According to the Law Concerning Central Securities Depository and Book-Entry Transfer (the "CSD Law"), which became effective in October 1991, central securities custody and book-entry transfer system has been implemented. Under the system, participants such as security firms and banks, who safekeep their customers' stocks or other securities, deposit those securities into a central securities depository, JASDEC, designated under the CSD Law. Deliveries of securities, resulting from a purchase, sale or use for collateral, is processed by book-entry transfers between accounts of customers maintained at participants and/or the accounts of participants maintained at JASDEC Inc. without any physical delivery of securities. It's similar to settlement of the cash by book-entry transfer between the saving accounts at banks without cash movement. Furthermore, shareholders can vote and exercise other rights while their securities are held in the accounts maintained at JASDEC. Along with the recognition of the central securities depository system among concerned parties and investors , over 80% of outstanding shares of public traded companies in Japan is held in custody with JASDEC.

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