Transcript DIFX Presentation LJ

DIFX Market Model Presentation
for AMEDA
20th April, 2006
by
Nasser Al Shaali, COO – DIFX
&
Muffadal Kagalwala, Head - DIFX CSD & Registry
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Topics covered in this presentation:
 Introduction to DIFC and DIFX
 DIFX Membership
 DIFX Trading
 DIFX Clearing and Risk Management
 DIFX Central Securities Depository
 DIFX Registry
 DIFX Systems
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Introduction to the DIFC and DIFX
 Dubai International Financial Exchange (DIFX) is a company
incorporated under Dubai International Financial Centre (DIFC), a
financial free zone situated in the heart of Dubai.
 Financial activities in DIFC are governed to the international standards
by an independent regulator, the Dubai Financial Services Authority
(DFSA)
 DIFX is the main gateway of opportunities in the GCC as well as
Middle East & Africa. It bridges the gap between Western Europe and
far east.
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Global Perspective of the DIFC
DIFC
believes
a new
financial
time zone
is fast
developing
Singapore
London
4
DIFX : Diverse and Complementary
 The DIFX complements regional and international stock exchanges
 The Exchange is attracting Issuers and Members from across the
globe on a level playing field
5
Products at DIFX
 IPOs
 Secondary Listings and Offerings
 Bonds
 Islamic Products
 Funds, Indices & Structured Products
 Warrants
 Futures & Options
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Products at DIFX
1 March 2006
KHI – Ordinary Shares
06 February 2006
Mashreqbank – EMTN
26 January 2006
Dubai Ports, Customs and Free Zone
Corporation (PCFC) – Sukuks
17 January 2006
National Bank of Dubai – EMTN
27 December 2005
4 Deutsche Bank CROCI Islamic US
Index
14 October 2005
Investcom (Global Depository Securities)
26 September 2005
5 Deutsche Bank Index Tracking
Certificates
In the pipeline: 3-5 further IPOs by end of Q2 2006
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Membership at DIFX
 DIFX membership offers 3 types of Membership to its participants:
 Non Clearing Member
:(NCM) i.e. Trading Only
 Individual Clearing Member :(ICM) i.e. Trading & Own Clearing
 General Clearing Member
:(GCM) i.e. 3rd Party Clearing Only
 DIFX CSD offers a Custodian role to international and regional banks.
 DIFX CSD also allows HNWI and corporate investors to open direct
accounts.
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Members at DIFX
 Today, DIFX has a presence of World class & International recognized
participants on its market as well as strong regional participation.
Trading Members:
General Clearing Members:
Custodian Members:
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DIFX Trading
 The DIFX Trading platform is a “Hybrid” trading system.
 The DIFX Trading system is based on the latest version of AEMS,
NSC trading platform.
 DIFX trading is an anonymous and order-driven market which also
allows for Market Makers to make markets in the products listed.
 DIFX offers GL Win Terminals to members for access DIFX
 GL also has an internet application which has the same features.
 DIFX offers a technical connectivity (API) for users & dealing room
equipment providers who wish to develop their own interface. Access
to the API is available from Dubai or Paris.
 The timing of the trading sessions are from 11.45 am to 04.45 pm
 The exchange operates from Monday to Friday.
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DIFX Clearing
 DIFX offers the Central Counter Party (CCP) for its Clearing Members
 Trade novation facility – DIFX becomes buyer to every seller and seller
to every buyers.
 Eliminates the bilateral counter party risks.
 CCP allows the multilateral netting and reduction of settlement
volumes.
 One delivery obligation per security per date per member.
 One cash obligations per currency per date per member.
 DIFX has outsourced all its banking activities to a Clearing Bank and
the Clearing Bank coordinates with Member’s Settlement Banks for
the funds transfers.
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DIFX Risk Management
 DIFX takes on certain risks in its capacity of Central Counter Party
(CCP) for all the On Exchange trades. The risks are: Counter Party Risks
 Replacement costs Risks
 These risks are addressed by DIFX Risk Management Policies
 Defining Membership criteria with certain capital adequacy
requirements
 Margins from DIFX Members
 Adequate Clearing Fund
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Margins at DIFX – Initial Margin & MTM
 Initial Margin
 DIFX uses the VAR methodology, based on each night Closing Price.
 Initial Margins are therefore expressed as a percentage of the closing
price.
 Variation Margin – Mark to Market Margins (MTM)
 DIFX does not give the notional credits to members – credit variation
margin cannot be used to offset margin obligations
 Margins are accepted in Cash, Securities, CD and Bank Guarantee
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DIFX Central Securities Depository (CSD)
 DIFX owns & operates a Central Securities Depository (CSD).
 Also, The DIFX owns a bare trustee company called ‘DIFX Guardian
Limited’ DIFX Guardian is hold the legal title or beneficial title (where
applicable) for the DIFX CSD.
 The CSD holds DIFX listed securities in a 100% electronically
dematerialized form.
