Next Steps for ASEAN+3 Central Securities Depository and Real-Time Gross Settlement Linkages: A Progress Report of the Cross-Border Settlement Infrastructure Forum

This report from the Cross-Border Settlement Infrastructure Forum (CSIF) provides an update on progress toward the establishment of a regional settlement intermediary (RSI) to support investment and more integrated bond markets among ASEAN+3 economies. The proposed RSI is to be based on bilateral links between national central securities depositories and central banks’ real-time gross settlement systems. This model can realize cross-border delivery versus payment settlement to enable safe and efficient cross-border financial transactions. The report also highlights emerging trends and challenges in cross-border financial transactions and sets out next steps in establishing an RSI.


TABLES AND FIGURES
This document explains the progress of ongoing CSIF discussions and explores the way forward.
Establishing a sound and efficient RSI is an effective way to stimulate intraregional financial investment.
CSIF's continued discussion will support the development of an RSI and promote financial integration within ASEAN+3.

Yasuyuki Sawada
Chief Economist and Director General Economic Research and Regional Cooperation Department Republic of China, Japan, and the Republic of Korea-a grouping that is collectively known as ASEAN+3.
The chair and vice-chair of the CSIF have been leading discussions to implement a regional settlement intermediary (RSI), with the Asian Development Bank serving as the Secretariat. CSIF members have contributed to discussions by sharing information on the status of their respective financial market infrastructure, in particular the real-time gross settlement (RTGS) and central securities depository (CSD) systems in each of their economies.
This report shares the outcomes of regional discussions on and progress made toward establishing an efficient and effective RSI. It is the crystallization of the region's shared knowledge and collaborative efforts toward more harmonized and integrated ASEAN+3 bond markets that has resulted from the strong support and cooperation of the region's central banks, CSDs, and authorities participating as observers, as well as experts from other regions.
Members of the CSIF Secretariat-led by Satoru (Tomo) Yamadera and including Kosintr Puongsophol, Byung-Wook Ahn, and Yvonne Osonia, as well as Asian Development Bank consultants, Jae-Hyun Choi and Taiji Inui-express their heartfelt gratitude to CSIF members and observers. The CSIF Secretariat also would like to thank the CSIF chair and vice-chair for guiding all discussions toward fruitful results.
No part of the report represents the official views of any of the institutions that participated as CSIF members or observers. The CSIF Secretariat bears sole responsibility for the contents of this report.

STATEMENT FROM THE CSIF CHAIRS
The chair and vice-chair express their heartfelt gratitude to the members and observers of the Cross- Japan, and the Republic of Korea-a grouping that is collectively known as ASEAN+3.
ABMI has conducted several studies on establishing a regional settlement intermediary (RSI as mentioned in the report).
To take advantage of these accomplishments and initiatives, the CSIF may pursue moving toward centralized integration based on such models that would lead to more bilateral agreements.
xii Executive Summary Also, as a sign of growing regional cooperation under ABMI, all CSIF members will adopt international standards, including ISO 20022 (possibly by 2023), as the basis for cross-border transactions. Further, amid the current regulatory trend of collateralization in cross-border transactions, the CSIF discussed freeing up the region's domestic collateral pools for use in cross-border transactions.
The CSIF will also need to consider the implications of recent advancements in financial technology.
Distributed ledger technology and blockchain will soon be employed as part of payment and settlement infrastructure in the region. Given these rapid developments, it is necessary to take stock of the varied experiences of CSIF members.

