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

Questions?

Thank you

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