4_Present MBayle

Document Sample
4_Present MBayle Powered By Docstoc
					CPSS-IOSCO recommendations for
  securities settlement systems:
         the Chilean case


                Marc BAYLE
      Deputy Head of Market Infrastructure


             Santiago de Chile, 1 August 2006
                                                1
  Introduction

Why applying international
 recommendations for SSSs?

   Stability of Payment
    Stability of Payment                          Smooth Monetary Policy:
                                                   Smooth Monetary Policy:
   Systems
    Systems                                        - delivery of collateral
                                                     - delivery of collateral
   - delivery of collateral
     - delivery of collateral
   - delivery of funds (DvP)
     - delivery of funds (DvP)
                                 Financial stability
                                  Financial stability



               Developing market and attracting
               international investors
                                                                                2
Recommendations for Securities Settlement
Systems
                                                       Legal framework
                         Central securities
                           depositories                                         Trade confirmation

               Delivery versus payment                                                 Settlement cycles

                                                                                         Central counterparties
          Settlement finality

            Risk controls                                                                     Securities lending
                                         CPSS-IOSCO
       Cash settlement
                                     19 recommendations                                           Efficiency


     Operational reliability                                                                      Access


                                 stors
                       of inve                                                              Transparency
           Pro tection

                            Governance                                                 Communication
                                                                                        procedures
                                         Cross-border links
                                                              Regulation & oversight
  http://www.bis.org/cpss
                                                                                                                   3
Recommendations for Securities Settlement
Systems
  Requirements relating to legal risks (Rec 1)
   8 Right, liabilities, and obligations should be clearly stated,
     understandable, and publicly accessible
   8 Rules and arrangements should be legally valid and
     enforceable

  Requirements relating to liquidity risks
   Risk that counterparty will not settle an obligation when due;
      potential for systemic implications;
   8 Rec 8: Timing of settlement finality (real time or multiple-
      batch processing).
                                                                     4
Recommendations for Securities Settlement
Systems


     Requirements relating to credit risks

  Principal risk, pre-settlement risk, settlement bank failure risk
  8 Rec 6: CSD to be credit-risk free to greatest extent possible;
  8 Rec 9: limiting credit activities, collateralisation;
  8 Rec 7: need for DvP;
  8 Rec 5: risk controls if CSD is principal in securities lending;
  8 Rec 10: preference for central bank money;
  8 Rec 2: trade confirmation;
  8 Rec 3: settlement cycles;
  8 Rec 4: CCPs.

                                                                      5
Recommendations for Securities Settlement
Systems
     Requirements relating to custody risks
   Risk of loss on securities in safekeeping;
   8 Rec 12: segregation of securities to ensure protection
      against claims by third parties; sound accounting to prevent
      creation of securities.
     Requirements relating to operational risks
  Risk that deficiencies in information systems, internal controls,
     human error or management failure lead to losses;
  8 Rec 11: issues relating to business continuity;
  8 Rec 16: communication procedures and STP;
  8 Rec 6: dematerialisation;
  8 Rec 13: sound governance arrangements.
                                                                      6
Recommendations for Securities Settlement
Systems

    Other requirements
   8 Rec 18: regulation and oversight;
   8 Rec 13: governance, conflict of interests;
   8 Rec 14: access limitation only for risk considerations;
   8 Rec 15: efficiency, macro-perspective, integration;
   8 Rec 17: transparency, updating information;
   8 Rec 19: risks in cross-border links.




                                                               7
Recommendations for Securities Settlement
Systems
                                                         Legal framework
                           Central securities
                             depositories                                         Trade confirmation

                 Delivery versus payment                                                 Settlement cycles

                                                                                           Central counterparties
            Settlement finality

              Risk controls                                                                     Securities lending


         Cash settlement                    Chilean market                                          Efficiency

                                            December 2003
       Operational reliability                                                                      Access


                                   stors
                         of inve                                                              Transparency
             Pro tection

                              Governance                                                 Communication
                                                                                          procedures
                                           Cross-border links
                                                                Regulation & oversight
 http://www.bis.org/cpss
                                                                                                                     8
Recommendations for Securities Settlement
Systems


    Three areas to improve

     8Legal framework
     8Market practices
     8Securities clearing and settlement




                                            9
Recommendations for Securities Settlement
Systems


    Legal framework

    8Finality of settlement
    8Netting arrangements
    8Securities lending
    8Dematerialisation regime




                                            10
Recommendations for Securities Settlement
Systems


    Market practices

    8Standardised master agreements
    8Smoothening of settlement of securities
      transactions
    8Secondary market for debt instruments




                                               11
Recommendations for Securities Settlement
Systems


    Securities clearing and settlement

    8Accounting of book-entries securities
    8Treatment of custodian bankruptcy
    8Settlement of cash leg of securities transactions
    8Clearing securities transactions




                                                         12
Recommendations for Securities Settlement
Systems


    Conclusive remarks

    8New developments
    8Priorities
    8Responsibility of BCCh




                                            13
CPSS-IOSCO recommendations for
  securities settlement systems:
         the Chilean case

    Comments - Questions – Answers



           Santiago de Chile, 1 August 2006
                                              14