Taiwan Depository & Clearing Corporation

Given the central bank's policy to build a mechanism for issuing foreign currency negotiable certificates of deposit (NCD), Taiwan Depository & Clearing Corp. (TDCC) launched new services covering foreign currency NCD issuance, secondary clearing & settlement and online redemption of bills at maturity on August 31 under the supervision of the Financial Supervisory Committee (FSC), providing a safer and more efficient environment for the new financial product.

As a part of the central bank's efforts to build a well-rounded foreign currency NCD market, TDCC has engaged in the general planning and build-out of a foreign currency NCD market since 4Q14, including the development of clearing & settlement systems and the new financial product per se, in continued collaboration with the issuing banks, bill dealers and settlement banks. Having confirmed the market mechanisms in May, 2015, TDCC finished the system development and testing in just three months, allowing the system to come on stream on August 31.

On the first day of the service launch, a total of seven domestic banks (Bank of Taiwan, Changhwa Bank, Mega Bank, Taiwan Business Bank, Standard Chartered Bank, E Sun Bank and CTBC Bank) and three Chinese banks (Bank of China, China Construction Bank and Bank of Communications Taipei branch) issued 34 foreign currency NCDs worth US$2.285 bn and RMB2.85 bn, respectively, with maturity periods ranging from 7-274 days. The first foreign currency NCD was issued by Bank of China (Taipei branch), worth RMB600 mn and subscribed by Bank of Taiwan. With a respective issuance value of US$850 mn and RMB1.15 bn, Bank of China was the biggest issuer of both USD and RMB NCDs of the day.

TDCC Chairman Ding Kung-wha said the company has launched delivery versus payment (DVP) services for NTD bills and bonds in 2004 and 2006, respectively. With a daily clearing value of NT$330 bn, TDCC has played a crucial role in securities clearing and settlement in Taiwan. Notably, TDCC has been able to expand its cross-border clearing and settlement capabilities by establishing a connection to the foreign currency clearing platform of the Financial Information Service Co. on July 28. Thanks to this infrastructure expansion, TDCC is able to roll out the foreign currency NCD services on August 31. International custody service provider Euroclear also said that its clients may participate in the trading of Taiwan-issued foreign currency NCDs from now on. In other words, the new services are also open to foreign investors.

Chairman Ding Kung-wha also noted that TDCC intends to facilitate the development of Taiwan's financial market by providing custody and settlement services that are trustworthy, safe and efficient. The provision of foreign currency NCD depository and clearing services by TDCC will not only expand the foreign currency fund-raising access and money market instruments available to banks, but also allow bill dealers and investors to put their funds to more efficient uses by leveraging short-term bills, which offer both high liquidity and diversity. Last but not least, the new services should help banks develop their wealth management business.