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ACSDASao Paulo
New Challenges for CSDs and CCPs
10 November 2006
Page 2 © 2006 Thomas Murray Ltd.
Contents
The old challenges – All done?
The new challenges – What next?
Structural issues
Extra revenue
Reduced costs
International benchmarking
Page 3 © 2006 Thomas Murray Ltd.
The old challenges – All done?
1. Dematerialised
2. Demutualised
3. For profit model
4. SFI DVP
5. Stock lending & borrowing
6. Central register
7. Adequately capitalised
8. Disaster recovery in place
Page 4 © 2006 Thomas Murray Ltd.
The old challenges – All done?
Country DematerialisedImmobilised
Demutualised For Profit
SFIDVP
SLB CentralRegister
AdequateCapital
DisasterRecovery
Argentina
Bolivia
Brazil CETIP CETIP
Canada
Chile
Colombia
Costa Rica
Dominican Republic
Eastern Caribbean
Ecuador
El Salvador
Guatemala
Jamaica
Mexico
Nicaragua
Panama
Peru
South Africa
Trinidad & Tobago
Uruguay (CBU)
USA
Page 5 © 2006 Thomas Murray Ltd.
Structural issues
Extra revenue
Reduced costs
International benchmarking
The new challenges – What next?
Page 6 © 2006 Thomas Murray Ltd.
The Standard Model
Exchange
CCP
CSD
RiskTransfer
RiskConcentration
RiskMinimisation
The Brazilian Model
BOVESPA
CBLCCSD
BM&FSISBEX
SELIC
BMA
CBLCCCP
CETIP
Structural issues
• This is a risk based model• It says nothing about ownership (vertical or horizontal) or governance
OTC
Page 7 © 2006 Thomas Murray Ltd.
Country Exchanges CCPs CSDs
Argentina BCBA, MERVAL MERVAL MERVAL, CVSA, CRYL
Bolivia BBV - EDV
Brazil BOVESPA, BM&F BMA, CBLC CBLC, CETIP, SELIC
Canada TSX CDS CDS
Chile SSE - DCV
Colombia MEC, BVC - DECEVAL, DCV
Costa Rica BNV - CEVAL
Dominican Republic BVRD - CEVALDOM
Eastern Caribbean ECSE ECCSD ECCSD
Ecuador Quito, Guayaquil - DECEVALE
El Salvador BVES - CEDEVAL
Guatemala BVN - BVN
Jamaica JSE - JCSD
Mexico BMV CCV INDEVAL
Nicaragua BVDN - CENIVAL
Panama BVP - LatinClear
Peru BVL - CAVALI
South Africa JSE, BESA JSE STRATE
Trinidad & Tobago TTSE, GSS - TTCD, TTCB
Uruguay BVM - BVM, CBU
USA NYSE, NASDAQ NSCC, GSCC DTC, Fed
The StandardModel
Structural issues
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Argentina Caja de ValoresAustralia SFE Austria OEKBBelgium Euroclear Belgium & Euroclear BankBrazil CBLCCanada CDSCroatia SDADenmark VPEgypt MCSDFinland APKFrance Euroclear FranceGermany Clearstream BankingGreece CSDHong Kong HKFEHungary KELERItaly Monte TitoliJapan JSCCKorea KSDLatvia LCD
Lebanon MidclearLuxembourg ClearstreamMexico IndevalNetherlands Euroclear NetherlandsNorway VPSPoland KDPWRussia DCC & NDCSingapore MCDSlovenia KDDSri Lanka CDSSouth Africa STRATESpain IBERCLEARSweden VPCSwitzerland SISTaiwan TDCCUAE DIFXUK CRESTUSA DTCC
CSDs using SWIFT
Structural issues
Page 9 © 2006 Thomas Murray Ltd.
Advantages
Drawbacks
Potential solutions
Structural issues
A Regional CCP
Page 10 © 2006 Thomas Murray Ltd.
Extra Revenues
Central matching
Issuer services
OTC Derivatives
Fund services
CSDs should NOT compete with their participants. There should be no disintermediationCSDs are a natural monopoly and should not abuse this position.
New sources of revenue
Page 11 © 2006 Thomas Murray Ltd.
Investors Broker/Dealers
Custodians
CentralMatching
Utility(within CSD)
Investors Broker/Dealers
Custodians
Confirmation
Average Price
Affirmation
Allocations SSI
Give-ups Give-ins Allocations
Without VMU With VMUCentral Matching Utility
Extra Revenues
Page 12 © 2006 Thomas Murray Ltd.
Reduced Costs
Cost reduction via consolidation or competition? Are CSDs different from CCPs?
Reduced costs for participants = revenue opportunities for CSDs
Use the utility to eliminate duplication in the market. Especially if there is no competitive advantage to be gained. Standardisation / Harmonisation is one of the main avenues to reduce costs.
Reduced costs for participants = fee reductions by CSDs
This depends on where you are on the development curve. Thus the need for proper price benchmarking exercise
Cost sharing – IT hub & spokes model
Africa, Greece/Cyprus, Middle East
Outsource to a regional CCP
Cost centralisation or cost reduction?
Page 13 © 2006 Thomas Murray Ltd.
International benchmarks
FTSE
Morgan Stanley
CalPERS
Thomas Murray
The Providers
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International benchmarks
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Morgan Stanley Emerging Markets
Emerging Global Equity Markets 2006
Argentina Indonesia Philippines
Brazil Israel Poland
Chile Jordan Russia
China Korea (South) South Africa
Colombia Malaysia Sri Lanka
Czech Republic Mexico Taiwan
Egypt Morocco Thailand
Hungary Pakistan Turkey
India Peru Venezuela
Sri Lanka and Venezuela have since been removed from the MSCI list
International benchmarks
Page 16 © 2006 Thomas Murray Ltd.
International benchmarks