INTRODUCTION
The Asian Bond Markets Initiative (ABMI) has conducted several studies on establishing a regional settlement intermediary (RSI). The development of efficient and sound market infrastructure for regional securities settlement is regarded as one of the key components of ABMI. The discussions at this meeting focused on the improvement of cross-border bond and cash settlement infrastructure in the region, including the possibility of establishing an RSI.
The CSIF consists of the central banks and national central securities depositories (CSDs) of ASEAN+3 members, with market regulators and officials from the region's ministries of finance joining as observers (Appendix 1). The CSIF reports to ABMI Task Force 4 (TF4) at least twice a year ( Figure 1).
The CSIF aims to (i) enhance dialogue among policy makers and operators of bond and cash settlement infrastructure in the region; (ii) assess existing settlement infrastructure and identify comprehensive issues and requirements to facilitate cross-border bond and cash settlement infrastructure in the region; (iii) develop common basic principles for cross-border bond and cash settlement infrastructure with medium-and long-term perspectives; and (iv) discuss prospective models, an overall roadmap, and an implementation plan for establishment of cross-border bond and cash settlement infrastructure in the region. Since its inception, the CSIF has submitted the following reports to ABMI TF4, which have been published upon approval by the ASEAN+3 finance and central bank deputies and endorsement by the ASEAN+3 finance ministers and central bank governors: (i) Basic Principles on Establishing a Regional Settlement Intermediary and Next Steps Forward (May 2014); (ii) Progress Report on Establishing a Regional Settlement Intermediary and Next Steps: international standards for enhancing the interoperability of FMIs ( Figure 2). Principle 3: Flexibility: Allow newcomers to join when the market is reasonably developed and ready.

Figure 2: Central Securities Depository-Real-Time Gross Settlement Linkages
Principle 4: Accessibility: Structure that small and medium-sized local financial institutions can benefit (not just for major and global players).
Principle 5: Gradual integration: Start from bilateral links. Explore the possibility of centralized integration as long-term goal.
Principle 6: Consistency and collaboration with other initiatives: Explore greater benefit by maintaining consistency and collaboration with other initiatives of the region.
Principle 7: Standardization: Standardize market practices and technical aspects among members as much as possible to minimize costs.
Principle 8: Harmonization of rules and regulations: Harmonize rules and regulations, as much as practical, that hinder cross-border transaction, including those that require holistic policy considerations such as capital controls and taxation, among others.

B.
Progress Report on Establishing a Regional Settlement Intermediary and Next Steps: Implementing Central Securities Depository-Real-Time Gross

Settlement Linkages in ASEAN+3
The Progress Report on Establishing a Regional Settlement Intermediary and Next Steps: Implementing  Cross-border DVP connects an RTGS system for cash settlement and a CSD system for securities settlement located in different economies to guarantee the settlement of both cash and securities completely. In other words, delivery of securities occurs if only if the correspondent payment (cash settlement) occurs.
A CSD-CSD linkage connects CSD systems located in two different economies, which enables to buy and sell securities in one economy from other economy.
PVP linkage connects RTGS systems located in different economies. PVP is a settlement mechanism that ensures that the final transfer of a payment in one currency occurs only if the final transfer of a payment in another currency or currencies takes place.
In the aforementioned report, the CSIF set out a roadmap for establishing CSD-RTGS linkages in ASEAN+3 ( Figure 4). CSIF members also discussed (i) fit and gap analysis of cross-currency DVP, (ii) possible implications of CSD-RTGS linkages, and (iii) policy recommendations and next steps. Regarding the fit and gap analysis, further study has been made, the outcome of which was shared at subsequent CSIF meetings.

C. Common Understanding on Cross-Border Business Continuity Planning and Cybersecurity
Common Understanding on Cross-Border Business Continuity Planning and Cybersecurity was published to establish a basic framework of cross-border business continuity planning (BCP) and cybersecurity, focusing on cross-border CSD-RTGS linkages. The CSIF recognized that all participants in CSD-RTGS linkages must have the same level of safety and soundness in their infrastructure. When connecting CSD and RTGS systems, the security measures of counterparty market infrastructure (CSD or RTGS system) are critical. As a prerequisite, CSD and RTGS systems must ensure sufficient levels of security to be connected with other CSD and RTGS systems through the linkages. Otherwise, the network will be vulnerable. The report discussed five key elements necessary to establish sound and resilient crossborder payment and settlement systems within the region: (i) governance, (ii) compliance, (iii) relevance, (iv) understanding, and (v) identification.

