TDCC’s VMU Service a Secure, Efficient Choice for Institutional Trading and Reconciliation

2020/12/01

Institutional investors are a critical part of Taiwan's securities market, accounting for more than 40% of the total transaction volume on the Taiwan Stock Exchange. About 40,000 large trades are executed and settled daily through securities firms and custodian institutions. Referencing DTCC's approach in the U.S. years ago, Taiwan Depository & Clearing Corporation (TDCC) has developed a Virtual Matching Utility (VMU) to securely transfer data and facilitate trade pre-matching and affirmation for trade settlements between securities firms and custodians, simplifying the complex clerical process of delivering statements by hand or mail.

An increase of cyber attacks in recent days has brought the issue of cyber security to public attention. Trade email communication is susceptible to data hijacking and higher risks for the securities market. To further improve efficiency and level of convenience, TDCC launched its VMU system on October 1st under the guidance of the Securities and Futures Bureau of FSC, with 208 main and branch offices of securities firms, as well as 32 custodian institutions onboard. Institutional trade reconciliation conducted in the VMU system is substantially more efficient and secure. Taiwan's institutional trade environment and international image can both benefit from it.

"Market-wide adoption of the VMU system will greatly reduce operational cost incurred from two different reconciliation methods used by custodian institutions with domestic and foreign institutional investors. The fully-automated process will bring greater synergy," said TDCC President Han-Chiang Chu.

The VMU system also allows TDCC to retain complete statement records. With the consent of competent authorities, Taiwan Stock Exchange officially adopts the VMU system for securities firms that reconcile for institutional investors, offshore overseas Chinese and foreign nationals. Those with the consent of the custodian institution are exempt from mailing monthly statements as stipulated by law, a move towards an all-electronic and paperless environment, higher efficiency and lower operational cost.