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General overview

Budapest, 22 May 200 3. KELER Functions & Services. General overview. Mr. Tamás Madlena. director. Marketing and Customer Relationship. Introduction. 1990: Re-opening of Exchanges 1993: KELER foundation Ownership structure:. Growth of Shareholders’ Equity In Million EUR, 1993 – 2002.

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General overview

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  1. Budapest, 22May 2003 KELER Functions & Services General overview Mr. Tamás Madlena director Marketing and Customer Relationship

  2. Introduction • 1990: Re-opening of Exchanges • 1993: KELER foundation • Ownership structure:

  3. Growth of Shareholders’ Equity In Million EUR, 1993 – 2002

  4. Organizational structure Independent Auditor Supervisory Board Shareholders' Meeting Board of Directors Internal Audit Foreign Relations Chief Executive Legal Counsel Business Development Officer Risk Management Treasury Marketing and Customer IT Operations Accounting Relations Depository Share Registry

  5. Participants • Basic distinction • Safekeeping and settlement of OTC („administrative” requirements by KELER) • Clearing (capital and collateral obligations) • Eligible entities • Investment service providers (broker/ dealer) • Credit institutions (custodian bank) • Issuers • Foreign CSDs, ICSDs • National Bank of Hungary • State Debt Management Agency, State Treasury • Other

  6. Fields of Core Services • Central Securities Depository, custody • Clearing and settlement for both Exchanges (spot and derivatives markets) • CCP • RTGS for the OTC market • Cash and securities account management • Cross-border settlements • Share registrar

  7. Depository • National depository • Central securities registration, ISIN allocation • Collective safe custody and fungibility for physical securities • Custody services, handling of corporate actions • Growing immobilization • Dematerialization through KELER (deadline for public companies: end of 2004) • 17f-7 eligibility

  8. Net Clearing and Settlement • BIS model 3, net securities/net cash • Multilateral netting • BSE trading • Settlement cycles: • T+2 for bonds • T+3 for equities • Settlement between 8.15-9.00 a.m. SD • Dedicated own/client securities settlement accounts

  9. Derivatives Clearing and Settlement Procedures • Matched trades received from exchanges (real time/EOD batch), settlement price EOD (per product/expiration) • Allocation (at trading level/after trading), Give-up, Option exercise • Clearing & comfirmation on T+0 • Settlement on T+1 8.00 a.m. – variation margin settlement in cash, initial margin settlement in gov’t securities/cash

  10. OTC - Gross Clearing and Settlement • Trade-by-trade BIS model 1 settlement • SFI DVP • Real-time processing between 8.15-16.00 • Markets served: • off-exchange trading and post-trading settlement (broker/custodian) • Budapest Stock Exchange block trading • BSE auctions trading

  11. Cross-Border Settlements • Outbound • Foreign currency DVP • Clearstream account / forwarded services • Automation (KID + SWIFT) • 25-30 % market share • Inbound • Standard custody • Clearstream, OeKB, JP Morgan (ADR)

  12. Share Registrar • No central registry in Hungary • KELER as market leader • Not a continuous recording - updates for corporate actions • STP with CSD • Value added services • Dividend payments • General Meetings • Administrative support

  13. Lending and Borrowing • Automatic • Supporting Stock Exchange Settlements • Pool based • Tri-party • KELER managing collateral • KELER as principal • Lending desk • Flexibility

  14. Repo Transactions • Two types • Hold-in-custody • Delivery • Mainly government securities • Real time processing

  15. FoP Securities Transfers • Two types • Without matching, delivery instruction only • With matching • Widely used • Segregation • Securities leg of against payment transactions (not DVP, a separate GIRO cash transfer needed) • RTGS and batch processing

  16. Collateral Management • Linked to several services • Marked to market daily • Special arrangements for the Central Bank as beneficiary (handling commercial bank limits) • New module in May 2003 • Eligible instruments added • „Collateral for third parties”

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