6
Next Steps for ASEAN+3 Central Securities Depository and Real-Time Gross Settlement Linkages

Common Understanding on International Standards and Gateways for Central Securities Depository and
Real-Time Gross Settlement Linkages consists of two parts: (i) creating a common understanding among CSIF members on international standards for those linkages, and (ii) establishing general user requirements and technical specifications for linkage gateways.

International standards to be used for CSD-RTGS linkages
International standards to be used for CSD-RTGS linkages include Common Criteria for Information Technology Security Evaluation, which follows ISO/IEC15408, is the basis for the evaluation of security properties of information technology products. Descriptions of these individual standards are provided below.

(i) ISO 20022 for messages
Upon discussing the key ISO 20022 messages, the following basic concepts may be adopted to make implementation easier: (a) Mandatory items in ISO 20022 message definition reports are also to be mandatory for CSD-RTGS linkage messages.
(b) Optional message items that may be used for cross-border connections are also to be standardized to the extent possible.
(c) It does not necessarily mean that message items to be used only for specific bilateral linkages or domestic purposes are prohibited.
(d) ISO 20022 message items that are already in use and/or to be used during implementation need to be honored. for ASEAN+3 economies are shown in Table 1.
(iii) ISO 4217 for currency codes The currency code must be a valid, active currency code. Valid, active currency codes are registered with the ISO 4217 Maintenance Agency and consist of three contiguous letters. 2 The currency codes (ISO 4217) for ASEAN+3 economies are also shown in Table 1.
(iv) ISO 6166 (ISIN) for securities numbering ISIN is a numbering system designed by ISO. Each country has a national numbering agency that assigns ISIN numbers for securities in that country. The national numbering agencies for ASEAN+3 economies are shown in Table 1. The Association of National Numbering Agencies is a global association with a common mission. 3 2 The maintenance agency is SIX Interbank Clearing on behalf of the Swiss Association for Standardization. The BIC is an eight-character code, defined as a "business party identifier," consisting of the business party prefix (four alphanumeric characters), the country code as defined in ISO 3166-1 (two alphabetic), and the business party suffix (two alphanumeric characters). The branch identifier is a three-character optional element that can supplement the three-character BIC, used to identify specific locations, departments, services or units of the same business party. Table 2 lists the BIC for financial institutions of CSD and RTGS operators in member economies of ASEAN+3.

A) Outline of user requirements
Possible general user requirements and technical specifications are as follows: i. Security: To prevent information leakage, tampering, and/or repudiation, messages including information sent through the network should be encrypted and marked with a digital signature.
ii. Reliability: To ensure the reliability of connections between CSD and RTGS systems, message sequencing, retransmission, and idempotency should be adopted.
(b) Duplication of platform of gateway to back up each other (redundancy).
i. Availability: To enhance the availability of gateways, active-active or active-standby configurations for gateways should be adopted.
(ii) Implementing measures to avoid negative impacts, such as failures from counterparty, are as follows: (a) Individual message instructions are to be processed item by item (message-oriented).
(b) Appropriate measures to prevent negative impacts from counterparties need to be implemented. Criteria for choosing network providers need to be specified. (c) Not only message items but also message flows may differ by economy and need to be harmonized as reasonably as possible to absorb differences between the gateways.
(v) Message identification (reference) that can uniquely identify each message for CSD-RTGS linkage end-to-end, even for messages transferred across the economy. An application-based, bilateral, unique, and sequential reference number (temporally named CSD-RTGS interlinking reference) may be introduced. Technologies and products that are available or will be available in all ASEAN+3 economies in or around 2020 will be adopted.
In order to share a common image of the gateway, possible functions include the following: (i) Communication protocol: (a) With respect to the standard communication protocol for CSD-RTGS linkages, Transmission Control Protocol/Internet Protocol (TCP/IP) is to be adopted since TCP/IP is already the standard communication protocol in ASEAN+3 as well as being adopted by all FMIs in the region.
(b) With respect to the communication interface, a loosely connecting interface such as SOAP is to be adopted. 5 (ii) Message format: XML, which is already widely accepted, is to be used. With respect to message types, ISO 20022 compatible messages are to be used in principle.
(iii) Character code set: Unicode (UTF-8) is to be used as the character code set.

