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?	The market uses DvP Model 1 for OTC transactions and for fixed income and money market transactions at the exchanges. Nevertheless, funds are not Central Bank funds, so transfers are not final. Within next year, the market should have a real DvP Model 1, for mentioned transactions. Transactions with shares, settled at exchanges use DvP Model 3. There is no plan to move it to DvP Model 1. Cash and securities move separately for both equities and fixed income. Simulates DVP but there is 1 day clearing of vale vista checks Vale vista checks can be used for onward payments on settlement date. (Can pay for securities purchases or to pay taxes etc. Subcustodian will turnaround the check for payment/repatriation. Market is considering interbank payment system.
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	OTC transactions are settled in a rolling settlement cycle of T+0, while transactions settled in the exchanges vary depending on the securities traded: money markets T+0; fixed income T+1 and; shares T+2. Market settlement of equities = T+2 Market settlement of Fixed Income = T+0 or T+1 (Foreign investors usually apply 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?	There are currently no plans to reduce the current settlement periods.
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 of trade details is achieved on trade date for direct and indirect participants. Direct Participant - Equity matching does not occur until T+0 and fixed income it is not applicable as trades usually settle on T+0. The stock exchange trade details are usually sent on T+0 or T+1 via electronic link Indirect Participant - Trade matching for indirect participants occurs on T+0 or T+1. Paper invoices (issued on T+0) that are received from brokers detailing trades are matched with trade instructions from global custodian bank.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	At DCV all trades are scrip-less. It is mandatory for direct participants to have securities first deposited before they sell.
6.	Does the market allow partial settlements?	No within the DCV systems.
7.	Can the depository accommodate same day turnarounds?	Yes, there are same day turnarounds. Turnarounds can be executed for fixed-income instruments only. Stock exchange regulations prohibit turnarounds for equity transactions.

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.