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ACSDA Sao Paulo

ACSDA Sao Paulo. New Challenges for CSDs and CCPs 10 November 2006. Contents. The old challenges – All done? The new challenges – What next? Structural issues Extra revenue Reduced costs International benchmarking. The old challenges – All done?. Dematerialised Demutualised

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ACSDA Sao Paulo

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  1. ACSDASao Paulo New Challenges for CSDs and CCPs 10 November 2006

  2. Contents • The old challenges – All done? • The new challenges – What next? • Structural issues • Extra revenue • Reduced costs • International benchmarking

  3. The old challenges – All done? • Dematerialised • Demutualised • For profit model • SFI DVP • Stock lending & borrowing • Central register • Adequately capitalised • Disaster recovery in place

  4. The old challenges – All done?

  5. The new challenges – What next? • Structural issues • Extra revenue • Reduced costs • International benchmarking

  6. BM&F SISBEX CBLC CCP CETIP SELIC BMA CBLC CSD Structural issues The Standard Model The Brazilian Model Risk Transfer Exchange BOVESPA OTC Risk Concentration CCP Risk Minimisation CSD • This is a risk based model • It says nothing about ownership (vertical or horizontal) or governance

  7. Structural issues The Standard Model

  8. Structural issues CSDs using SWIFT Lebanon Midclear Luxembourg Clearstream Mexico Indeval Netherlands Euroclear Netherlands Norway VPS Poland KDPW Russia DCC & NDC Singapore MCD Slovenia KDD Sri Lanka CDS South Africa STRATE Spain IBERCLEAR Sweden VPC Switzerland SIS Taiwan TDCC UAE DIFX UK CREST USA DTCC Argentina Caja de Valores Australia SFE Austria OEKB Belgium Euroclear Belgium & Euroclear Bank Brazil CBLC Canada CDS Croatia SDA Denmark VP Egypt MCSD Finland APK France Euroclear France Germany Clearstream Banking Greece CSD Hong Kong HKFE Hungary KELER Italy Monte Titoli Japan JSCC Korea KSD Latvia LCD

  9. Structural issues A Regional CCP • Advantages • Drawbacks • Potential solutions

  10. Extra Revenues New sources of revenue • Central matching • Issuer services • OTC Derivatives • Fund services CSDs should NOT compete with their participants. There should be no disintermediation CSDs are a natural monopoly and should not abuse this position.

  11. Broker/ Dealers Investors Confirmation Affirmation Average Price Give-ups Give-ins Allocations Allocations SSI Custodians Central Matching Utility Extra Revenues With VMU Without VMU Broker/ Dealers Investors Central Matching Utility (within CSD) Custodians

  12. Reduced Costs Cost centralisation or cost reduction? • Cost reduction via consolidation or competition? Are CSDs different from CCPs? • Reduced costs for participants = revenue opportunities for CSDs • Use the utility to eliminate duplication in the market. Especially if there is no competitive advantage to be gained. Standardisation / Harmonisation is one of the main avenues to reduce costs. • Reduced costs for participants = fee reductions by CSDs • This depends on where you are on the development curve. Thus the need for proper price benchmarking exercise • Cost sharing – IT hub & spokes model • Africa, Greece/Cyprus, Middle East • Outsource to a regional CCP

  13. International benchmarks The Providers • FTSE • Morgan Stanley • CalPERS • Thomas Murray

  14. International benchmarks

  15. International benchmarks Morgan Stanley Emerging Markets Sri Lanka and Venezuela have since been removed from the MSCI list

  16. International benchmarks

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