C) Interoperability by adopting international standards
The international standards mentioned above should be adopted.

D) Cross-border network connecting CSD and RTGS systems
Gateways for CSD-RTGS linkages are to be connected to each other bilaterally by commonly used technological measures such as an internet protocol virtual private network. Network providers that are widely used by CSDs and central banks may be adopted as part of the network infrastructure ( Figure 5).
Basic requirements for network providers of CSD-RTGS linkages are shown in Appendix 2.

E) Cross-border BCP and cybersecurity
Given the importance of sound and resilient linkages among regional CSD and RTGS operators, it is important that CSIF members maintain the smooth operation of critical business functions and the resiliency of CSD and RTGS systems against potential cyber risks. Gateways for CSD-RTGS linkages need to satisfy the recommendations specified by the CSIF. 6 5 Simple object access protocol, or SOAP, has a high level of conformity with XML.

F) Other specifications
The following issues need to be considered: (i) Version change policy of international standards: ISO 20022 messages are to be reviewed and versions updated annually. A version updating policy needs to be agreed between the parties that are connected by the relevant CSD-RTGS linkages.
(ii) System performance: Criteria for securing system performance will be discussed and specified. Community Blueprint 2025 notes that inclusive and stable financial sector development is a key goal of regional economic integration. 7 As a strategic measure, greater market access and operational flexibility for Qualified ASEAN Banks through the ASEAN Banking Integration Framework should be considered. The expected benefits of CSD-RTGS linkages are discussed below.

Enhancing the financial stability of ASEAN+3
CSD-RTGS linkages can not only reduce cross-border transaction costs but also support risk

B. Cross-Border Delivery Versus Payment Linkages
The Bank of Japan and the HKMA are developing cross-border DVP links by connecting the Bank of Japan Financial Network System Japanese Government Bond services with the Hong Kong Dollar Clearing House Automated Transfer System, known as Hong Kong dollar CHATS, which is the RTGS for Hong Kong dollars. The link, which will enable DVP settlement of Japanese Government Bonds and Hong Kong dollars, will go live in spring 2021. Cross-border DVP will eliminate settlement risk arising from differences in time zones and jurisdictions and will facilitate cross-currency repurchase agreements (repo). Figure 6 illustrates how financial institution A can transfer Japanese Government Bonds to financial institution B in return for simultaneous Hong Kong dollar funding from financial institution B to A. The harmonization of message flows would be necessary to expand cross-border DVP linkages in the region.
Among the message items, transaction identifications are needed to ensure smooth cross-border settlement between CSD and RTGS. In addition, the sending date and operating hours need to be harmonized.     Figure 9 shows the outline of cross-border CSD linkage with domestic delivery versus payment published in the progress report in 2015.

D. Payment Versus Payment Linkages
Cross-border bilateral PVP linkages directly connect RTGS systems located in different economies. The definition of PVP is "a settlement mechanism that ensures that the final transfer of a payment in one currency occurs if and only if the final transfer of a payment in another currency or currencies takes place." 9 9 The Bank for International Settlements (BIS) glossary is available at https://www.bis.org/cpmi/publ/d00b.htm.  Figure 10).  Figure 11 shows the outline of RTGS-RTGS linkages for payment versus payment published in the progress report in 2015.

