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New Infrastructures for OTC Derivatives Central Repository for Forward Contracts November 2011. DCV in figures In detail, Central Repository for Forward Contracts The Derivatives Market in Chile Overview Central Repository for Forward Contracts Background

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New Infrastructures for OTC Derivatives

Central Repository for Forward Contracts

November 2011


  • DCV in figures

  • In detail, Central Repository for Forward Contracts

    • The Derivatives Market in Chile

      • Overview

    • Central Repository for Forward Contracts

      • Background

      • Current issues with existing operating procedures

      • Features of the new service

      • Service model

      • Some statistics

      • Phase 2 & Phase 3

      • Conclusions


Dcv in figures
DCV in figures

  • Chile’s national CSD with 18 years of experience in the market

  • 176 participants

  • Shareholders:

    • Pension Funds 27%

    • Banks 27%

    • Santiago Stock Exchange 21%

    • DTCC holding ILLC 10%

    • Life Insurance Cos. 9%

    • Electronic Exchange 5%

    • Others 1%

  • US$ 250 billion under custody in local securities

  • Transactions registered in 2011 (sept): US$1,037 billion

  • Transactions registered in 2011 (sept): 1,2 million

  • Through DCV Registros (subsidiary) maintains Corporation’s shareholders registries

  • Role of NNA, issuing ISINs for Chilean securities

  • International custody services for local participants investing abroad


  • The derivatives market in chile
    The Derivatives Market in Chile

    Overview:

    • Active OTC derivatives market in Chile

      • Forwards (82%)

      • Swaps (18%)

    • Currencies in Forwards Contracts

      • CLP - US dollar (95%)

      • Euro – US dollar (2%)

      • US Dollar – Yen (2%)

      • Others (1%)

    • Volumes in Forwards Contracts

      • Notional amounts: US$ 1,5 billion (daily average)

      • # of CLP – US dollar contracts: 70,000 annual basis

    • Potential new gross income

      • 2012 USD 100,000

      • 2013 USD 150,000

    4


    Central repository for forward contracts
    Central Repository for Forward Contracts

    Background:

    • The idea was originated from the need to provide a comprehensive and centralized solution for pension funds / banks regarding their forward contracts: subscription, registration and custody

    • This is an opportunity to generate a new source of funds for DCV

    • We worked together to define the scope, objectives and commitments

    • An agreement between Pension Funds and Banks took place in March 2010; this became the business reason for the project

    • The potential market considers the rest of current participants… and also their institutional customers


    Central repository for forward contracts1
    Central Repository for Forward Contracts

    Current issues with existing operating procedures

    • Lack of standard procedures

    • Too many administrative procedures (Too much time-consuming paperwork)

    • Need to keep updated records of representatives authorized to sign the contracts

    • Receiving contracts with inaccurate data

    • Receiving signed contracts several days after the respective operations agreements

    • Involved many operational and financial risks

    • High operating costs

    6


    Central repository for forward contracts2
    Central Repository for Forward Contracts

    Features of the new service

    • Electronic and centralized subscription, registration and custody

    • Official legal record

    • Digital certificate with an advanced electronic signature

    • Control of expiration dates

    • On-line information (100% reliable)

    • Pension Fund Services: Daily reports to the Pension Funds Superintendence

    • STP with the Electronic Stock Exchange



    Central repository for forward contracts4
    Central Repository for Forward Contracts

    Some Statistics

    • 21 Participants have adhered the service

      • 8 Participants operating

      • 13 Participants in the road to activate their accounts

    • Up to september 984contracts registered

    • Up to september 161contracts matured


    Central repository for forward contracts5
    Central Repository for Forward Contracts

    Phase 2:

    • Registration of contracts between a participant and their corporate customers

    • Expanding to other types of Forwards contracts and Swaps

    • Payment instructions to banks

    • Supporting collateral management

      Phase 3:

    • Interconnection with a CCP, managed by banks


    Central repository for forward contracts6
    Central Repository for Forward Contracts

    Conclusions:

    • Service started on last March 15th

    • Smooth incorporation of new participants

    • Aims to build a modern, standard and competitive infrastructure to provide high efficiency and safety levels to the market



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