The AMEDA Messaging Hub
PRESENTED BY: Steve EverettDATE: 28 April, 2010
PLACE: 11th AMEDA Conference- Beirut, Lebanon
WHAT IS THE NEED FOR CSD TO CSD LINKS?
Reduction of Cross-Border Settlement costs
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Studies have revealed an increase Globally in CSD to CSD links
Reduction of Systemic Risks in Cross-Border settlement The increased need for Regulation Access to top investment destinations as required by
investors Local Market Benefits The actual CSD Benefits by moving up the Value Chain
CROSS-BORDER TRADE INITIATIVES IN THE AMEDA REGION
Initiatives on trading often lead to initiatives in the post-trade environment
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THE CURRENT CROSS-BORDER POST-TRADE SETTLEMENT ENVIRONMENT IN THE AMEDA REGION
Often in the region links are not CSD to CSD links, however are links between Custodian Banks
Multiple Custodian links outnumber CSD to CSD links in Africa
CSD to CSD linksCustodial Links
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A POSSIBLE FUTURE FOR CROSS-BORDER POST-TRADE SETTLEMENT IN THE AMEDA REGION
By using a ‘virtual Hub’ for all intra-AMEDA messaging and for those from the AMEDA region to the rest of the world
HUBHUB
CSD to CSD links
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Settlement volumes/demand and regional initiatives to increase trading and settlement
Cash Settlement processes for each country and co-operation
amongst Central Banks
Legal/Regulatory/Political barriers for each country
A number of considerations need to be accounted for in the feasibility and Business case for the Hub
Currency and Tax Regimes Sophistication of CSDs and the means of communication (SWIFT,
WAN, etc.)
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Processing of Corporate Actions and the scope , implication and
operation of Custodial Services to service member CSDs
THE RULES OF THE GAME
The AMEDA Messaging Hub
Driving message harmonization through message conversion
Leveraging existing technology and infrastructure by licensing Link-Up Markets
technology to a virtual ‘Hub’ through the existing Link-Up Shareholders, Strate and
MCDR
Routing of messages to Link-Up Shareholders, either Strate or MCDR dependent on
the geographical proximity of a message sender by ‘sponsoring another CSD’
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Using the proven Link-Up Markets technology, the Messaging Hub will be a ‘Link-Up’ Markets for the AMEDA Region
THE BUSINESS MODEL
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The Hub will be closely aligned to the business model for Link-Up Markets in Europe
The Business Model
The solution should provide for both DVP and FoP settlement options Local Cash Settlement Agent banks in each country will remain Pre-Funding of cash for settlement of equities and bonds to reduce credit risks The local CSD Participant for inbound settlement will only facilitate the cash-leg
of transactions being processed through the AMEDA Messaging Hub The Hub would enable to message conversion functionality required in order to
harmonize messages
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THE BUSINESS MODEL (CONT.)
CSDs in the AMEDA region can cost-effectively move up the Value Chain
The Benefits THE BENEFITS
Enabling settlement of foreign transactions at domestic CSD rates and reducing the number of indirect costs (through multiple intermediaries) associated with cross border settlement
An alternative channel to enable foreign investment into and out of Africa The opportunity to offer additional, white-labelled, services to (the African
investor Market) and move up the value chain Low costs for current CSDPs to use the service, as domestic infrastructure
is used to effect a cross-border settlement Harmonization of legal/regulatory issues between AMEDA member country
CSDs
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Revenue stream diversification for African CSDs through the new service of cross-border settlement
CSDs may make use of Link-Up technology without being a Shareholder and meeting the stringent requirements of being a Link-up Member
Status
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A whitepaper has been submitted to the AMEDA board for the approval
of the initiation of sub-committee to work on a business case and
the subsequent project on behalf of AMEDA.
RECOMMENDATIONS - THE AMEDA BOARD
Approve the Adoption of the European Linkup Markets Approach within the AMEDA to gain leverage on the financial, infrastructure or legislative aspects.
RECOMMENDATIONS - THE AMEDA BOARD
Technical, Technological infrastructure needs Collect the necessary data from all interested
members to better understand their individual needs
To develop a meaningful business case for this initiative.
Approve the standardisation Task Force to find study and solutions to enable AMEDA members benefits:
RECOMMENDATIONS - THE AMEDA BOARD
Providing the model for AMEDA member collaboration in terms of how AMEDA can effectively plan and execute the initiative at hand.
Sanction initiative and give the green light for a feasibility study to build the business case
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