Notes: 1. Bank A in economy A sends a sell local currency A and buy local currency B instruction to RTGS (A). Bank B in economy B sends a sell local currency B and buy local currency A instruction to RTGS (B). 2. RTGS (A) and RTGS (B) forward the information to gateways in economy A and economy B, respectively.
3. The gateways exchange and match the information. 4. When matched, each gateway sends an instruction to each RTGS to hold (earmark or block) the local currency funds of each economy. 5. After holding the funds, each RTGS sends a holding completion message to the gateway. The gateways exchange information with each other and confirm the holding of funds. 6. Each gateway forwards the information to the appropriate RTGS. 7. Each RTGS releases the held funds (local currency A to bank X's account and local currency B to bank Y's account). 8. Fund settlement confirmation is sent to bank A and bank B as well as counterparty RTGS through the gateways.   (Figures 12, 13).

Systems in ASEAN+3
10 RTGS system in Cambodia will be live by the time this progress report is published.

B. Adoption of ISO 20022
The owners and operators of CSD and RTGS systems in ASEAN+3 are adopting international standards such as ISO 20022 as the message standard to secure interoperability with other systems, particularly for cross-border connections. Adoption of ISO 20022 for the CSD and RTGS systems under operation is shown in Table 3.

C. Remaining Challenges for More Standardized Markets
The CSIF conducted a survey on the features and functions of cross-border connections such as adoption of XML, DVP model including real-time function, blocking securities, matching, operating hours, and BCP. To fully implement CSD-RTGS linkages in the region, it is necessary to make further efforts with regard to the following features.

ISO 20022 (XML)
XML is a technology (language) used to specify ISO 20022. With respect to government bond CSD systems, three economies (Brunei Darussalam, the PRC, and Japan) have already implemented XML. All other economies in ASEAN+3 will be able to implement this technology by or around 2023. Nam) have adopted central matching, which confirms both the sell and buy sides' intention to settle.
Regarding corporate bond markets, most CSD systems operating in the region have adopted central matching, except for Brunei Darussalam.

Operating hours
Regarding operating hours, including cut-off times for the business operation of cross-currency DVP, all ASEAN+3 members have indicated that their RTGS and CSD systems have sufficiently overlapping operating hours. However, there are differences in individual markets' schedules such as the start time of DVP processing, cut-off times for different events, and the end of DVP processing each day. Therefore, operating hours for cross-currency DVP should be decided bilaterally. Also, when actual linkages involve more than two economies, operating hours should be discussed among ASEAN+3 members.

Business continuity planning
Contingency measures based on those outlined in Principles for Financial Market Infrastructures have, in principle, been accepted by all ASEAN+3 member economies. When actual linkages are established, more detailed contingency measures need to be determined. Therefore, BCP issues also need to be revisited after actual linkages have been established so that market participants agree upon the standard or minimum measures to be implemented.

V. EMERGING TRENDS IN CROSS-BORDER TRANSACTIONS
A.

Cross-Border Collateral
As economic and financial linkages within ASEAN+3 are increasing, collateral demands for cross-border transactions and the need for LCY liquidity will increase. Therefore, CSIF members studied and discussed the possibility of using collateral in one economy to obtain liquidity in another, which is referred to as cross-border collateral.   Securities was developed with the auto-collateralization mechanism. Furthermore, an initiative to consolidate TARGET 2 and TARGET 2 Securities into a single platform is underway (Figure 15). Such enhancements of payment and settlement infrastructures is expected to contribute to the further development of financial markets in Europe.

Cross-border collateral services by China Central Depository & Clearing Co., Ltd.
With respect to the currency swap transaction between commercial banks in the PRC and foreign central banks, Chinese banks accept CNY-denominated bonds held by the foreign central banks as collateral to control the credit risk from their counterparties to ensure that the swap contract can be successfully implemented (Figure 16).

