Clearing and settlement services are a cornerstone of investment banking operations, ensuring that executed trades are accurately processed, validated, and finalised between counterparties.
For Kenanga Investment Bank, these services represent a critical business function that underpins market confidence, liquidity management, and regulatory compliance. The clearing and settlement process encompasses multiple interdependent activities—from trade capture and validation to margin management, exception resolution, and final settlement of funds and securities.
Each activity requires precise coordination of people, processes, technology, and external counterparties to maintain operational continuity, especially under adverse or disruptive scenarios. Understanding these detailed processes is essential for appreciating the Bank’s operational resilience framework and its commitment to safeguarding client assets while maintaining market integrity.
This chapter aims to provide a comprehensive overview of the detailed business processes (Sub-CBS) that constitute CBS‑2 Clearing & Settlement Services at Kenanga Investment Bank. The reader will gain insights into the rationale behind each sub-process, the interdependencies that exist across internal and external stakeholders, and how these processes collectively ensure uninterrupted clearing and settlement operations. By the end of the chapter, the reader is expected to understand how Kenanga structures, monitors, and mitigates risks within this critical service, thereby appreciating the operational resilience measures that support both day-to-day and stress scenarios. This foundational knowledge equips stakeholders, regulators, and internal teams with clarity on process responsibilities, potential points of disruption, and the Bank’s strategic safeguards.
Below is a structured breakdown of “CBS‑2 Clearing & Settlement Services” for Kenanga Investment Bank focused on its critical business processes (Sub‑CBS). This reflects typical post‑trade activities that are essential to operational resilience in line with themes discussed in the 2025 Bank Negara Malaysia (BNM) Operational Resilience Discussion Paper (which emphasises maintaining continuity of critical services, identifying dependencies, and managing disruptions in high‑impact areas).
Note: The Sub‑CBS listed here are tailored to investment banking and broker‑dealer clearing & settlement operations, drawing on general clearing/settlement industry practice and Kenanga’s business scope (including broking, clearing & settlement support functions).
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Sub‑CBS Code |
Name of Sub‑CBS |
Description of Sub‑CBS |
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2.1 |
Trade Capture & Validation |
Recording, validating and confirming executed trade details from trading systems; includes same‑day affirmation (SDA) to ensure trade terms align before processing. This prevents erroneous trades from entering clearing & settlement and supports resilience by catching data inconsistencies early. |
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2.2 |
Clearing Instructions & Netting |
Preparing trade instructions for submission to central clearing counterparties (CCPs) or internal clearing units; includes aggregation and netting to minimise settlement obligations, credit and liquidity exposure. |
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2.3 |
Margin & Collateral Management |
Monitoring and computing margin requirements; managing client or house collateral postings; reconciling margin calls and settlement of collateral to meet regulatory and CCP mandates. |
|
2.4 |
Settlement Execution |
Conducting delivery‑versus‑payment (DVP) where securities and funds are exchanged; interacts with central securities depositories (CSDs) and payment systems to complete settlement cycles (e.g. T+2). |
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2.5 |
Funds & Securities Reconciliation |
Reconciling positions, cash balances, and security holdings between internal ledgers, custodians, CCPs and clients; identifies breaks and discrepancies for timely resolution. |
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2.6 |
Corporate Actions Processing |
Handling events such as dividends, rights issues or stock splits that affect securities being settled; updating records and adjusting client holdings accordingly. |
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2.7 |
Exception & Fail Management |
Identifying and resolving failed or unmatched trades, settlement exceptions or exception reports; coordinating with counterparties, custodians and exchanges to remediate issues. |
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2.8 |
Regulatory & Financial Reporting |
Generating regulatory reports on settlement performance, risk exposures, failed trades, balances and compliance metrics; supports transparency and operational oversight. |
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2.9 |
Client & Counterparty Communication |
Providing real‑time updates to clients and stakeholders on trade status, settlement confirmations, exceptions, and margin requirements is essential for trust and continuity of service. |
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2.10 |
Technology, Controls & Monitoring |
Infrastructure support functions (e.g., STP processing, system availability monitoring, automated recon workflows) that underpin real‑time processing, risk controls and resilience against disruptive events. |
BNM’s operational resilience guidance calls for a holistic, business‑led view of critical services — from prevention through recovery — rather than isolated technical fixes. Strong processes in trade capture, reconciliation, exception management, settlement execution and reporting are core to ensuring continuity, accuracy and confidence in clearing & settlement operations, even under stress.
This table can be adapted into a formal chapter section on Kenanga’s critical service taxonomy, highlighting internal risk controls and dependencies for each Sub‑CBS to further strengthen operational resilience documentation.
The detailed mapping of CBS‑2 Clearing & Settlement Services demonstrates the intricate architecture of Kenanga Investment Bank’s post-trade operations. Each sub-process—from trade capture and netting to exception management and regulatory reporting—plays a vital role in ensuring the seamless flow of securities and funds across the financial market.
By systematically understanding these processes, the Bank can identify key dependencies, monitor critical controls, and strengthen its resilience against operational disruptions. Ultimately, the robust design and management of clearing and settlement services not only safeguard Kenanga’s operational continuity but also reinforce client trust, regulatory compliance, and the overall stability of the financial markets in which the Bank operates.
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Resilience by Design: Kenanga Investment Bank’s Operational Resilience Journey |
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| CBS-2 Clearing & Settlement Services | |||||
| CBS-2 DP | CBS-2 MD | CBS-2 MPR | CBS-2 ITo | CBS-2 SuPS | CBS-2 ST |
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