Transcript Document 7344927

Argentina Derivatives Update
OTC Latin America Panel
Derivatives and Risk Management
in Mexico - ISDA Conference
May 8th, 2001
J. Andrew Hall - Commissioner
Securities & Exchange Commission
Buenos Aires, Argentina
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Email: [email protected]
Tel.: 54-11/4345-2876
Web: www.cnv.gov.ar
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Contents
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A Customer Daily Quote Sheet, for Motivation!
Required Infrastructure and Status
Regulatory Framework
Knowledge Management
Basic Products
Potential Clients and Uses
A Questionnaire-Survey
The “To Do” List
Resources
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An ARGENTINE DERIVATIVES
Daily Customer Quote Sheet !!!
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An ARGENTINE DERIVATIVES
Daily Customer Quote Sheet !!!
• Term Structure of Interest Rates, July 1998.
(USD, Argen-Dollar, Argentine Peso)
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An ARGENTINE DERIVATIVES
Daily Customer Quote Sheet !!!
• Argen-Dollar Interest Rate Swaps
(Floating 1 Month BAIBOR Vs. Fixed Rate)
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An ARGENTINE DERIVATIVES
Daily Customer Quote Sheet !!!
• Argentine Peso Interest Rate Swaps
(Floating 1 Month BAIBOR Vs. Fixed Rate)
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An ARGENTINE DERIVATIVES
Daily Customer Quote Sheet !!!
• USD-Argentine Peso Cross-Currency Swaps
(Fixed Pesos vs. 1 Month USD LIBOR)
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Required Infrastructure (and Status):
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Legal
Tax
Accounting
Financial Engineering and Operational
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Required Infrastructure (and Status):
Legal (I)
• Currently, argentine bankruptcy law does NOT allow netting and
margining to take place, EXCEPT in the case of the Federal
Government as a counterparty.
• Thirty-some countries have already modified their Bankruptcy Laws to
allow ISDA-style Master Agreement netting and margining, including
Spain, Italy, France and Germany, jurisdictions traditionally dear to the
argentine legal community for jurisprudence.
• The Argentine Securities & Exchange Commission is sponsoring a
Bankruptcy Law Reform Project for Derivatives to permit netting and
margining for transactions booked under a master agreement.
• The Bankruptcy Law Reform Project, once enacted, will merit clean
netting and margining opinions, according to Cravath, Swaine &
Moore, legal counsel to ISDA.
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Required Infrastructure (and Status):
Legal (II)
• The Argentine Bankruptcy Law Reform Project has the
support/approval of:
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The Senate (Sanctioned in November 2000)
The Ministry of Economy
The Ministry of Justice
The Central Bank
The Buenos Aires Stock Exchange (Bolsa)
The Buenos Aires Securities Market (MerVal)
The Argentine Banking Association
ISDA - International Swaps & Derivatives Association
EMTA - Emerging Markets Association
• The Argentine Bankruptcy Law Reform Project is currently pending
final approval by the Congress (Cámara de Diputados), and...
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Needs YOUR support !!
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Required Infrastructure (and Status):
Tax
• Decree 1130/97
• An important milestone concerning the taxation of
Derivatives in Argentina
• Significantly reduces taxation uncertainty of
Derivatives.
• According to the IFA – International Fiscal
Association, taxation of derivatives ought to be
economically neutral.
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Required Infrastructure (and Status):
Accounting
• Informe Area Contabilidad Nº 17 Argentine
Accounting Standards Board (Federación
Argentina del Consejo de Profesionales)
• A modern, voluntary framework for derivatives
accounting
• Based on IASC – International Accounting
Standards Committee Rule Nº 32
• Since November 1995
• Final, mandatory accounting framework by
IVQ2001
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Required Infrastructure (and Status):
Financial Engineering and Operational
• LIBOR-style Floating Rate Index (BAIBOR, Available!)
• Non-Callable Government Bills and Bonds to build a ZeroCoupon Curve (BonTes and LeTes, Available!)
• Electronic Trading Systems (MerVal SINAC and M.A.E.
SIOPEL, Available!)
• Money Transfer System (FedWire-style Central Bank
MEP, Operational!)
• Internationally well-connected communications networks
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Regulatory Framework
• Argentina permits the free flow of capital
• Central Bank implements Basle Capital Adequacy
Standards according to Interest Rate VAR
• Argentine Securities and Exchange Commission
regulates futures exchanges (Regulation Nº 337 of
1999, based on the U.S. Futures Industry
Association’s Global Task Force’s Financial
Integrity Recommendations)
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Knowledge Management
• Need for potential future competitors to cooperate in
workgroups (“co-opetition”) to create the market they will
later compete in
• Training and Marketing are KEY to developing
Argenmtina’s derivatives markets
• For international banks, Head Office is a source of:
– Experience
– Initial staffing for local operations
– Back-Office Technology for risk management and processing
transactions
• Customers must be educated and marketed before they will
enter the Risk Management Business
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Initially, the Basic Products!
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FRA – Forward Rate Agreement
Interest Rate and Currency Swaps
Caps, Floors, Swaptions
Interest Rate and Government T-Bill and
Bond Futures
• The customer quote sheet shown is an
example of what is already being done!
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Potential Argentina Target Clients
and Derivatives Uses
• Commercial Banks (ALM-Asset and Liability
Management, Reducing Imputed Capital)
• Investment Banks (Structured Note Issues)
• Commercial and Industrial Companies (Bond
hedges, interest rate, exchange rate and
commodity price risk management)
• Insurance Companies (synthetic long term assets)
• Pension Funds, Mutual Funds, Money Market
Funds (interest rate and equity risk management
products)
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A Survey for You!
• Are you interested in the development of financial derivatives
for Argentina? Is your interest a career play?
• Do you believe it’s possible to develop financial derivatives
markets in Argentina?
• Is it likely? This year? In 5 years? In 10+?
• Do you have a client in Argentina that could benefit from
derivatives and risk management? Do you have 5? Or 10+?
• If you work for a foreign financial institution, does your Head
Office trade derivatives?
• If yes, could your Head Office provide you with information
on the development of financial derivatives markets in
comparable (Brazil, Spain, Italy, Australia) jurisdictions and
help you develop a Business Plan?
• Would you be willing to join a team to develop Argentina´s
derivatives markets?
• Would you participate in an ISDA Survey on this subject?
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Your “To Do” List...
• Organize marketing and educational conferences for your
clients
• Survey your clients’ risk management situation and needs
• Use the BAIBOR Floating Rate Index for your floating
rate operations
• Analize the VaR inherent in your Balance Sheet and how
you could reduce this risk, and BIS Imputed Capital, with
the aid of FRAs.
• Contact your Head Office Derivatives Team and develop a
Business Plan
• Support the Bankruptcy Law Reform and contact your
Congressman
• Support ISDA both financially and with your valuable time
and expertise
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Resources...
• For Institutional Support...
ISDA (www.isda.org), and
ADA – Argentine Derivatives Association (www.ada.org.ar)
• For Professional Development...
GARP – Global Association of Risk-Management
Professionals (www.garp.com)
• Build your Library...
(Search www.amazon.com Books for “derivatives” - 765
items! – or “Risk Management” – 1,487 items!, most popular
always listed first)
• Search the Web...
(The www.google.com search engine finds 7,300 pages with
the keywords “derivatives risk management argentina”)
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It´s Your Market!
It´s Your Future!
Rise to the Challenge!
Get I-n-v-o-l-v-e-d!
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