Korea Securities Depository's foreign-currency-denominated customer repo service
Korea Securities Depository has been operating the tri-party repo services since 1999. In December 2018, responding to customer and marketplace demands, Korea Securities Depository introduced a foreign currency-denominated customer repo service to (i) increase market liquidity by utilizing offshore securities as repo collaterals, (ii) reinforce investor protections with increased transparency, and (iii) improve the effectiveness of market monitoring by financial authorities (Figure 17).
Source: Korea Securities Depository.

Repo System
Transaction Details

Proprietary
Start-leg settlement Close-leg settlement Book-Entry Transfer, MTM (Mark-to-Market), Corporate Actions

Euroclear/ Clearstream
Emerging Trends in Cross-Border Transactions 31 4. Regional collateral pool The Asian Prime Collateral Forum shared its proposal to expand the eligibility of central bank collateral within ASEAN+3. As a general practice, a central bank's collateral is restricted to domestic assets such as the government bonds under its jurisdiction. If central banks in the region agreed to expand eligibility to include the government and other qualified bonds of ASEAN+3 member economies, whether via bilateral or multilateral collateral arrangements, it would increase crossborder bond transactions, thereby improving market liquidity and enhancing financial stability in ASEAN+3 markets.
In October 2019, the Asian Prime Collateral Forum jointly organized a session at the 19th CSIF Meeting to discuss the respective collateral frameworks of ASEAN+3 central banks and to explore the possible expansion of the collateral pool for cross-border transactions. More than 100 people, including researchers and government officials in the region, participated in the session and shared their ideas of expanding the collateral pool in ASEAN+3. The discussions enhanced participants' understanding of the segmented collateral and repo markets in the region, allowing them to envision a practical roadmap toward more harmonized transactions. Expanding cross-border collateral arrangements among the region's central banks, together with currency swaps, will help ASEAN+3 protect itself against external shocks and secure the momentum needed to develop the region's LCY bond markets.

B. Distributed Ledger Technology
Central banks in the world are conducting various studies, experiments, and assessments of new technologies such as distributed ledger technology (DLT) and blockchain. Some central banks in ASEAN+3 have made steps to implement such technologies into their payment and settlement applications.

DLT Scripless Bond in Thailand
The Bank of Thailand and the Thailand Securities Depository have launched an initiative, known as DLT Scripless Bond, that adopts DLT and blockchain. The main purpose of the project is to reduce the time from issuance to subsequent settlement of Thai retail government bonds from 15 days to 2 days (T+2). Along with the Bank of Thailand and the Thailand Securities Depository, major Thai banks are also participating in the project. In the system, the selling agent keeps a record of their own customers as distributed ledgers, while the Bank of Thailand and the Thailand Securities Depository keep the master ledger. The process of securities account opening is conducted automatically with smart contracts, and all transactions are time-stamped and lodged in ledgers retained by authorized participants. Thanks to blockchain technology, the recorded information will be immutable ( Figure 18).

The Bakong System in Cambodia
The Bakong System is a blockchain-based payment service supported by National Bank of Cambodia. It can provide a peer-to-peer fund transfer service to retail customers of participating banks in Cambodia. The service is provided through a mobile app that enables the transfer of funds across the platform on a continuous basis by using a personalized QR code or mobile phone number, instead of a bank account number. To register, a customer needs to have a national identification card or passport and local valid phone number. The Bakong System will connect financial institutions and payment service providers and serve as the backbone for real-time retail payment in Cambodia ( Figure 19). furthering market integration to maximize the benefits of regional cooperation. To successfully implement an RSI, the following issues require further attention from CSIF members.

Cross-border business continuity planning and cybersecurity
While the CSIF has already published the Common Understanding on Cross-Border Business Continuity Planning and Cybersecurity, it is necessary to continuously review these important issues.
The process of information sharing and discussion among CSIF members will help crystalize the region's expectation for BCP, cybersecurity standards, system security, and system resiliency. The exchange of information and communication will establish the basis of mutual assurance and recognition needed for systems to be linked in the future. language characters may be accommodated in the future. Currently, cross-border messages are only alphanumeric. To improve know-your-customer processes, ensure anti-money laundering, and combat the financing of terrorism, it is desirable to accept local language characters in the identification of counterparties and monitoring of financial transactions. Such regional efforts should be incorporated into global standards and practices. These issues can be discussed within the ASEAN+3 Bond Market Forum.

