Cross-Border Custody Links Case: Central America and Panama
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Transcript of Cross-Border Custody Links Case: Central America and Panama
Cross-Border Custody Links Case: Central America and Panama
Iván Díaz G.
General Manager
Central Latinoamericana de Valores, S.A.
A Bit of History: Background of the CSDs* in the Region
• Project sponsored by BID-BOLCEN• Duration of the Project: 1995-1998• Countries involved in the project:• Guatemala, Honduras, El Salvador, Nicaragua,
Costa Rica y Panama.
Project:“Harmonization of the Securities Markets in Central America
*(Central Securities Depository)
Central Depositories in the region:
CEHVAL
LATINCLEAR
CENIVAL
CEVAL
CAJA DE VALORES
CEDEVAL
CEVAL
Guatemala Honduras El Salvador Nicaragua Costa Rica Panama
Development of the Securities Markets in the Region
– Progress on the equity markets regulation : Costa Rica: Adoption of a securities law in 1997 Panama: New regulatory scenario in 1999 El Salvador: Securities Market Law (1994) and subsequent
regulations.El Salvador: Electronic recording of Securities by Book-Entry
Law (2002) – Mandatory immobilization / dematerialization as of September, 2003.
Nicaragua: A new Capitals Market is approved. November, 2006.
Guatemala: The securities market is regulated by the Securities and Goods Law which was approved in 1996.
About the Regulatory Framework :
Experiences in Panama: Year 2001- in compliance with applicable regulations the mandatory
immobilization and/or dematerialization of the market is in effect
Year 2002: Latinclear and Ceval of Costa Rica sign an International Custody agreement
Latin Clear and Ceval of Costa Rica link their systems electronically.
Year 2003: Latinclear signs a a Custody Agreement with Cedeval from El Salvador.
Note: Other CSDs in the region have entered into bilateral International Custody Agreements on a reciprocal basis.
CSD Developments: International Best Practices and Cross-border Custody Agreements:
The structure improves as well as the adoption of international standard.
Cross-border custody increases Based on the establishment of the CSDs and the signing of the
custody agreements, international custody activity has become more active, both in the public securities sector and in the private sector.
The regulatory bodies have also promoted securities trading beyond the domestic markets :
In 2003, the Regulators of Panama and El Salvador sign an Agreement of Acknowledged Jurisdiction (a more dynamic binational listing)
In May of 2005; the National Securities Commission of Panama accepts Costa Rica as as an Acknowledged Jurisdiction.
As a result of the preceding …
The Links in NumbersCaso: Latinclear/Cedeval
Year 2007
(to 31 Aug)Year 2006Term
0021.9Withdrawals
59159.6101144.8Total
93.941.1Capital Payments
284.5457.1Interest
Payments
223.9865.2Capital payments upon maturity
2027.44269.5Transfers
No. TxAmount (In USD million)
No. TxAmount (In USD
million)
Type of Transaction
Market Profile
Regional Profile of the Market -CSD’sNumbers December 2006
Detail\Country Guatemala Honduras El Salvador Nicaragua Costa Rica Panama
Balance in Custody (US$MM)
US$1,166 N/A US$3,992 US$230 US$13,743 US$4,192
%Fixed Income 99.8% 100.0% 88.9% 100.0% 74% 68%
% Securities market
0.17% 0% 11.1% 0% 26% 32%
% Immobilized/Dematerialized
Local Market 2%
Int’l
Market. 100%
100% -Physical
Securities
83% 100%-Physical
Securities
87% 99.8%
Form of proving the existence of the securities :
Physical
Securities
------ Physical Securities
Immobilized/ Dematerialized
----- Physical Securities
Immobilized/ Dematerialized
Immobilized/ Dematerialized
Settlement
Cycle
T+1 Public
T Private+ Repo’s
T T Repo’s
T+1 MP & MS T+3
T T+1Fixed income
T+3 Shares
Market
T+3
% Make up of the Custody
5% N/A 17% 1% 59% 18%
Balance of Regional Custody: US$23,323 million
Main CSD Services
Detail\ Country
Guatemala Honduras El Salvador Nicaragua Costa Rica Panama
Custody Corporate
Events -------- --------
Clearing and
Settlement
(Stockmarket)
-------- (Stockmarket)
Bilateral
Settlement Stock market
positions
(Stock market)
(Latin Clear)
International
Custody
Clearstream -------- JPM -------- Clearstream
BoNY
Clearstream
Securities
Lending
-------- -------- Project -------- Automatic Loan
Project
Intruction Routing Model in Central America and Panama
FECHA DE OPERACIONSETTLEMENT DATE
FOREIGNBROKER
1.- PURCHASING TRANSACTION:1.- PURCHASING TRANSACTION:
LOCALBROKER
INSTRUCTS PURCHASE ORDER
LOCAL STOCK MARKET
INPUTS PURCHASE ORDER
(FOREIGN BROKER)
CONFIRMS TRANSACTION
COMMERCIAL BANK
PURCHASES FOREIGN CURRENCY IN LOCAL
MARKET
SETTLES WITH THE LOCAL INTERMEDIARIE’S ACCOUNT
CONFIRMS TRANSACTION PAYMENT
CONFIRMS PURCHASE INSTRUCTION(PRICE, DATE AND AMOUNT)
INSTRUCTS FUTURE
RECEPTION OF SECURITIES
FROM ABROAD
LOCALCUSTODIAN
TRANSACTION DETAILS FOR
LOCAL SETTLEMENT
CONFIRMS SECURITIES DEPOSIT IN ITS ACCOUNT UNDER THE NAME OF THE FOREIGN BROKER
CONFIRMS DEPOSIT OF SECURITIES IN
HIS ACCOUNT
FOREIGN CUSTODIAN
COMPARE AND MATCH TRANSACTION DETAILS SIMULTANEOUSLY
INSTRUCTIONS ROUTINGINSTRUCTIONS ROUTING
LOCAL ISSUER
2.- DIVIDEND AND INTERST PAYMENT :2.- DIVIDEND AND INTERST PAYMENT :
ANOUNCES ENTITLEMENT AND
ITS DETAILS
LOCALDEPOSIT
INSTRUCTS FX TRANSACTION
COMMERCIALBANK
FOREIGN DEPOSITOR
NOTIFIES TYPE OF ENTITLEMENT
AND ITS DETAILS
DELIVERS CASH IN THE CORRESPONDING FOREIGN CURRENCY
FOREIGN BROKER
INFORMS ENTITLEMENTS WITH TIMING AND THE CHARACTERISTICS
OF THE LOCAL MARKET
MAKES CASH
PAYMENT
DEPOSITS CASH IN THE CORRESPONDING LOCAL
CURRENCY
INSTRUCTIONS ROUTING INSTRUCTIONS ROUTING
Thanks!!
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