Taiwan Depository & Clearing Corporation

TDCC, the back office of the financial market, has served and been devoted to the whole market for over three decades. In recent years, the company has complied with multiple policies from the Authority, such as the “Capital Market Roadmap” and “Corporate Governance Roadmap.” In addition, TDCC has been digitalizing its existing business step by step and planning diverse digital business. Each “online, digital, non-counter” service aims to let investors “use more online services and take fewer trips,” optimize finical trade processes, improve investors’ experience, and create a financial ecosystem of common prosperity and growth.

According to TDCC Chairman, Han-Chiang Chu, under the strategic direction of “innovation,” “resilience,” and “sustainability,” TDCC’s positioning has gradually turned from the back office to the middle office. Over the past years, TDCC has set three primary visions in its sustainable reports. The first is to create a financial service hub to raise operational efficiency and reduce market costs. The company is also devoted to developing financial inclusion and enhancing financial service accessibility. Thirdly, TDCC will assist national financial market supervision, exerting the effects of Fintech.

Chairman Chu also mentions that all TDCC staff “have a head for figures,” yet the word “figures” here indicates “digitalization” and “data.” Under this concept, the next step of TDCC is to implement five major action plans: “cultivating diverse fund market services,” “developing 4e issuer services,” “joining the ESG sustainable investment trend,” “establishing sub-brokerage cross-border custody services,” and “strengthening cyber security resilience.”

I. Cultivating diverse fund market services In the following years, TDCC aims to devote time and efforts to the fund market to create a fund services ecosystem. The top priority is constructing an “Onshore Fund Centralized Settlement System.” This is to transform the market’s current “many-to-many” remittance operation into a “many-to-one, one-to-many” form. That is to say, currently more than 50 existing fund sales agents (such as bank trusts) need to conduct remittances individually to more than 3500 exclusive accounts for funds in 24 custodian banks. In the future, TDCC’s Onshore Fund Centralized Settlement System will serve as a hub so that sales agents only need to channel payment flows to the platform. Then the payments are cleared from the platform to each account exclusively for funds to promote operational efficiency.

Through this standardized, automatic service platform, the resilience of Taiwan fund market’s back-office infrastructure can be enhanced, and the agents’ operational costs can be lowered. The proposal won approval and strong support from the Authority this May and is divided into three phases. First, B2B gross receipt and payment service for investment trusts and sales agents will be launched next year. The service will be expanded to B2C in two years, and the feasibility of releasing net centralized settlement is expected to be conferred in 2025.

In addition to constructing a centralized settlement system for fund market development, as Chairman Chu indicates, TDCC will optimize Fundclear in the meantime. The measures include creating an ESG fund disclosure area, a financial inclusion literacy area, and a fund information exchange center. The most remarkable feature is the financial literacy area: TDCC will cooperate with its subsidiary, FundRich, to promote financial literacy for funds. TDCC also makes the most of its 4-years’ big data experience to improve fund supervisory analysis further. This includes increasing declaration information, standardizing formats, introducing AI to strengthen supervision, and enhancing fund risk exposure analysis. In this way, the Authority can gain assistance with management and supervision and further protect investors’ rights and benefits.

II. Developing 4e issuer services 4e issuer services include electronic voting (e-Voting), Virtual Shareholder Meeting Platform (e-Meeting), stock affairs electronic notification (E-Notice), and the digitalization of shareholder meeting souvenir issuance (e-Gift). These services are expected to boost the dynamic digital development of shareholder meetings to provide investors with more efficient and convenient digital experiences.

As Chairman Chu points out, TDCC has been offering e-Voting services for over a decade. This year’s e-voting rate is approximately 60%, and foreign investors’ electronic voting rate is 98%. Next year, all listed companies in the emerging market are obligated to adopt e-Voting. Based on many years’ operational experience in e-Voting, e-Meeting construction has been completed. This year is the first year of the system’s official launch, and a total of 72 companies have adopted this new measure. The release of the 3.0 version platform is scheduled for March next year. TDCC’s issuer services will be extended and cover e-Notice. The stock dividend electronic notification service is planned for launch in the middle of next year with TDCC ePASSBOOK and email as notification channels. Then the e-Gift service release will be discussed. The research and survey are scheduled to start this year to reduce companies’ and shareholder services agents’ operational costs of issuing souvenirs.

III. Joining the ESG sustainability investment trend With ESG sustainable investment becoming the mainstream, TDCC first launched diverse ESG information disclosure services in 2020. The company provided local issuers, institutional investors, and general investors with ESG rating data compiled by many dominant ESG research organizations. In addition to the already included FTSE Russell, ISS ESG, MSCI, and Sustainalytics, S&P ESG is incorporated this year, which means almost all leading ESG databases worldwide have been enlisted. Chairman Chu states that besides increasing ESG rating information, TDCC will further offer performance reviews of sustainable investment portfolios. The company will also study the feasibility of establishing a domestic voting consulting organization. TDCC also will construct a case-by-case voting disclosure system to facilitate investors’ voting process. The efforts from both public and private sectors are made to promote sustainable finance.

IV. Establishing sub-brokerage cross-border custody services TDCC will cooperate with TWSE to plan and construct a sub-brokerage custody services platform, taking charge of the back office’s funds and securities custody accounting management. With TWSE’s Joint Credit Information Platform and Risk Management Supervisory Information Platform, the services will exert synergy from the division of business, the combination of strategies, and the sharing of resources. Chairman Chu indicates that TDCC has had many years’ experiences in cross-border foreign bonds custody services, and it is believed that the experience will be incorporated into the securities, ETFs, and fixed income products for sub-brokerage. Besides, a single clearing custody service provider can guarantee investors’ asset security, further expand securities firms’ business scale, put risk control and management into practice, and monitor related supervisory information. Therefore, Taiwan’s capital market is expected to reach another milestone.

V. Strengthening cyber security resilience The last action plan is also what TDCC, one of the national critical infrastructure sectors, heavily values. In response to international situations and digital risks, TDCC conducted active cyber security operations with automatic tools. This aims to continuously reinforce financial cyber security joint defense, facilitate cyber security governance, strengthen cyber security protection, and foster cyber security talents. Besides, by assisting securities and futures companies in raising cyber security awareness and enhancing incident response capability, Taiwan’s capital market operation can be more stable, reliable, and trustworthy to investors. Chairman Chu emphasizes that not only will TDCC fortify its cyber security protection but F4, the securities peripherals under the FSC, will also share intelligence and conduct cyber security joint defense. This will even include other peripherals for multiple joint defenses. Since the peripherals are closely interdependent, they need to consolidate their own duties to elevate the overall national cyber security resilience.

In addition to “innovation,” TDCC’s core concept also includes “renovation.” “Innovation” means promoting market innovation through novel thinking and cutting-edge techniques. “Renovation” means being brave to break new ground, constantly optimizing conventional core business, and raising operational efficiency. Furthermore, TDCC plays a crucial constructive role under the concept of “Altruism and Common Good.” Based on financial infrastructure, the company will expand the interdisciplinary applications to realize the visions of Taiwan’s sustainable finance.