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?	There are two CSDs in the Colombian Securities Market and each uses a different settlement procedure. The DCV, which is the central depository for government securities, uses the DVP settlement procedures in accordance with BIS Model 1. DECEVAL does not settle securities using DVP settlement procedures. DECEVAL plans to implement a true DVP system similar to BIS Model 1; however, it will be a deferred gross settlement system.
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	The settlement cycle depends on the type of security: Equity: T+3 Fixed Income: T+0
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 no plans to reduce the settlement cycle.
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 for stock exchange transactions is performed by the SE system at the time the trade is executed. For broker to custodian transactions, pre-matching occurs on settlement date minus one. The subcustodian manually compares client’s trade instructions against trade details transmitted from the broker via fax. Pre-matching is not mandatory and it does not guarantee settlement.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	Yes, both depositories are scrip-less.
6.	Does the market allow partial settlements?	Partial settlements are not permitted.
7.	Can the depository accommodate same day turnarounds?	Yes, both CSDs can accommodate same day turnarounds.

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.