Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 1

Securities Systems* have a primary responsibility to their users** and other stakeholders. They must provide effective low cost processing. Services should be priced equitably.

* Securities Systems = depositories, settlement and clearing systems
** Users = customers of the securities system, and all other parties to whom the securities system owes a duty of care

1.	Is the board that governs the depository answerable to its users?	Yes, the board of directors of Indeval is drawn from market users and is structured to be representative of all market participants. It is made up of 11 proprietary board members and 11 alternate board members (including president, vice-president and treasurer). Typically the 9 largest participants are the 9 board proprietary members. The proposed changes to the Securities Market Act include the requirement of at least 25% of the board members of Indeval to be independent. These changes are expected to be approved in the following months and should be applicable for 2002.
2.	Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository?	Each member of Indeval owns one share of Indeval, all of which have the same rights and voting privileges. At a shareholder’s level, brokers have the largest voting block as a group as they own 31 of the 56 shares of Indeval. At the board level, the largest participants (that are typically banks) have the largest voting position. Please note, however, that in the financial group structure in Mexico, most brokerage houses are part of a financial group that include a bank. Depending on the relevance of the matter different approvals are required. Some decisions only require approval from the board, others require the CNBV’s approval, and the most important ones require a shareholder’s meeting to vote for the approval.
3.	Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)?	The primary source of income of Indeval is derived from safekeeping (80%) and secondly transaction charges (20%). Indeval also obtains income by acting as paying agent for dividend and interest payments for Mexican issuing companies and the central bank. As such, there is no cross subsidization of products through Indeval.
4.	What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)?	Indeval holds periodic surveys and fee revisions with all its users. It also participates in several working groups with specific committees such as the Insurance Companies Committee, the Mexican Financial Intermediaries Association, the Mexican Pension Funds Association, the Mexican Banking and Securities Commission, the Central Bank, the Mexican Banks Association, etc.
5.	What is the communications strategy of the depository to its stakeholders and how is this run?	Indeval’s regular communication method with its users and members is through its systems, even though written communications are also used. Information posted on Indeval’s web is also considered as a communication strategy and is always available. Indeval also gives presentations to market participants and market committees.