Status: November 7, 2001

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?	CAVALI use a DVP in accordance with Model 2. There are no plans to implement Model 1.
2.	Does the market have a rolling settlement cycle of T+3 or shorter for all exchange traded instruments?	The market's maximum cycle is T+3. Within this cycle, fixed-income instruments can be settled, as well as equity stocks.
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?	It would not be feasible, and there are currently no plans to reduce the 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?	All the information is received on trade date. The information is sent by the Lima Stock Exchange, and it is delivered to our direct participants, who confirm trade information, adding the data required for trade settlement.
5.	Is the depository scrip-less, and, if not, is it working to enable scrip-less settlement?	All securities settling through CAVALI must be previously dematerialised and recorded in account entries.
6.	Does the market allow partial settlements?	No, it does not allow.
7.	Can the depository accommodate same day turnarounds?	There is a possibility of being able to settle same-day buy/sales, provided the buy takes place before the sale. The buy/sale strategy will be implemented in November 2001.

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.