“Securities Cross-Border Clearing & Settlement” Order Routing Model ACSDA - FIAB
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Transcript of “Securities Cross-Border Clearing & Settlement” Order Routing Model ACSDA - FIAB
“Securities Cross-Border Clearing & Settlement”
Order Routing Model ACSDA - FIAB
Punta del Este, UruguayOctober 28, 2005
ACSDA Seminar 2005
Securities Cross-Border Clearing & Settlement
I. Cross-Border Clearing and Settlement in Mexico BMV GLOBAL MARKET
II. Pilot Plan Brazil Mexico FIAB ORDER ROUTING MODEL
Securities Cross-Border Clearing & Settlement
I. Cross-Border Clearing and Settlement in Mexico BMV GLOBAL MARKET
Cross-Border Clearing & Settlement
BMV-S.D. Indeval
The scheme is based in the incorporation of securities that are listed and quoting in some principal international markets, into the BMV Trading System (Sentra Capitales). This, using the “International Quotation System” (SIC) and the intermediaries or institutional sponsorship programs in accordance with the applicable regulation.
Cross-Border Clearing & Settlement
BMV-S.D. Indeval
The BMV Global Market is sustained by the International Quotation System legal and operative platforms.
It's a Mechanism designed to list and trade the following instruments in the Mexican Stock Exchange (BMV) environment:
Securities without an IPO in the Mexican Market and not inscribed in the securities section of the National Securities Register, and
listed in foreign securities markets authorized by the Mexican Banking and Securities Commission (Recognized Foreign markets) or which issuers had received such recognition.
Cross-Border Clearing & Settlement
BMV-S.D. Indeval
The objectives of the BMV Global Market are:
Incrementing the efficiency of the Securities Market Offering new products for the equity marketEncouraging domestic investors Creating new business alternatives for intermediariesOffering Foreign securities for qualified and institutional investorsDiversifying PortfoliosGranting Domestic issues equivalent tax treatmentCentralizing Securities custody for cross-border transactions
Cross-Border Clearing & Settlement
BMV-S.D. Indeval
Local Clearing & Settlement:
Because of the listing and trading of foreign securities at the BMV, its clearing and settlement are performed in the same way of local securities, through:
Cross-Border Clearing & Settlement
BMV-S.D. Indeval
Cross-Border Clearing & Settlement:
Local Intermediary: through S.D. Indeval systemS.D. Indeval: via SWIFT with its international custodianInternational Custodian: with the Central Securities Depository or Central Counterparty of the country where the securities were issuedFree or Versus Payment Settlement: mandatory pre-funding of cash for cross-border RVPsCorporate Actions: same day cash payments in foreign currency to intermediaries’ offshore cash accounts
Cross-Border Clearing & Settlement
BMV-S.D. Indeval
Traded Securities in BMV Global Market:
95 USA issues form NYSE, NASDAQ Y AMEX.23 Exchange Traded Funds which tracks MORGAN STANLEY, STANDARD & POORS, RUSSELL STOCK INDEXES ; US TREASURIES, IBOXX EURO LIQUID CORPORATE DEBT INDEXES; AND GOLD & BRENT OIL MARKET PRICES. 84 European, Asian & Australian ADR´s.As of September close, 152 issues maintained holdings in deposit at S.D. Indeval.
Valor del Depósito de Acciones ExtranjerasValuación al 30 de Septiembre de 2005: $374 millones USD
Otros40%
Intl Business Machines Corp.
3% Altria Group Inc.3%
Procter & Gamble Co.3%
Wal-Mart Stores Inc4%
UTStarcom Inc.3%
SBC Communications Inc.
6%BellSouth Corp
15%
American International Group
Inc. 2%
Caterpillar Inc. 2%Exxon Mobil Corp.
