By embracing this fragmented market, we will create a globally attractive trading environment. The Independent Clearing and Settlement House of the Americas (ICSA) will be the first functional component of the Centre, acting as a catalyst for the development of the full range of services it will come to offer.
The ICSA is to be supported by a team of experts in the Latin American markets, whose in-depth local knowledge will allow us to address existing inefficiencies. The result for participants is a reduction in costs and operating risk in a well-regulated environment.
The key features of the clearing and settlement house are:
- It specialises in Latin America
- It is developed in partnership with leading market participants
- It uses existing, robust, advanced, state-of-the-art technology
- It is linked to active electronic trading platforms in the region
- It is operated as a market utility
- Its ownership and governance will be driven by market participants
It differentiates itself from other similar entities through:
- Its focus on Latin American markets, other clearing houses being focused on Europe and North America
- Its location at the heart of the region
- Its recruitment of specialists in Latin American markets who bring local knowledge and expertise
- The benefits of a specially tailored regulatory environment
Initially the clearing house will concentrate on providing post-trade services, cash flow reconciliation and netting.
- Communication interface
- Transaction validation and matching
- Trade information warehouse
- Cash flow reconciliation and netting
- Support functions
- Full CCP service
- Cash settlement evolving to include physical settlement
- Collateral management
- Product coverage extended to include delivery of physicals
- Fixed income
- CDS
- Interest Rates
- FX
- Basket of Products
- Fixed income
- CDS
- Interest Rates
- FX
- Basket of Products
The service will bring a number of benefits from the beginning of phase 1:
- Increase post-trade efficiency through electronic confirmation or affirmation, enabling mismatches to be identified and corrected earlier, resulting in faster creation of a legal contract
- Create an electronic audit trail to facilitate resolution of disputes
- By pre-matching cash payments, make it possible to identify and correct errors before the payment date
- By netting transactions, reduce the number of cash payments
- Provide a central repository of contract details, making it easier to keep track of counterparties when contracts are assigned
Experience in other markets has shown that processing efficiencies of this kind reduce risk and costs, resulting in increased market activity.
The clearing house will be available to process trades dealt bilaterally between market participants or executed on an electronic trading platform, as well as being able to backload existing trades.
Initial ICSA model:
