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Innovation at ACSDA CSDs March 2011

Innovation at ACSDA CSDs March 2011. DCV in figures Innovation at DCV In detail, Central Repository for Forward Contracts The Derivatives Market in Chile Overview Central Repository for Forward Contracts Background Current issues with existing operating procedures

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Innovation at ACSDA CSDs March 2011

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  1. Innovation at ACSDA CSDs March 2011

  2. DCV in figures • Innovation at DCV • In detail, Central Repository for Forward Contracts • The Derivatives Market in Chile • Overview • Central Repository for Forward Contracts • Background • Current issues with existing operating procedures • Features of the new service • Service model • Phase 2 • Conclusions

  3. DCV in figures • Chile’s national CSD with 18 years of experience in the market • 171 participants • Shareholders: • Pension Funds 27% • Banks 27% • Santiago Stock Exchange 21% • DTCC holding ILLC 10% • Life Insurance Cos. 9% • Electronic Exchange 5% • Others 1% • US$ 250 billion under custody in local securities • Transactions registered in 2010: US$1,234 billion • Transactions registered in 2010: 1,6 million • Through DCV Registros (subsidiary) maintains Corporation’s shareholders registries • Role of NNA, issuing ISINs for Chilean securities • International custody services for local participants investing abroad

  4. Innovation at DCV • International market • MILA • Some of the initiatives related with the Relationship Agreement signed with DTCC • Fund/SERV USA and eligible mutual funds quotas – pension funds • OMGEO – stockbrokers • Local market • Local Mutual Funds quotas – pension funds • Invoices – pension funds • Electronic registration of pledges – banks • Offering of new stocks – stockbrokers • Centralized Registry of powers of attorney – stockbrokers and banks • Repo transactions – banks and stockbrokers • Central Repository for Forward Contracts – Pension funds and banks

  5. The Derivatives Market in Chile Overview: • Active OTC derivatives market in Chile • Forwards (82%) • Swaps (18%) • Currencies in Forwards Contracts • CLP - US dollar (95%) • Euro – US dollar (2%) • US Dollar – Yen (2%) • Others (1%) • Volumes in Forwards Contracts • Notional amounts: US$ 1,5 billion (daily average) • # of CLP – US dollar contracts: 70,000 annual basis • Potential new gross income • 2011 USD 175,000 • 2012 USD 500,000 5

  6. Central Repository for Forward Contracts Background: • The idea was originated from the need to provide a comprehensive and centralized solution for pension funds / banks regarding their forward contracts: subscription, registration and custody • This is an opportunity to generate a new source of funds for DCV • We worked together to define the scope, objectives and commitments • An agreement between Pension Funds and Banks took place in March 2010; this became the business reason for the project • The potential market also considers current institutional participants

  7. Central Repository for Forward Contracts Current issues with existing operating procedures • Lack of standard procedures • Too many administrative procedures (Too much time-consuming paperwork) • Need to keep updated records of representatives authorized to sign the contracts • Receiving contracts with inaccurate data • Receiving signed contracts several days after the respective operations agreements • Involved many operational and financial risks • High operating costs 7

  8. Central Repository for Forward Contracts Features of the new service • Electronic and centralized subscription, registration and custody • Official legal record • Digital certificate with an advanced electronic signature • Control over the representatives with power of attorney to sign • Control of expiration dates • On-line information (100% reliable) • Pension Fund Services: Daily reports to the Pension Funds Superintendence

  9. Central Repository for Forward Contracts

  10. Central Repository for Forward Contracts Phase 2: • Expanding to other types of Forwards contracts • Including Swaps • “Re-couponing” functionality on signed contracts • Payment instructions to banks • Supporting collateral management • Integration with the Exchanges • Registration of contracts between a participant and their customers

  11. Central Repository for Forward Contracts Conclusions: • Service started on last March 15th • Smooth incorporation of new participants • Aims to build a modern, standard and competitive infrastructure to provide high efficiency and safety levels to the market

  12. THANK YOU!

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