Rapid technological advancement
Recent technological advancements are supporting the region's market development. Lessdeveloped markets can more easily catch up with or even surpass developed markets because of such rapid advances. The cost of servers has been slashed, and affordable cloud sourcing has made easier the setting up of backup facilities. The expansion of mobile technology is supporting access to information, the digitalization of financial transactions, and the personalization of information that can support faster and more robust identification. The use of QR codes is proliferating in the region, and faster and instantaneous payments are now more widely available in different markets. In addition, the border of wholesale and retail payments is blurring as some central banks are supporting such payments through the central bank system. The existing cross-border banking network based on correspondent agreements between banks is facing challenges as new technologies support the establishment of secured and traceable cross-border payment networks. Given the heightened risk of cybersecurity, an existing framework of network security can quickly become obsolete. In previous CSIF discussions, it was assumed that further development of CSD-RTGS linkages between all members would require a centralized unit to facilitate smooth cross-border data exchanges and transactions. However, it is not clear such an assumption still holds. In the current technological environment, the most suitable system architecture for the region needs to take such advancements into account. Therefore, the CSIF may need to conduct more research on available technologies such as DLT, blockchain, and tokenization.

Linkages between securities and cash payment system
As described in previous sections, CSD-RTGS linkages will support not only securities settlement but also cross-border PVP. Given the increase in intraregional transactions amid remaining frictions in cross-border currency transactions, it is necessary to consider how CSD-RTGS linkages can support cross-currency liquidity provision. Without an actual cash fund transfer, the pledging of high-quality liquid local currency assets could supplement and support local currency payments. Since most ASEAN+3 markets operate in either the same (or an adjacent) time zone, regional CSD-RTGS linkages would create additional market liquidity. 36 Next Steps for ASEAN+3 Central Securities Depository and Real-Time Gross Settlement Linkages

B. Next Steps
Rapidly proliferating disruptive technologies such as DLT, blockchain, crypto-asset, and tokenization could substantially influence the future technical architecture of payment and settlement systems in the region, including CSD-RTGS linkages. Therefore, the CSIF should study the possible impacts of such To create more concrete opportunities for cross-border transactions, the collateral usage of government bonds for LCY-to-LCY cross-border transactions and liquidity management needs to be discussed and studied continuously and in depth. Enriched regional collateral pools for cross-border monetary transactions are another important component of the regional safety net.
The cross-border DVP linkage between the Bank of Japan and the HKMA, which is expected to go live in spring 2021, is a leading example and an important benchmark case for further implementation in other jurisdictions across the region. Therefore, the CSIF should support the successful launching of this and other similar initiatives involving members of ASEAN+3.

Depository-Real-Time Gross Settlement Linkages
1. The network providers should provide services with a high level of security, reliability, and availability ( Figure A2).
2. The network providers should have secure user identification, authentication, and authorization scheme and services.
3. The network providers should have a sufficient level of technological capability to support Central Securities Depository-Real-Time Gross Settlement linkages.
4. The network providers should be compliant with the international standards, in particular ISO 20022.
5. The network providers should have a stable management foundation.
6. The network providers should have a switching hub in the ASEAN+3 region.
7. The messages transferred between ASEAN+3 FMIs through the network providers should be processed within the ASEAN+3 region.
8. The backup site of the network hub should also be located in ASEAN+3, but in a different economy than that of the primary site.
9. The network providers should accept cooperative oversight by ASEAN+3 central banks.
10. The network providers should have reasonable cost efficiency and transparency.
11. The network providers should commit to FMIs in ASEAN+3 to provide a sufficient level of services, which will enable FMI operators to provide high-quality services to their participants.