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“Securities Cross-Border Clearing & Settlement” Order Routing Model ACSDA - FIAB. ACSDA Seminar 2005. Punta del Este, Uruguay October 28, 2005. Securities Cross-Border Clearing & Settlement. Cross-Border Clearing and Settlement in Mexico BMV GLOBAL MARKET Pilot Plan Brazil Mexico

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“Securities Cross-Border Clearing & Settlement” Order Routing Model ACSDA - FIAB

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Securities cross border clearing settlement order routing model acsda fiab

“Securities Cross-Border Clearing & Settlement”Order Routing Model ACSDA - FIAB

ACSDA Seminar 2005

Punta del Este, Uruguay

October 28, 2005


Securities cross border clearing settlement

Securities Cross-Border Clearing & Settlement

  • Cross-Border Clearing and Settlement in Mexico BMV GLOBAL MARKET

  • Pilot Plan Brazil Mexico

    FIAB ORDER ROUTING MODEL


Securities cross border clearing settlement1

Securities Cross-Border Clearing & Settlement

  • Cross-Border Clearing and Settlement in Mexico BMV GLOBAL MARKET


Cross border clearing settlement bmv s d indeval

Cross-Border Clearing & SettlementBMV-S.D. Indeval

The scheme is based in the incorporation of securities that are listed and quoting in someprincipal 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.


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-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.


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-S.D. Indeval

The objectives of the BMV Global Market are:

  • Incrementing the efficiency of the Securities Market

  • Offering new products for the equity market

  • Encouraging domestic investors

  • Creating new business alternatives for intermediaries

  • Offering Foreign securities for qualified and institutional investors

  • Diversifying Portfolios

  • Granting Domestic issues equivalent tax treatment

  • Centralizing Securities custody for cross-border transactions


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-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:


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-S.D. Indeval

Cross-Border Clearing & Settlement:

  • Local Intermediary: through S.D. Indeval system

  • S.D. Indeval: via SWIFT with its international custodian

  • International Custodian: with the Central Securities Depository or Central Counterparty of the country where the securities were issued

  • Free or Versus Payment Settlement: mandatory pre-funding of cash for cross-border RVPs

  • Corporate Actions: same day cash payments in foreign currency to intermediaries’ offshore cash accounts


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-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.


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-S.D. Indeval


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-S.D. Indeval


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-S.D. Indeval


Securities cross border clearing settlement order routing model acsda fiab

Cross-Border Clearing & SettlementBMV-S.D. Indeval


Securities cross border clearing settlement2

Securities Cross-Border Clearing & Settlement

  • Pilot Plan Brazil Mexico

    ACSDA - FIAB ORDER ROUTING MODEL

    BOVESPA / CBLC

    BMV / S.D. Indeval


Securities cross border clearing settlement order routing model acsda fiab

ACSDA – FIAB Order Routing Model

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 information

    • Offering of new business opportunities to intermediaries

    • Avoidance of markets liquidity fragmentation

    • Basic 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.


  • Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    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 Facts

      • Operability and Business Model

      • Market Practices

      • Legal and Regulatory Matters

      • Other Market Issues


    Securities cross border clearing settlement order routing model acsda fiab

    ACSDA – FIAB Order Routing Model

    • Operative Processes Flows:

      Foreign Investors Accessing to the Local Market

      • Instructions and Securities Flow for Purchases

      • Instructions and Securities Flow for Sales

        Corpoate Actions

      • Information Flow

      • Dividens and Cupon Payments Cash Flow

      • Suscriptions Information and Payment Flow

      • In Kind Dividend Payment Securities Flow

      • Voting Rights Information Flow


    Securities cross border clearing settlement order routing model acsda fiab

    Brazil-Mexico 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.

      Premises

    • Take 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.


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    Brazil-Mexico Order Routing Model

    • Emisoras Brasileñas


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab

    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 Registar

      • Operational Procedure for Brazilian securities trading

      • Operational Procedure for Mexican securities trading

      • Operational Procedure for Brazilian securities custody events

      • Operational Procedure for Mexican securities corporate actions

      • Informative reports for securities holdings

      • Fee schedules


    Securities cross border clearing settlement order routing model acsda fiab

    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.


    Securities cross border clearing settlement order routing model acsda fiab1

    “Securities Cross-Border Clearing & Settlement”Order Routing Model ACSDA - FIAB

    ACSDA Seminar 2005

    Punta del Este, Uruguay

    October 28, 2005


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