3%
Sprint Nextel Corporation
7%
Boeing Co.3%
3M Co. 3%
Johnson & Johnson3%
Foreign Stocks Value on DepositValuation as of September 30, 2005: $374 million USD
Cross-Border Clearing & Settlement
BMV-S.D. Indeval
Cross-Border Clearing & Settlement
BMV-S.D. IndevalValor del Depósito de Exchange Traded Funds
Valuación al 30 de Septiembre de 2005: $284 millones USD
iShares S&P Europe 350 Index Fund
4%
iShares S&P 500 Index Fund /US
7%
Nasdaq100 Index Tracking Stock
9%
iShares COMEX Gold Trust
2%
Otros 2%
iShares Lehman 1-3 Year Treasury Bond
Fund76%
Exchange Traded Funds Value on DepositValuation as of September 30, 2005: $284 million USD
Cross-Border Clearing & Settlement
BMV-S.D. IndevalValor del Depósito en el Extranjero por Custodio
Valuación Promedio del mes de Septiembre de 2005: 6,640 millones USD
Clearstream18%
Euroclear26%
Banco Bilbao Vizcaya Argentaria
2%
MERCADO GLOBAL Deutsche Bank
10%
The Bank of New York44%
Foreign Securities Value on Depositwithin International Custodians
Average Valuation for September 2005: $6,640 million USD
Cross-Border Clearing & Settlement
BMV-S.D. IndevalOperatividad de Instrumentos Emitidos
en el ExtranjeroOperaciones con el Extranjero (Septiembre 2005)
MERCADO GLOBAL ACCIONES (DBAG)
60%
UMS (CBL, ECLR)12%
STOXX 50 (DBAG)8%
T-Bills (DBAG, BNY)2%
Tenaris (ECLR)0%
MERCADO GLOBAL ETF's (DBAG)
8%
Citigroup (BNY)3%
Eurobonos (CBL)5%
BBVA (BBVA)2%
Depósitos: 474 operaciones por 4,401 miles de títulosRetiros: 702 operaciones por 1,416 miles de títulos
Cross-Border Trading on Foreign Securities
Trades performed on September 2005
4,401 Titles through 474 Deposits 1,416 Titles through 702 Withdrawals
II. Pilot Plan Brazil Mexico ACSDA - FIAB ORDER ROUTING MODEL
BOVESPA / CBLCBMV / S.D. Indeval
Securities Cross-Border Clearing & Settlement
FIAB Background:
During the last two years, FIAB has been working in a markets integration project that looks for:
Increment of the range of instruments available in the markets Improvement in the markets integration and the domestic development Investors protection through accurate informationOffering of new business opportunities to intermediariesAvoidance of markets liquidity fragmentationBasic regulatory changes
Bovespa & BMV, agreed the start of a pilot plan for the operative linkage of their equity markets; this, with the collaboration of their respective custody and settlement entities, CBLC & S.D. Indeval.
ACSDA – FIAB Order Routing Model
Integration Reasons:
Focus on the centralization of the regional financial resources for latinamerican enterprises.Develope Latinamerican Equity Markets, which as of today remain relatively small within the international scope.Improve the issuers operational and liquidity conditions.Offer new investment alternatives.
ACSDA – FIAB Order Routing Model
A year ago, the ACSDA Working Committee started working in a Central Securities Depositories linkage model, the outcome obtained from this effort is reflected in an operative guide and detailed flows needed to establish an operative linkage:
Central Securities Depositories Linkage Guide:
Central Securities Deposit Technical FactsOperability and Business ModelMarket PracticesLegal and Regulatory MattersOther Market Issues
ACSDA – FIAB Order Routing Model
Operative Processes Flows:
Foreign Investors Accessing to the Local Market
Instructions and Securities Flow for PurchasesInstructions and Securities Flow for Sales
Corpoate Actions Information FlowDividens and Cupon Payments Cash FlowSuscriptions Information and Payment Flow In Kind Dividend Payment Securities FlowVoting Rights Information Flow
ACSDA – FIAB Order Routing Model
Pilot Plan Bovespa- BMV Objective:To establish the technological, operative, regulatory and commercial conditions to set a feasible access for Brazilian investors to securities traded in the Mexican Market, and for Mexican investors to securities traded in the Brazilian Market.To be used as a model for further market integrations.
