The financial markets are globally linked through the development of cross boarder trading and financial investments, and it is important to establish appropriate capital market infrastructures that allow time reduction of the trade process that match international standards, ease the process of trading, and establish an efficient depository system. For this purpose, many countries have introduced electronic registered securities with full or partial systems to their financial markets. In Korea’s case, the issues of physical securities and the demands of the physical securities have reduced gradually with the introduction and maturity of various centralized depository systems. Nevertheless, the electronic registered securities system for complete dematerialization is necessary to improve our current financial infrastructure. Concept and structure of electronic registered securities An electronic registered securities system is defined as an electronic issuing and circulation of securities by registering or recording in electronic records called “book entries”. in particular, under the electronic registered securities system, issued securities are processed through a book-keeping entry, the circulation of the securities is processed through book transfer and the rights over the securities are based on the book registration. Thus, the core of electronic registered securities system is book entries. As a system with issuers, a central registrar, registration agents (or account keeper) and investors, electronic registered securities systems have different features depending on the types of securities available, application methods (mandatory or voluntary) and registration process (direct or indirect registration). Domestic conditions for electronic registered securities Domestic financial markets have developed significantly not only in market size but also in various financial instruments. The development of depository regulations demands the introduction of electronic registered securities. The Korea Securities Depository was established in 1974 with an introduction of a concentrated depository securities system. Then it set up incentives for investors to place their securities at the Korea Securities Depository. The proportion of deposited securities is 73.3% of the total and the proportion of deposited bonds is 96.4%. Nevertheless, the current en bloc depository system is not free of materialization in that it is a system that issues real securities in principle. Therefore, it needs to eliminate the inefficiency of real securities and non-transparency in the financial market through the introduction of electronic registered securities. International organizations such as ISSA, IOSCO, and G30 have recommended dematerialization through electronic registered securities. This is one of a series of recommendations for reducing credit risk factors and inefficiency in the clearing and settlement process as well as matching international standards. Physical securities can be used for illegal trades that facilitate tax-evading transfers, inheritance or gifts, and they may restrict fair trade in the capital market. A mixture of the physically issued securities and non-physically issued securities may incur inefficiency in operation. Foreign electronic registered securities system After Denmark introduced the world`s first electronic registered securities system, currently around 50 countries operate electronic registered securities system either fully or partially. In 1993, the Bank of England, the UK central bank, started to develop the CREST system, the current electronic registered securities system. The CREST system operates for most securities with voluntary application method. France`s electronic registered securities system covers all securities under the French law and Euroclear France, the central registrar, maintains indirect registration that manages the book in the name of depositor. In Sweden, Vaerdepaperscentralen(VPC) became the central registrar by the enactment of the “Share Account Act” in 1989. The electronic registered securities system in Sweden covers most securities with a mandatory application and investors should register with the VPC directly using their own names for the securities managed by the account manager. The electronic registered securities system is run via a direct registration system(DRS) and book-entry system in the US partially in the sense that it covers only some types of securities. The DRS operates for securities under the Company Act while the book-entry system operates for government bonds, mutual funds and short-term financial products. The Japanese electronic registered securities system initially only covered national bonds but has since been extended for short-term corporate bonds, straight bonds and so on. The electronic registered securities system is expected to operate for stock in 2009. The economic effect of the electronic registered securities Once the electronic registered securities system is introduced, all physical listed stock securities will disappear after recording in the electronic registration record. The electronic registered securities system will also change the commercial paper(CP) issuing process which currently issues CP physically. We considered the economic effects of the electronic registered securities system by analyzing a theoretical model that reflects the reduction in investors` cost of monitoring issuers after the system is introduced. The results suggest that the electronic registered securities system will provide issuer with incentive to be more socially efficient, increase investors` welfare directly and indirectly, and decrease the equilibrium market interest rate while enhancing the capital market. We also simulated the impact of electronic registered securities on the cost of market participants under the assumption of all securities` book-entry starting in 2009. it is expected that the cost reduction will be ￦112 billion annually and ￦563 billion in total for the next five years. The cost reduction was greatest in operation, cost reduction in risk was second, while the opportunity cost reduction was the lowest. Schemes for electronic registered securities introduction The electronic registered securities system should cover securities under in 「the Capital Market and Financial investment Service Act」and need to include certificate of deposit (CD). Corporate paper certainly should be included, but, in the case that its application is difficult, substituting short-term corporate bonds for corporate paper should be considered. Indirect registration would be more efficient than direct registration because direct registration demands the high cost of building and operating a system. Like many foreign countries, the united system combining issuance and circulation of securities would be optimal. Transferring existing physically issued securities to electronic registered securities needs a step by step process while extending the range of applicable securities. Simultaneously, current depository regulations associated with physical securities system should be improved. The enactment of the electronic registered securities based on commercial laws and regulations corresponding to each security will be difficult to regulate the electronic registered securities system with consistency. in contrast, the enactment of special laws for electronic registered securities will make it easier to subject all securities under the securities exchange law and for the contract rights to be included under the investor protection regulations in 「the Capital Market and Financial Investment Service Act」, and further will facilitate mandatory application and the united system of a central registrar. Therefore, it would be optimal that the commercial law provides the basis for electronic registered securities and that special laws give more detailed provisions. There is a debate as to which government institution should be the registrar for the government bonds. Most financially advanced countries except the US and Japan provide an authority for settlement of the dematerialized government bonds to central securities depository. This is supported by the fact that besides extension of settlement processes to the private sector through the enactment of CLFI in italy, CRESTCo in U.K., Euroclear France and Monte Titoli carry out settlement process for the government bond. So, efficiency and convenience should be the most important criteria for the government bond registration and settlement institution.