Securities Deposits

Jorge Clasing de la Mora
>Jorge Clasing de la Mora>President of Money Market Committee

 

Treasury and Securities aspects

In 2007, the Association worked together with S.D. Indeval on implementing that institution's new system, contributing to the transformation of the Central Securities Counterparty, and bringing in more efficient settlement procedures (T+3 settlement in the stock market).

 

New system at S.D. Indeval

At the end of 2006, the Association presented a document to the General Director of S.D. Indeval expressing the industry's agreement with the use of ISO Standard 15022 financial protocol in the operation of the New Indeval System.

This new initiative by the central depository systematizes processes in order to reduce manual operation, improve trading activity and bring Mexico into line with the world's best market practices in clearing in settlement, through use of a standard protocol.

During the year, brokerage firms took part in a number of activities toward the introduction of this Protocol and the startup of S.D. Indeval's new portal. These included:

    • In March 2007, S.D. Indeval presented the 36 institutions that were using the host-to-host communication tool, including 15 brokerage firms, with a description of the process for bringing the protocol into the New System.  The process consists of four phases.
      • > Developing a connection and authentication process.
      • > Implementation of the securities transactional end
      • > Implementation of the cash transactional end
      • > Development notices and inquiry functions.
    • To monitor the progress of each phase, an Implementation Committee was established, with representatives of Banco de Mexico, the ABM, AMIB and SDI.  A testing lab was also provided by Bursatec and Indeval staff to provide ongoing support to 30 institutions in modular tests (incident administration, process monitoring and clients)
      • At the end of April, various processes in the Indeval portal were released in connection with the money market (Valpre-E, system opening), the SCO (guarantees and control), the International Division (foreign investment and transfers) and common elements (unified account statement, file transfer, etc.).
    • Among the operating changes that took place during the year wer
      • > Account structure
      • > Change of accounts at the CSC
      • >Trade confirmation (Matching)
    • Further changes that will take effect in 2008 include:
      • > Cash accounts
      • > Elimination of phase
      • > Portal
      • > Standard 15022 protocol
      • > Security aspects
      • > Permits

    Central Securities Counterparty (CSC)

    The Administration Committee and the Sub-Committee on Treasury and Securities examined the CSC's functioning in order to improve operations and reduce the inherent costs for brokerage firms. Their activities included:

      • Reviewing value at risk (VaR) and lowering the risk factor from 1.75 (established as a contingency last year) to between 1 and 1.3, which is considered sufficient for dealing with the rest associated with contingency events.
      • Analyzing and approving proposed modifications to the basic changes in the CSC's Regulations and Manual, pursuant to the New Indeval System. These included extraordinary settlement processes such as:
        • > Moving up settlement in contingency situations
        • > Returning to the buy-in/sell-out scheme
        • >Extending the settlement period when the parties involved have no objection.

       

      Settlement of trades in T+3 on the local market

      At the initiative of the Equity Market Committee, the settlement term for transactions on the local stock market was changed to reduce administration times.  Trade settlement in T+3 on the local market took effect on March 5, 2007.

      AMIB was in charge of coordinating the distribution of informational brochures to brokerage firms to be inserted into clients' account statement, and the BMV was responsible for publicizing the change among issuers and international markets.

       

      Haircut table for Repo and Securities Lending transactions

      Some members of the Money market Committee have been helping AMIB's Risk Committee to develop the process of revising the haircut table for Repo and Securities Lending transactions.  In principle, they decided that price vendors would evaluate the methodology developed by a work group made up of AMIB and ABM Risk Committees, and use it to update the table.

      The goal is to institutionalize the procedure for reviewing and updating the haircut table, which requires a joint effort.  The new table will apply to brokerage firms, banks, mutual fund managers, specialized retirement fund managers, and rural finance development banks.