or 12345 |
LEI (20-character alpha-numeric code) of the beneficial owner at Clearstream Banking | For example, 123456AB789CD1EFH01 |
Clearstream Banking beneficial owner account number (5-digit number) | For example, 12345 |
Note: Clearstream Banking clients 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 Korean government bonds 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.
Domestic against payment settlement
Domestic against payment settlement in Korean government bonds 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.
Bridge settlement
Bridge settlement in Korean government bonds and MSBs as well as in KRW is not possible.
Internal settlement
Internal settlement of Korean government bonds and MSBs is possible against any Clearstream-eligible currency, except KRW. KRW is not allowed for internal settlement.
Investor identification and account opening
To settle and safekeep Korean government bonds and MSBs with Clearstream Banking, clients are requested to take note of the following:
1. Investor eligibility requirements
Clients may only settle and safekeep Korean government bonds and MSBs with Clearstream Banking if they comply with the following eligibility criteria:
a. Beneficial owners must be considered as foreign investors, and therefore, not South Korean residents (including residents in South Korea for tax purposes).
b. Beneficial owners cannot be individuals.
c. Beneficial owners must not have a permanent establishment or branch in South Korea for tax purposes.
d. Overseas Investment Vehicles (OIVs) who are considered 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 Korean government bonds 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 Banking who wish to act as an intermediary and hold Korean government bonds and MSBs for underlying UBOs must first 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 Korean government bonds and MSBs.
Please refer to the Market Taxation Guide – South Korea for further details on how to do so.
Clients should take note that Clearstream Banking S.A. and Clearstream Banking 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.
b. Once the QFI status and QFI tax exemption have been obtained, the Clearstream Banking client who is acting as intermediary for underlying beneficial owners can open a segregated account per beneficial owner in Clearstream Banking’s books. This will be in addition to the client’s existing main Clearstream Banking Account.
Note i: The requirement for opening segregated Clearstream Banking accounts per beneficial owner is to distinguish third-party assets from proprietary assets on Clearstream Banking’s direct omnibus Korean link and facilitate the automated monthly disclosure reporting of beneficial owners holding Korean issued government bonds and MSBs.
Note ii: As per point 1 above, account opening requests for beneficial owners that are South Korean nationals, residents of South Korea and individuals will not be accepted. Similarly, account opening requests for Overseas Investment Vehicles (OIVs) who are not considered as beneficial owners will not be accepted as well. 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 Banking reserves the right to revoke a client’s access to the market in the event that such conditions and criteria are not fulfilled.
Note iii: Beneficial owners who already have an IRC number in the South Korean market must provide this number when opening the related segregated account in Clearstream Banking’s books. In this case, the beneficial owner’s IRC number will be mentioned in all trading, settlement and reporting activities. Otherwise, beneficial owners with no existing IRC number must provide their LEI when opening the related segregated account in Clearstream Banking’s books. In this case, the beneficial owner’s LEI will be mentioned in all trading, settlement and reporting activities.
Note iv: Clearstream Banking segregated accounts are not required for those clients who wish to settle and safekeep Korean government bonds and MSBs as proprietary assets.
Please refer to the CBL Client Handbook (Section 2.2 - “Opening additional CBL accounts”) for further details on how to open the additional account.
c. The Clearstream Banking client who is acting as intermediary for underlying beneficial owners must file for BO tax exemption for each underlying beneficial owner. Likewise, the Clearstream Banking client who is holding Korean government bonds and MSBs as proprietary assets must also file for BO tax exemption for themselves.
Please refer to the Market Taxation Guide – South Korea for further details on how to do so.
Note: There is no requirement to open segregated cash or securities accounts for each BO in the local market.
4. Submission of beneficial owner details
a. The following Swift MT599 free-format message should be sent to Clearstream Banking. Clients with a CBL account should send it to Clearstream Account Admin Singapore and clients with a CBF-i 6-series account should send it to the Clearstream Client Data Management Team.
QUOTE
Attn: Clearstream Account Admin Singapore (CBL accounts) or Clearstream Client Data Management Team (CBF-i accounts)
Please take this MT599 as our submission of the following beneficial owner details:
CBL Account Number: <insert account number of the beneficial owner holding prop assets>
Beneficial Owner Name: <insert name of beneficial owner 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 BO tax exemption form>
Legal Entity Identifier: <insert BO LEI regardless of whether the BO has an IRC number or not. If the BO does not have an existing IRC number then the LEI here must also exactly match the LEI submitted on the BO tax exemption form>
UNQUOTE
b. The beneficial owner details submitted in the MT599 mentioned above must match exactly those submitted on the BO tax exemption form and vice versa.
Note i: The client’s account in Clearstream Banking will not be made eligible to invest in Korean government bonds 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 BO details with their Relationship Manager, as well as renew the BO tax exemption form whenever there are changes to the BO details.
Clients are liable for the usage of any safekeeping accounts obtained through Clearstream Banking. Clearstream Banking shall bear no responsibility for any illegitimate or erroneous use – for any trading or other purpose – of such safekeeping accounts. Clearstream Banking does not validate whether the safekeeping accounts that clients use in their settlement instructions sent to Clearstream Banking 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.
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.