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1
S.D. INDEVAL /
Securities Clearing and
Settlement System
Luis Cano, Risk Management Specialist
October 8, 2007
2
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.
3
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
4
Corporate Structure
IndevalCSD
CCV 51%CCP
(Equities)
Asigna 21.3%CCP
(Derivatives)
Bursatec 1%(Technology
Provider)
5
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
6
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)
7
Pre-Trade
TradePost-Trade
Pre-Settlement
SettlementPost-
Settlement
Securities and transactions INDEVAL - CSD
Transaction cycle
CCV
8
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
9
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
10
Indeval Statistics
Shares andPrivate Debt
USD 528 billion
GovernmentSecurities
USD 238 billion
BankSecurities
43 MM USD
65%30%
5%
11
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
12
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
13
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.
14
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.
15
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
16
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%