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DIFX CSD Services
 Custody of securities
 Settlement Services for DIFX Clearing Members
 Securities transfer between accounts (Push Transfers)
 Securities transfer with DVP / RVP and DFP /RFP
 DIFX facilitates transfer of securities between CSD accounts and
Registry accounts
 The CSD handles all corporate action processing & IPO processing.
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DIFX CSD Accounts Structure
 Custodian can hold securities for their clients under their account at
the CSD. The custodian account type are Omnibus without details and
OWN accounts.
 Trading Members will operate accounts at the CSD for Settlement
purposes. The account type is normal accounts.
 The Clearing Member will operate accounts at the CSD for Settlement,
and other purposes. The account types are SSP and normal accounts.
 HNWI and Corporate Investors operate accounts at the CSD for
Custody purposes. The account type is normal accounts.
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DIFX Settlement
 DIFX follows a continuous T + 3 rolling Settlement cycle.
 Securities settlement takes place on the DIFX CSD and Cash
settlement takes place through the DIFX Clearing Bank
 DIFX has nominated Standard Chartered as its Clearing Bank.
 All Clearing Members are required to have a Securities Settlement
Pool account (SSP) for settlement purposes and a Settlement Bank
account for Cash.
 Presently, All securities traded are denominated, cleared & settled in
US Dollars.
Settlement activity is not performed on US Fed Reserve holidays.
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DIFX Settlement (T+3)
07:00
13:00
14:00
2.
Reservation
Start Time
1.
DIFX Performs
BOD for
CSD/Registry
14:15
3.
Identification
of shortfall
End Time
14:30
5.
CCP to
inform affected
CMs regarding
recomputed
obligations
4.
Re-compute
securities & cash
obligations
16:30
CB liaises with
SB to conduct
Cash settlement
6.
Send Cash
obligations
to CB
17:15
17:30
19:30
8.
Reconcile and
Compute Cash
Shortfall
7.
Receive
confirmation
from CB
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16:40
9.
Book transfer
(Settlement)
Securities
through CCP
10.
Announce
Completion of
Settlement (excl.
fails) for
T day trades
11.
CCP to create
new trades for
carry forward
of the security
fails
12.
DIFX Performs
EOD for CSD
/Registry
DIFX Fails Settlement (T+4)
07:00
09:00
10:00
2.
Reservation for
fails
1.
DIFX Performs
BOD for
CSD/Registry
10:20
3.
Identify security
shortfall for fails
& compute Cash
Settlement for
the same
10:30
5.
CCP to inform
affected members
regarding
recomputed
obligations
4.
Re-compute
securities
obligations
12:30
CB liaises with
SB to conduct
Cash settlement
6.
Send Cash
obligations
to CB
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12:40
8.
Reconcile and
Compute Cash
Shortfall
7.
Receive
confirmation
from CB
13:00
19:30
9.
Book transfer
(Settlement)
Securities
through CCP
10.
Announce
Completion of
Settlement for
Fails of T+3 day
11.
DIFX Performs
EOD for CSD/
Registry
Future programs of DIFX CSD
 DIFX envisages in future to have links with other International CSD (ICSD)
which will enable DIFX account holders to move securities from one market
to another markets.
 The DIFX also plans to tie-up with regional CSD’s to allow investors to hold
DIFX securities in their existing accounts






DIFX CSD also plans to offer other value added services:Pledge of securities.
Securities Lending & Borrowing of securities (SLB).
SMS alerts, WAP / IVR based services.
eC connect & eC access facilities.
Online risk management profile.
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DIFX Registry
 Holds the Shareholder Register of Legal Title for the Issuer.
 Company Registrar functions.
 Corporate Actions Processing.
 IPO processing for the Issuers & Lead Managers.
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DIFX Clearing, CSD and Registry System (eClearSettle)
 The DIFX uses its eClearSettle system for Clearing, Settlement, CSD
and Registry activities.
 The DIFX eClearSettle systems has been developed by Tata
Consultancy Services (TCS Ltd) India.
 It’s a Highly secured web based application system.
 It is an end to end integrated systems capable of performing Clearing,
Settlement, CSD, Risks Management & Registry Functions.
 It is SWIFT compliant for all internationally accepted messages.
 User friendly reports (PDF) on the pre specified email address.
 On-line query of all accounts & securities balances held.
 Participants can participate & instruct in all corporate action –
mandatory & voluntary.
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DIFX Clearing, CSD and Registry System (eClearSettle)
Web
Interface
SWIFT
ISO 15022
WAP
IVR
email
File
Transfer
Communication Layer
Integrated Risk Management
Registry
Services
CSD
Services
Payment
Services
Cash
Clearing & Settlement
Pledge
Corporate
Actions
Derivatives
Clearing & Settlement
Cross Border
Settlement
Securities
Lending and
Borrowing
Repo
COMMON LIBRARY
Business
Partner
Master
Instrument
Master
Calendar
User
Administration
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Accounts
System
Parameters
Fees
And
Billing
Reports
Thank You
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