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S.D. INDEVAL / Securities Clearing and Settlement System

S.D. INDEVAL / Securities Clearing and Settlement System. Luis Cano, Risk Management Specialist October 8, 2007. Mission (INDEVAL).

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S.D. INDEVAL / Securities Clearing and Settlement System

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  1. S.D. INDEVAL / Securities Clearing and Settlement System Luis Cano, Risk Management Specialist October 8, 2007

  2. Mission (INDEVAL) • Provide the financial sector with the public interest services of safekeeping, custody, management, clearing and settlement of securities within a framework of maximum assurance and security. • Strive to cover customers needs under transparent and effective services with high quality standards. • In order to fulfil its mission INDEVAL depends on solid finances, adequate technology, adopting and developing the best business practices and on its human resources.

  3. Services and Functions • Custody and Management of Securities.- • Securities safekeeping in physical or electronic book-entry form with authorized custodians. • Physical securitied deposit and withdrawal at the depository’s vault; • Domestic Transactions • Electronic securities transfers • Electronic money transfers • Trade clearing and “DVP¨ settlement • Money Market settlement of transactions, and • Collateral Management • International Transactions • Settlement of transactions executed on the international markets • Corporate action processing on foreign issues • Tax services on US shares • Information Services • Assign ISIN codes to security issues • Services to issuers

  4. Corporate Structure

  5. CCP CCP Mexican Financial Infrastructure CSD, Custodians Derivatives Indeval CSD Issuers Equities & Debt Mexican Stock Exchange Representatives Banks Broker firms Brokers Banks, Custodians Broker firms Payment Systems Investors Institutional Retail • Supervised: • Central Bank • CNBV

  6. Indeval’s Components Participants Participants Delivery Means Indeval’s Financial Protocol Web Site Match Securities Settling System (SLV) Collateral Management Safekeeping Vault Securities Lending Corporate Action Processing (Issuers) Settlement Pre-settlement ( ) Collateralized Repos Safekeeping Accounts Clearing ( )

  7. Transaction cycle INDEVAL - CSD Securities and transactions CCV Post-Trade Pre-Settlement Post-Settlement Pre- Trade Trade Settlement

  8. Corporate Debt Shares issued abroad Centralized Settlement OVER-THE-COUNTER TRANSACTIONS (OTC) BANKING GOVERNMENTAL Brady’s & UMS INDEVAL DVP Settlement by securities transfer followed by net settlement by funds transfer

  9. Amount in Custody USD 809 billion Government Securities USD 238 billion Bank Securities USD 43 billion Shares and Private Debt USD 528 billion Number of securities 4,783 Non-Local Custody USD 25 billion Registered USD 4 billion Global BMV market USD 6 billion Eurobonds USD 15 billion Number of Securities 638 Average daily settlement (June 2007) USD 208 billion Average transaction amount USD 24 billion Indeval Statistics

  10. Indeval Statistics Government Securities Shares and Private Debt 30% USD 528 billion USD 238 billion 65% 43 MM USD Bank Securities 5%

  11. Collateral Requirement Registration Process Trade Incorporation of Transactions Is there sufficient collateral Clearing Appointment of Agents for the Payment of Transactions transacitons Pending settlement Settlement Transactional Process for Settlement YES NO

  12. Trade Extended settlement period Buy- In / Sell -Out Settlement of Transaction in default Non-recurring Period Non-recurring cash settlement Life-cycle of a Transaction T+7 T+8 T T+1 T+3 T+4 T+5 T+6 T+2 8:30 Settlement Cycles Collateral requirements Novation or registration ---------------------------------------------------Market Closing ---------------------------------------------------------------- 15:00 Securities Lending Agents in default 15:30 Securities Lending CCV 15:45 Last settlement cycle Defaulted Transaction Transaction in default 16:00 Clearing Cycle 20:00

  13. Clearing /Settlement • Transaction Clearing: • For each counterparty and issue, there will be a net resulting from the lesser amount of securities compared tof the total amount received versus the total amount delivered. • Price differential due to Clearing: • Since the clearing is performed with agreed prices, there will be a price differential which comes from the Clearing of Transactions. • CCV shall net the price differentials from Clearings for all issues, for each pair of participants; thereby generating a global differential that will be sent for settlement. • Net payment to DVP: • DVP criteria shall be applied to the settlement of the remainder of non-cleared securities which are party to a net settlement.

  14. System of Financial Safeguards The System of Financial Safeguards (SSF) is a set of measures aiming to guarantee compliance with obligations derived from Transactions where CCV performs as a reciprocal creditor and debtor.

  15. Mutualized Clearing Fund Contribution Fund Agent was suspended Clearing Fund Settling Agent was Suspended Sale of the AL shares suspended Financial Safeguards Reserve Fund Equity 80% Equity 20%

  16. CCV Statistics

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