PremisesTake advantage of the existing regulatory frame, applying just feasible and essential reforms.Preserve and respect local structures: Stock Exchanges, Intermediaries, CSDs and Securities Settlement Systems.Avoid market liquidity fragmentation.
Brazil-Mexico Order Routing Model
Implementation Challenges:
Pilot Plan implementation differences between countries.
Necessity to adapt other country’s existing models and rules.
Priority to encourage securities trading and to spread issuers information.
Enforce intermediaries and issuers participation in the project.
Brazil-Mexico Order Routing Model
First Solid Steps:
Creation of an Investors Operative Guide
Stock Exchanges Agreement
Central Securities Depositories Agreement
Quotations exchange scheme to spread prices among foreign intermediaries.
Issuers information disclosure scheme through web pages.
Brazil-Mexico Order Routing Model
Operational Matters:
Each market will continue operating in accordance with their own rules and procedures, intermediaries of both countries will play the roll of market’s interfaces.
Markets Guides with basic investment information of the other market will be developed on both countries, and foreign intermediaries will be provided with such guides (the first draft is already created).
Trading agreements among intermediaries of each market will have to be signed as foreign clients.
Brazil-Mexico Order Routing Model
Issuers Information:
Technical conditions will be established in order to facilitate informational systems connectivity between exchanges; thus issuers’ relevant events and general information can be disclosed in both markets.
In this sense, stock exchanges web pages will be connected sharing Brazilian and Mexican issuers’ information.
Each stock exchange will provide information to the other in its own language, and will be responsibility of the receiver exchange to translate the information that requires so.
Brazil-Mexico Order Routing Model
Quotations:
Technical conditions will be established in order to facilitate informational systems connectivity between exchanges; thus quotations related to selected stocks can be disclosed to brokerage firms of both markets.
As of today there are no Brazilian vendors that discloses Mexican quotations and vice-versa.
The availability of real time prices can motivate the interest for Mexican securities in Brazil and for Brazilian ones in Mexico.
Brazil-Mexico Order Routing Model
Information Disclosure:
The Mexican Stock Exchange will sponsor the Brazilian securities that will be included under the BMV GLOBAL MARKET platform; assuming the Brazilian issuers information disclosure within the Mexican market.
Issuers general information, relevant events and corporate actions will be obtained through a FTP connection.
Brazil-Mexico Order Routing Model
• Emisoras Brasileñas
Brazil-Mexico Order Routing Model
Custody and Settlement Matters:
An agreement will be performed between CBLC and S.D. Indeval in order to grant custody services and to control in a reciprocal way Brazilian and Mexican investors’ holdings.
Clearing and settlement of cross-border trades placed under the agreement frame, will be carried out by the respective central counterparty of the local intermediary; as it is done today.
Brazil-Mexico Order Routing Model
Agreement between Central Securities Depositories:
The agreement created under the Order Routing Model frame considers seven attachments detailing the mechanical procedures in order to perform the custody, administration, transfer, and settlement of the Brazilian and Mexican securities:
Investors RegistarOperational Procedure for Brazilian securities tradingOperational Procedure for Mexican securities tradingOperational Procedure for Brazilian securities custody eventsOperational Procedure for Mexican securities corporate actionsInformative reports for securities holdingsFee schedules
Brazil-Mexico Order Routing Model
Current Status:
The definitive version of the agreement between CBLC and S.D. Indeval it’s in the last review of each legal department. Is expected that during November the final agreement can be defined in order to deliver it to the Brazilian and Mexican Securities Commissions for their approval.
In this sense, both Central Securities Depositories will be prepared to grant each other custody, administration and securities settlement services the same day that BOVESPA and BMV will decide to start operations.
Brazil-Mexico Order Routing Model
“Securities Cross-Border Clearing & Settlement”
Order Routing Model ACSDA - FIAB
Punta del Este, UruguayOctober 28, 2005
ACSDA Seminar 2005