Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 5

The major risks in Securities Systems should be mitigated by five key measures:

• the implementation of real delivery versus payment
• the adoption of a trade date plus one settlement cycle in a form that does not increase operational risk.
• the minimisation of funding and liquidity constraints by enabling stock lending and borrowing, broad based cross collateralisation, the use of repos and netting as appropriate
• the enforcement of scrip-less settlement
• the establishment of mandatory trade matching and settlement performance measures.

1.	Does the market use DvP settlement procedures in accordance with one of the recognised BIS models? If so, which one? If the model is not BIS model 1, are there plans to move to this model?	Yes. The Merval uses a Model 3 -DVP settlement system for interbroker trade settlements. In broker to custodian settlements, money is transferred through MEP (Método Electronico de Pagos; electronic funds transfer system operated by the central bank, enabling online realtime payments), securities are transferred through instructions issued by Merval to CVSA.
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	The Merval has a T+3 settlement cycle (securities purchase and sale), and it is fully able to settle on T+0 or T+1.
3.	Could the market reduce the current settlement period to T+2 or below, without increasing fails rates? If so, how would this be achieved, and what plans are there to shorten the existing settlement cycle?	Yes. The Merval has already used settlement procedures on T+2 or shorter periods, without increasing fail rates. Some trades currently settle on T+0 or T+1.
4.	Is matching of trade details achieved on trade date, at least for direct market participants; and by trade date plus one for indirect participants?	Matching occurs electronically on settlement date; Merval being the guarantor of the clearing and settlement of all transactions.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	Settlement of securities (equities and corporate/government debt) takes place in scrip-less form. Securities holdings are transferred between accounts and sub-accounts within CVSA consistently with accounting standards.
6.	Does the market allow partial settlements?	Yes, with net closing amounts at day-end.
7.	Can the depository accommodate same day turnarounds?	Yes, the Depository operates in rapid batch/read time throughout the day.

Bank of International Settlements (BIS) Settlement Models

Model 1:	Systems that settle transfer instructions for both securities and funds on a trade-by-trade (gross) basis, with final (unconditional) transfer of securities from the seller to the buyer (delivery) occurring at the same time as final transfer of funds from the buyer to the seller (payment).
Model 2:	Systems that settle securities transfer instructions on a gross basis, with final transfer of securities from the seller to the buyer (delivery) occurring throughout the processing cycle, but settle funds transfer on a net basis, with final transfer of funds from the buyer to the seller (payment) occurring at the end of the processing cycle.
Model 3:	Systems that settle transfer instructions for both securities and funds on a net basis, with final transfers of both securities and funds occurring at the end of the processing cycle.