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?	Both the SCO and the SIDV systems are true DVP mechanisms. The SCO follows the BIS Model 3 as interbroker equity settlements occur on a bilateral net basis in seven settlement cycles throughout the day. Indeval is in the process of adapting the SCO system to a multilateral net basis for interbroker equity settlements. The SIDV system, which handles broker to custodian equity settlements and all fixed income settlemens, follows the BIS Model 1 as settlement occurs on a 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).
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	The settlement cycle for exchange traded instruments is T+2. The settlement cycle for fixed income instruments, which are traded OTC but which settle through Indeval, can settle on a T, T+1, or T+2 basis. Failed transactions are bought in no later than T+5.
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?	Mexico has a T+2 settlement cycle. There are plans to move to a T+1 settlement cycle, however authorities and participants are discussing the risks considering the relevance of the cross border activity in Mexico which may account more than 60%.
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?	For equity transactions executed on the BMV, matching is performed by the BMV at the time the trade is executed. The trade is automatically transferred by the BMV to Indeval where the transaction is registered for settlement. For broker to custodian transactions, prematching occurs on settlement date (T+2 for equities) by phone. Indeval’s SIDV system requires the deliverer to input the transaction and the receiver to confirm or match it. Until confirmed an inputted transaction can be cancelled. Citibank has a prematch T+1 program in which some market counterparts participate. This program is performed on information purposes only and does dot guarantee settlement.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	Equities are held in physical form immobilized in Indeval’s vault and represented by book entry. Indeval has discussed the complete dematerialization of the securities that it holds, however no implementation date has been announced.
6.	Does the market allow partial settlements?	The market allows partial settlements through the SCO system for BMV executed trades only. There are no partial settlements allowed through the SIDV system, for broker with custodian or Fixed Income transaction settlements. If ever decided to do so, the original instruction must be cancelled and a new instruction with new details must be inputted.
7.	Can the depository accommodate same day turnarounds?	Yes, Indeval can accommodate same day turnarounds for both equity and fixed income securities. For interbroker turnarounds, the receive portion must settle no later than the next to last settlement cycle in order for the deliver portion to settle in the final settlement cycle.

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.