ACSDA SEMINARACSDA SEMINAR
BEST ACHIEVEMENTS ON DEPOSITORY, CLEARANCE
AND SETTLEMENT SERVICES IN THE AMERICAS
APPROACHES TO TRUE APPROACHES TO TRUE DVPDVP
ACSDA SEMINARACSDA SEMINAR
BEST ACHIEVEMENTS ON DEPOSITORY, CLEARANCE
AND SETTLEMENT SERVICES IN THE AMERICAS
APPROACHES TO TRUE APPROACHES TO TRUE DVPDVP
Margarida BaptistaNovember 16, 2001
AGENDA
The New Brazilian Payment System
CBLC at a glance
CBLC Model: SFI-DVP 3
The New Brazilian Payment System
CBLC at a glance
CBLC Model: SFI-DVP 3
CBLC at a glanceCBLC at a glanceMajor milestones Major milestones ...... 1997: CBLC creation1997: CBLC creation
CSD, CCP and settlement corporation for equities (cash, options and forward markets)
2000:2000: CBLC becomes the only CSD, CCP and settlement corporation for the Brazilian equities market (exchanges and OTC markets)
2000/2001: Diversification process2000/2001: Diversification process Government Bonds: Clearance and
Settlement functions Corporate bonds: CSD, clearance and
settlement corporation, CCP
CBLC at a glanceCBLC at a glanceWhat we are ... ...
CSD for private issued securities (equities and corporate bonds)
Clearing and Settlement Corporation: equities
corporate bonds
government bonds
Central Counterparty (equities and corporate bonds)
CBLC at a glanceCBLC at a glanceNear future Near future ......
April 2002: April 2002: CCP and guarantor for equities, debt
instruments (corporate and government) and money market
Exchanges and OTC markets
New operational model: SFI-DVP 3
NEW BRAZILIAN PAYMENT SYSTEMNEW BRAZILIAN PAYMENT SYSTEM
AGENDA
The New Brazilian Payment System
CBLC at a glance
CBLC Model: SFI-DVP 3
The new Brazilian Payment The new Brazilian Payment SystemSystemMain objectives Main objectives ......
Reduction of systemic risk Compliance with international best practices and
recommendations
Improvement of the Brazilian market competitiveness
The new Brazilian Payment The new Brazilian Payment SystemSystemMain features Main features ......
Control of reserves accounts in real time by Central Bank, not allowing overdrafts (RTGS payment facilities)
SELIC (Central Bank’s depository and government bonds settlement system) operating in a RTGS fashion
Implications: Maximum principal risk mitigation
Greater liquidity requirements
Minimizing ...
The new Brazilian Payment The new Brazilian Payment SystemSystemMain features Main features ......
Private clearinghouses operating DNS systems with direct access to Central Bank systems (SELIC and STR) through settlement accounts FOREX Payments Securities
Central Central CounterpartiesCounterparties
COMPLEMENTARITY RTGS AND DNS COMPLEMENTARITY RTGS AND DNS SYSTEMSSYSTEMS
The new Brazilian Payment The new Brazilian Payment SystemSystemThe Central Counterparties The Central Counterparties Role Role ...... Definition (CPSS-IOSCO): “an entity that
interposes itself between the counterparties to trades, acting as the buyer to every seller and the seller to every buyer”
Main function: To measure, manage and assume counterparty
risk Main advantages:
Guarantee of anonymity Supports multilateral netting Absorption of risks between trade and the
settlement period Protection of participants in the event of a
participant default Prevents the spillover of securities settlement
risks to the payments system
AGENDA
The New Brazilian Payment System
CBLC at a glance
CBLC Model: SFI-DVP 3
CBLC Settlement ModelCBLC Settlement ModelWhat was taken into account ... What was taken into account ...
Objectives and regulations of the New Brazilian Payment System
International best practices and recommendations
Profile and the characteristics of the Brazilian financial market
CBLC accumulated expertise as a central counterpaty and settlement corporation
CBLC Clearance and Settlement CBLC Clearance and Settlement ModelModel General characteristics General characteristics ... ...
