Working Group # 4 - Report

1. Working Group # 4 - Report

2. Working Group # 4 Principle # 18 Requirements for access and participation • What constitutes "compliance" with the Principle? Describe (in specific terms) the state characteristics of a CSD that fully meets the requirements of the Principle. • That there be open-ended, equitable and fair requirements for all Participants, including • access to the tariffs and that they be published adequately. Not withstanding the • aforementioned, when analyzing this principle at the international level, we find certain • tariffs’ anomalies between the treatment given to a foreign participant and that given to a • local one (such is the case in Chile, Bolivia and Panama).

3. Working Group # 4 Principle # 18 • 2. In relation to the Key Considerations for the Principle, what metrics/data should a CSD compile in order to demonstrate compliance? How might this data be sourced? • Currently, the requirements are being determined by international standards due to the interoperability between the CSDs. • Based on a risk analysis, i.e. : i) Legal Basis, ii) Financial Strength y iii) Risk Management (Due Diligence, periodic reviews, etc.) • This entails greater responsibility for the CSDs, along with costs related with the undertaking of these tasks. • These requirements must be duly approved by the regulatory bodies.

4. Working Group # 4 Principle # 18 • 3. What “result levels" with respect to these metrics/data should a CSD achieve in obtaining "compliance"? Why? • Within the analysis of the Working Group we agreed that the CSDs, currently with these levels of requirements, except for the comment on the previous slide (tariffs for foreign and local Participants).

5. Working Group # 4 Principle # 18 • 4. What, if any, provisions should you (as an FMI) be making to ensure continued adherence to the principle(s), for example in times of market or operational distress? • A periodic review (e.g. yearly). • Standardize the certification model. • An agreement between the regulated where each regulating body determines and establishes these principles.

6. Working Group # 4 Principle # 19 Participation mechanisms at different levels. • What constitutes "compliance" with the Principle? Describe (in specific terms) the state characteristics of a CSD that fully meets the requirements of the Principle. • This principle requires the raising of additional information, and the review of indirect Participants. • Establish a regulatory framework for controlling indirect Participants.

7. Working Group # 4 Principle # 19 • 2. In relation to the Key Considerations for the Principle, what metrics/data should a CSD compile in order to demonstrate compliance? How might this data be sourced? • A random and periodic review could be considered, e.g. in the cases of Panama and Colombia; however to this end it is recommended to have an approved legal framework in order to undertake these revisions and inspections on the Participants.

8. Working Group # 4 Principle # 19 • 3. What “result levels" with respect to these metrics/data should a CSD achieve in obtaining "compliance"? Why? • Our Working Group reached the conclusion that the CSDs partially achieve compliance with this principle. The objective is to make the CSDs more responsible for indirect participants; however we feel that should be the responsibility of the Direct Participants and the Regulatory Bodies.

9. Working Group # 4 Principle # 19 • 4. What, if any, provisions should you (as an FMI) be making to ensure continued adherence to the principle(s), for example in times of market or operational distress? • To be consistent with the regulatory framework • Responsibility to inform (by the Participant or the affiliates) • Interdependence between the Inderect and the direct Participants (information).

10. Working Group # 4 Principle # 20 Links between FMIs • What constitutes "compliance" with the Principle? Describe (in specific terms) the state characteristics of a CSD that fully meets the requirements of the Principle. • Establishing that FMIs should not have any transfer risks at either the local or international level or for any other FMI. • Each FMI must assume its own responsibility for risk controls and risk management in order to avoid duplicating its tasks.

11. Working Group # 4 Principle # 20 • 2. In relation to the Key Considerations for the Principle, what metrics/data should a CSD compile in order to demonstrate compliance? How might this data be sourced? • To have all risk controls duly justified with respect to the other FMIs in line with each country’s regulations.

12. Working Group # 4 Principle / Principio # 20 • 3. What “result levels" with respect to these metrics/data should a CSD achieve in obtaining "compliance"? Why? • To have a business model process which takes into account, amongst others, the following: legal risks, operational risks, credit risks, due diligence, compliance policies.

13. Working Group # 4 Principle # 20 • 4. What, if any, provisions should you (as an FMI) be making to ensure continued adherence to the principle(s), for example in times of market or operational distress? • One suggestion is to set up a Committee for new initiatives that can also assess and monitor any potential links between FMIs. • Perform an analysis by comparison; e.g. Matrix of cross-border links (ACSDA), which would permit obtaining a fairly clear idea about the level and potential of risk between the FMIs.