1 SAME DAY SETTLEMENT WITH DVP Rogerio Martins November 14, 2002 ACSDA LIMA.

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SAME DAY SETTLEMENT WITH DVP

SAME DAY SETTLEMENT WITH DVP

Rogerio MartinsNovember 14, 2002

Rogerio MartinsNovember 14, 2002

ACSDA LIMA

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TópicosTópicos Contents

1. The New Brazilian Payments System

2. CETIP Overview

3. Same day net settlement

4. Same day gross settlement

5. Same day guaranteed net settlement CENTRALCLEARING

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TópicosTópicos Contents

1. The New Brazilian Payments System

2. CETIP Overview

3. Same day net settlement

4. Same day gross settlement

5. Same day guaranteed net settlement CENTRALCLEARING

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Objectives Objectives

Reduce systemic risk - credit risk management transferred to the private sector

RTGS and money market securities depositary in Central Bank

Private DNS clearing houses for securities, derivatives, interbank payments and foreign exchange

Certainty and finality of settlement

Reduce gap between trading and settlement

Legal certainty of multilateral netting and execution of guarantees

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ActionsActions

Credit risk management and support migrates from Central Bank to market participants through clearing houses

Central Bank acts as:

System regulator

Risk control supervisor

RTGS operator

Money market CSD operator

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The new sceneryThe new scenery

FX

SELIC

BM&F

CETIP

CB MONEY ACCOUNTS

CENTRAL

CBLC

COMPECHECKS &DOCS

STOCKEXCHANGE

CIPINTERBANKSPAYMENTS

MONEYMARKE

T

FIXED INCOME AND DERIVATIVES

COMMODITIES &FUTURESEXCHANGES

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TopicsTopics Contents

1. The New Brazilian Payments System

2. CETIP Overview

3. Same day net settlement

4. Same day gross settlement

5. Same day guaranteed net settlement CENTRALCLEARING

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ProfileProfile

One of the main Latin American fixed income

securities depositories

Private and public securities

OTC registration and settlement

Electronic trading system - CetipNET

Non-profit organization

Nation-wide coverage

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Planet CETIPPlanet CETIP

US$ 156 billion in Custody

US$ 3 billion in average daily turnover

US$ 2 billion in daily financial settlement

4,430 participants

43 types of securities and derivatives

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ParticipantsParticipants

Total: 4,430

Consumer Credit, Leasing and Mortgage

118

Broker-dealers220 Banks

220Non Financial Organizations

881

Investment Funds2,991

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Custody by volumeCustody by volume

Derivatives48%

Private45%

Government Bonds

7%

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The new CETIPSettlement Alternatives

The new CETIPSettlement Alternatives

CETIP

Secondary

Public / Private

Multilateral Netting

Gross Settlement

And Bilateral Netting

New Issues

Redemption and Events

Multilateral Netting

CENTRALCLEARINGSTR

Central Bank

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How we operateHow we operate

Primary and secondary markets

Transactions registered by double entry

Segregation of assets held by participants

STP - integrated trading, book entry, settlement and custody

DVP - delivery versus payment

Financial settlement in Central Bank money

CETIP is not a Central Counterpart

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How we operate How we operate

OTC Registration

Electronic Trading System

Central Bank

FinancialSettlement

Custody

STP

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CustodyCustody

Dematerialized electronic registry

Segregated by participant

Custody watch over the ‘life’ of securities,

automatically executing known events

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TopicsTopics Contents

1. The New Brazilian Payments System

2. CETIP Overview

3. Same day net settlement

4. Same day gross settlement

5. Same day guaranteed net settlement CENTRALCLEARING

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DNS SettlementDNS Settlement

Input data checking and matching

Securities flagged in seller´s account until

payment finality

Confirmation by settling banks

Settlement in T+0

BIS type 2 (gross/net)

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DNS Financial SettlementDNS Financial Settlement

Integrated to Custody

Issuer risk only

Multilateral netting

Buyer´s bank pays to CETIP´s central bank

money account

CETIP pays to seller´s bank central bank money

account

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DNS Delivery Versus PaymentDNS Delivery Versus Payment

SELLERCustody

BUYER Custody

Reserve Account Bank A

Reserve Account Bank B

GROSS

NET

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TopicsTopics Contents

1. The New Brazilian Payments System

2. CETIP Overview

3. Same day net settlement

4. Same day gross settlement

5. Same day guaranteed net settlement CENTRALCLEARING

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RTGS Matching and SettlementRTGS Matching and Settlement

Input data checking and matching

Securities flagged in seller´s account until

payment finality

Same day settlement in real time

BIS type 1 (gross/gross)

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RTGS Financial SettlementRTGS Financial Settlement

Primary and secondary markets

Integrated to Custody

Real Time Gross Settlement

Buyer´s bank pays to CETIP´s central bank

money account

CETIP pays to seller´s bank central bank

money account

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Delivery Versus PaymentDelivery Versus Payment

SELLERCustody

BUYER Custody

Reserve Account Bank A

Reserve Account Bank B

GROSS

GROSS

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TopicsTopics Contents

1. The New Brazilian Payments System

2. CETIP Overview

3. Same day net Settlement

4. Same day gross Settlement

5. Same day guaranteed net settlement CENTRALCLEARING

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Guaranteed Settlement - CENTRALGuaranteed Settlement - CENTRAL

DNS Settlement in T+0 or T+1

Real Time Novation

Securities move to CENTRAL in real time

Real time collateral management

Day trades and short selling

DVP

BIS type 3 (net/net)

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Guaranteed Settlement - CENTRALGuaranteed Settlement - CENTRAL

Private and public securities

Secondary market

Double entry checking and matching done

by CETIP

Limits and trades approval by CENTRAL

STP Participant/CETIP/CENTRAL

Securities lending

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Delivery Versus PaymentDelivery Versus Payment

SELLERCustody

BUYER Custody

Reserve Account Bank A

Reserve Account Bank B

NET

NET

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www.cetip.com.brwww.centralclearing.com.brrogeriomartins@cetip.com.br

www.cetip.com.brwww.centralclearing.com.brrogeriomartins@cetip.com.br