CBLC as a central counterparty SFI-DVP model 3 - multilateral netting
both for securities and cash legs For cash leg, multilateral netting across
different markets and instruments - single net position
Same day finality in central bank money Settlement cycles:
Equities: T+3 Corporate Bonds: T+1 Government Bonds: T+0 and T+1
Settlement window: 3:30 p.m.-3:55 p.m.
Allocation toBeneficial
Owner
Allocation toBeneficial
Owner
• Allocation Process
• Information to Brokers
Information Information
• Trading and Matching (Trading Systems)
TradingTrading(Trading Systems)(Trading Systems)
Broker ABroker A Broker BBroker B
Sell
OrderBuy
OrderMatchingMatching
CBLCCBLC
• After Matching all trades are reported to CBLC
• CBLC becomes CCP to Clearing AgentsCBLC becomes CCP to Clearing Agents
CBLCCBLC(CCP)(CCP)Clearing Agent A Clearing Agent A Clearing Agent BClearing Agent B
• Multilateral Netting Multilateral Netting
Multilateral Netting
Broker A1Broker A1
Settlement Bank ofSettlement Bank ofClearing Agent AClearing Agent A
Broker B1Broker B1
Settlement Bank ofSettlement Bank ofClearing Agent BClearing Agent B
• Netting Information (Securities and Netting Information (Securities and Cash)Cash)
CBLC’s Settlement Account in CBLC
Depository Service
CBLC’s Settlement Account in SELIC
Delivery Process to Delivery Process to CBLCCBLC
CBLC has settlement accounts in SELIC Depository Service Bonds (Government Bonds) and in CBLC Depository Service (Equities and Corporate Bonds).
Selic Participant must instruct the delivery.
SELICSELICParticipantParticipant
CBLC CBLC Depository ServiceDepository Service
(Equities and Corporate Bonds)(Equities and Corporate Bonds)
SELICSELICDepository ServiceDepository Service
(Government Bonds)(Government Bonds)
Securities are transferred on net basis from the seller accounts to CBLC Settlement Accounts:• T+3 - Equities (11:00 a.m.)
• T+1 - Corporate Bonds (2:00 p.m.)
•T+0/T+1 - Government Bonds (2:00 p.m.)
Payment Process to CBLC (3:30 p.m.)Payment Process to CBLC (3:30 p.m.)
STR STR (Central Bank Money(Central Bank Money
Transfer System)Transfer System)
CBLC Accountin STR
Clearing Clearing Agent CAgent C
SettlemenSettlement t
BankBank
Clearing Clearing Agent AAgent A
SettlemenSettlement t
BankBank
Clearing Clearing Agent BAgent B
SettlemenSettlement t
BankBank
At Settlement Window CBLC At Settlement Window CBLC coordinates DVP model 3coordinates DVP model 3
STR (Central Bank Money Transfer System)STR (Central Bank Money Transfer System)
CBLC CBLC AccountAccountin STRin STR
Settlement BankSettlement Bank(Clearing Agent (Clearing Agent
A)A)Settlement BankSettlement Bank(Clearing Agent (Clearing Agent
B)B)
Settlement BankSettlement Bank(Clearing Agent (Clearing Agent
C)C)Settlement BankSettlement Bank(Clearing Agent (Clearing Agent
D)D)
Depository ServicesDepository ServicesCBLC CBLC
AccountsAccountsinin
DepositoryDepositoryServicesServices
CBLCCBLCDepository Depository Services Services
SELICSELICDepository Depository
ServicesServices
SFI - Delivery versus Payment (3:55 SFI - Delivery versus Payment (3:55 p.m.)p.m.)
CBLC Clearance and Settlement CBLC Clearance and Settlement ModelModel Failure Procedures Failure Procedures ......
Settlement window: 3:30 p.m.- 3:55 p.m.
Delivery failure :
Securities lending
Buy-in
Payment failure :
Financial Credit Lines
Collateral Execution
Settlement Fund
Segregated Networth
THANK YOU VERY MUCH !THANK YOU VERY MUCH !