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Cross-Border Custody Links Case: Central America and Panama

Cross-Border Custody Links Case: Central America and Panama. Iván Díaz G. General Manager Central Latinoamericana de Valores, S.A. A Bit of History: Background of the CSDs * in the Region. Project: “Harmonization of the Securities Markets in Central America.

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Cross-Border Custody Links Case: Central America and Panama

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  1. Cross-Border Custody Links Case: Central America and Panama Iván Díaz G. General Manager Central Latinoamericana de Valores, S.A.

  2. A Bit of History: Background of the CSDs* in the Region Project: “Harmonization of the Securities Markets in Central America • Project sponsored by BID-BOLCEN • Duration of the Project: 1995-1998 • Countries involved in the project: • Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica y Panama. *(Central Securities Depository)

  3. CEHVAL CAJA DE VALORES CEVAL CENIVAL CEDEVAL LATINCLEAR CEVAL Central Depositories in the region: Guatemala El Salvador Nicaragua Costa Rica Panama Honduras

  4. Development of the Securities Markets in the Region

  5. About the Regulatory Framework : • Progress on the equity markets regulation : • Costa Rica: Adoption of a securities law in 1997 • Panama: New regulatory scenario in 1999 • El Salvador: Securities Market Law (1994) and subsequent regulations. • El Salvador: Electronic recording of Securities by Book-Entry Law (2002) – Mandatory immobilization / dematerialization as of September, 2003. • Nicaragua: A new Capitals Market is approved. November, 2006. • Guatemala: The securities market is regulated by the Securities and Goods Law which was approved in 1996.

  6. CSD Developments: International Best Practices and Cross-border Custody Agreements: Experiences in Panama: Year 2001- in compliance with applicable regulations the mandatory immobilization and/or dematerialization of the market is in effect Year 2002: Latinclear and Ceval of Costa Rica sign an International Custody agreement Latin Clear and Ceval of Costa Rica link their systems electronically. Year 2003: Latinclear signs a a Custody Agreement with Cedeval from El Salvador. Note: Other CSDs in the region have entered into bilateral International Custody Agreements on a reciprocal basis.

  7. As a result of the preceding … • The structure improves as well as the adoption of international standard. • Cross-border custody increases • Based on the establishment of the CSDs and the signing of the custody agreements, international custody activity has become more active, both in the public securities sector and in the private sector. • The regulatory bodies have also promoted securities trading beyond the domestic markets : • In 2003, the Regulators of Panama and El Salvador sign an Agreement of Acknowledged Jurisdiction (a more dynamic binational listing) • In May of 2005; the National Securities Commission of Panama accepts Costa Rica as as an Acknowledged Jurisdiction.

  8. The Links in NumbersCaso: Latinclear/Cedeval Term Year 2006 Year 2007 (to 31 Aug) Type of Transaction Amount (In USD million) No. Tx Amount (In USD million) No. Tx Transfers 69.5 42 27.4 20 Capital payments upon maturity 65.2 8 23.9 2 Interest Payments 7.1 45 4.5 28 Capital Payments 1.1 4 3.9 9 Withdrawals 1.9 2 0 0 Total 144.8 101 159.6 59

  9. Market Profile

  10. Regional Profile of the Market -CSD’sNumbers December 2006 Balance of Regional Custody: US$23,323 million

  11. Main CSD Services

  12. Intruction Routing Model in Central America and Panama

  13. INSTRUCTIONS ROUTING 1.- PURCHASING TRANSACTION: FECHA DE OPERACION SETTLEMENT DATE COMMERCIAL BANK SETTLES WITH THE LOCAL INTERMEDIARIE’S ACCOUNT PURCHASES FOREIGN CURRENCY IN LOCAL MARKET CONFIRMS TRANSACTION PAYMENT CONFIRMS PURCHASE INSTRUCTION (PRICE, DATE AND AMOUNT) FOREIGN BROKER LOCAL BROKER INSTRUCTS PURCHASE ORDER INPUTS PURCHASE ORDER (FOREIGN BROKER) CONFIRMS TRANSACTION INSTRUCTS FUTURE RECEPTION OF SECURITIES FROM ABROAD CONFIRMS DEPOSIT OF SECURITIES IN HIS ACCOUNT LOCAL STOCK MARKET TRANSACTION DETAILS FOR LOCAL SETTLEMENT CONFIRMS SECURITIES DEPOSIT IN ITS ACCOUNT UNDER THE NAME OF THE FOREIGN BROKER FOREIGN CUSTODIAN LOCAL CUSTODIAN COMPARE AND MATCH TRANSACTION DETAILS SIMULTANEOUSLY

  14. INSTRUCTIONS ROUTING 2.- DIVIDEND AND INTERST PAYMENT : LOCAL ISSUER FOREIGN BROKER INFORMS ENTITLEMENTS WITH TIMING AND THE CHARACTERISTICS OF THE LOCAL MARKET MAKES CASH PAYMENT DEPOSITS CASH IN THE CORRESPONDING LOCAL CURRENCY ANOUNCES ENTITLEMENT AND ITS DETAILS NOTIFIES TYPE OF ENTITLEMENT AND ITS DETAILS LOCAL DEPOSIT FOREIGN DEPOSITOR INSTRUCTS FX TRANSACTION DELIVERS CASH IN THE CORRESPONDING FOREIGN CURRENCY COMMERCIAL BANK

  15. Thanks!! www.latinclear.com

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