1 s.d. indeval / securities clearing and settlement system luis cano, risk management specialist...
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S.D. INDEVAL /
Securities Clearing and
Settlement System
Luis Cano, Risk Management Specialist
October 8, 2007
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Mission (INDEVAL)
• Provide the financial sector with the public interest services of safekeeping, custody, management, clearing and settlement of securities within a framework of maximum assurance and security.
• Strive to cover customers needs under transparent and effective services with high quality standards.
• In order to fulfil its mission INDEVAL depends on solid finances, adequate technology, adopting and developing the best business practices and on its human resources.
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Services and Functions• Custody and Management of Securities.-
– Securities safekeeping in physical or electronic book-entry form with authorized custodians.
– Physical securitied deposit and withdrawal at the depository’s vault;
• Domestic Transactions– Electronic securities transfers– Electronic money transfers– Trade clearing and “DVP¨ settlement– Money Market settlement of transactions, and– Collateral Management
• International Transactions– Settlement of transactions executed on the international markets– Corporate action processing on foreign issues– Tax services on US shares
• Information Services– Assign ISIN codes to security issues– Services to issuers
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Corporate Structure
IndevalCSD
CCV 51%CCP
(Equities)
Asigna 21.3%CCP
(Derivatives)
Bursatec 1%(Technology
Provider)
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Mexican Financial Infrastructure
CCP
CCP
IndevalCSD
PaymentSystems
IssuersEquities & Debt
RepresentativesBanksBroker firms
InvestorsInstitutionalRetail
BrokersBanks, Custodians Broker firms
Mexican Stock Exchange
Supervised:• Central Bank• CNBV
CSD, Custodians Derivatives
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Delivery Means
Collateral Management
Pre-settlement Settlement
ParticipantsParticipants
Match
Clearing
SafekeepingVault
( )
SafekeepingAccounts( )
Collateralized Repos
Collateralized Repos
Indeval’s Components
Indeval’s Financial Protocol Web Site
Securities SettlingSystem (SLV)
Securities Lending Corporate
Action Processing
(Issuers)
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Pre-Trade
TradePost-Trade
Pre-Settlement
SettlementPost-
Settlement
Securities and transactions INDEVAL - CSD
Transaction cycle
CCV
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Centralized Settlement
INDEVALINDEVAL
DVPDVP
Settlement by securities transferSettlement by securities transfer
followed by net settlement by funds transferfollowed by net settlement by funds transfer
OVER-THE-COUNTER TRANSACTIONS (OTC)
BANKING
GOVERNMENTAL
Brady’s & UMS
Corporate Debt
Shares issued abroad
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Amount in Custody USD 809 billion Government Securities USD 238 billion
Bank Securities USD 43 billion
Shares and Private Debt USD 528 billion
Number of securities 4,783
Non-Local Custody USD 25 billion Registered USD 4 billion
Global BMV market USD 6 billion
Eurobonds USD 15 billion
Number of Securities 638
Average daily settlement (June 2007)
USD 208 billion
Average transaction amount
USD 24 billion
Indeval Statistics
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Indeval Statistics
Shares andPrivate Debt
USD 528 billion
GovernmentSecurities
USD 238 billion
BankSecurities
43 MM USD
65%30%
5%
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Trade
Incorporationof Transactions
Appointment of Agents for the
Payment of Transactions
CollateralRequirement
Is there sufficient collateral
transacitons Pending settlement
NO
Registration Process
Clearing
Settlement
YES
Transactional Process for Settlement
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Life-cycle of a Transaction
TT T+1T+1 T+3T+3 T+4T+4 T+5T+5 T+6T+6
DefaultedDefaultedTransaction Transaction
Non-recurring Non-recurring cash settlementcash settlement
Securities LendingAgents in default
TradeTradeSettlement of Settlement of
Transaction in defaultTransaction in default
Non-recurringNon-recurringPeriod Period
T+2T+2 T+7T+7
Extended settlement Extended settlement periodperiod
Buy- In /Buy- In /Sell -OutSell -Out
T+8T+8
ClearingClearingCycleCycle
8:308:30
15:0015:00
20:0020:00
15:3015:30
15:4515:45
16:0016:00
Collateral requirementsCollateral requirements
Novation orNovation orregistrationregistration
------------------------------------------------------------------------------------------------------Market ClosingMarket Closing --------------------------------------------------------------------------------------------------------------------------------
Securities LendingCCV
Last settlementcycle
SettlementCycles
Transaction in default
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Clearing /Settlement
• Transaction Clearing: For each counterparty and issue, there will be a net resulting from the
lesser amount of securities compared tof the total amount received versus the total amount delivered.
• Price differential due to Clearing:Since the clearing is performed with agreed prices, there will be a price differential which comes from the Clearing of Transactions.
CCV shall net the price differentials from Clearings for all issues, for each pair of participants; thereby generating a global differential that will be sent for settlement.
•Net payment to DVP:
DVP criteria shall be applied to the settlement of the remainder of non-cleared securities which are party to a net settlement.
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System of Financial Safeguards
The System of Financial Safeguards (SSF) is a set of measures aiming to guarantee compliance with obligations derived from Transactions where CCV performs as a reciprocal creditor and debtor.
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Reserve
Fund Equity
80% Equity
20%
Sale of the AL shares suspended
Contribution FundAgent was suspended
Clearing Fund Settling Agent was Suspended
Mutualized Clearing Fund
Financial Safeguards
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CCV Statistics
Monthly Average 2007:
Change
2006 – 2007:
Transaccion Volumes 340,000 40%
Trade Amounts 13.3 billion USD 49%
Numer of Fails 839 -23%
Amounts of Fails 36 million USD -24%
Resolved in 1 day: 31 million USD -18%
Resolved in 2 or more days: 5 million USD -12%
Amount of fails resolved by securities lending
42 million USD 97%