CENTRAL SECURITIES DEPOSITORIES FUNCTIONS: EL SALVADOR CASE

ACSDA 2005 Seminar

Punta del Este, Uruguay, October de 2005.

MARIANO NOVOA FLORESCEDEVAL-President

Presentation Estructure

Antecedents. El Salvador Securitie’s Market Evolution

Central Securities Depository Evolution

Goals Achieved

Depository Benefits

Proyects in Development

CENTRAL SECURITIES DEPOSITORIES FUNCTIONS: EL SALVADOR CASE:

1. ANTECEDENTS

1.1 El Salvador Securitie’s Market Evolution.

1989

Constitution of the society named “Mercado de Valores de El

Salvador” (BVES)

1989

Constitution of the society named “Mercado de Valores de El

Salvador” (BVES)

1994

Issue of the Securities Market Law

1994

Issue of the Securities Market Law

1992

Inauguration and first trade in the stock exchange.

1992

Inauguration and first trade in the stock exchange.

2002

The Congress approved the Electronic Book-Entry Law

2002

The Congress approved the Electronic Book-Entry Law

2004

Dematerialization of securities

2004

Dematerialization of securities

2004-2005

Dematerialization of securites issued by the goverment of El

Salvador and the Reserve Central Bank of el Salvador

(BCR)

2004-2005

Dematerialization of securites issued by the goverment of El

Salvador and the Reserve Central Bank of el Salvador

(BCR)

1997

Beguinning operations of Securities Superitendence of El

Salvador

1997

Beguinning operations of Securities Superitendence of El

Salvador

1999

Implementation of the Electronic Settlement System

1999

Implementation of the Electronic Settlement System

1998

CEDEVAL begins operations

1998

CEDEVAL begins operations

1961

Established the first stock exchange in El Salvador.

1961

Established the first stock exchange in El Salvador.

1976

The low negociation levels brought the closing of the stock

exchange.

1976

The low negociation levels brought the closing of the stock

exchange.

1986

The promoting members of the actual stock exchange

1986

The promoting members of the actual stock exchange

1999

Inscription and trading of international securites

1999

Inscription and trading of international securites

1999

Implementation of Risk Clasification to both Issuers

and Securities Issues

1999

Implementation of Risk Clasification to both Issuers

and Securities Issues

2002

Inauguration of the Electronic Trading System, SIBE

2002

Inauguration of the Electronic Trading System, SIBE

1.2 Evolution of Central de Depósito de Valores: CEDEVAL

Main objectives of CEDEVAL:

To contribute to the reduction of risk in the securities processing industry.

To insure investors the availability of the securities adquired by the investors.

To provide information in a safe and flexible inviroment, to contribute the investor’s best decision.

CEDEVAL S.A. DE C.V. Within the salvadorean securities market, is the specialized entity in safekeeping and administration of securities via its higly secure electronic system.

1.2 Evolution of Central de Depósito de Valores (Cont...)

Operations begining.

19981998

20012001

In 2001 in force The Money Integration Law.

International Custodian’s agreements:

Clearstream Banking and Deutsche Bank

20022002

Electronic Book-entry Securitie’s Law approbation.

The creation of The Issue’s Electronic Register and Securities Accounts Electronic Register.

Improvements in the technologic platform of CEDEVAL.

September of 2003 CEDEVAL and BURSATEC (México) sign a contract of permanent and actualized maintenance of the operations and values accounts in custody.

Dematerialization of securities.

20032003

1.2 Evolution of Central de Depósito de Valores (Cont...)

20042004

TrueSecure’s Certification as a entity that offers safe, effective technologist and communication services for its customers using international best practices and standars.

20052005

Begins electronic registration of the values issued by the Goverment

and the Central Reserve Bank of El Salvador.

Opening of securities accountsSafekeeping and management of securities

Transactions Clearing and settlementSettlement of crossborder transactions

Guaranties processingCollection Agents

Share SplitsLocal and International safekeeping

CEDEVAL provides their Participants main services such as follow:

1.2 Evolution of Central de Depósito de Valores (Cont...)

2. GOALS ACHIEVED

VALUES ON DEPOSIT

722.1

1,237.0

1,695.02,130.0

2,583.0

3,342.0

517.7

4,088.4

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1998 1999 2000 2001 2002 2003 2004 Sept.-05

$ Millions US

2.1 Increase of Values on Deposit

2.1 Increase of Values on Deposit

Banco Central de Reserva de El Salvador, Superintendencia Sistema Financiero.

VALORES EN DEPOSITO COMO % DEL PIB Y DEPOSITOS DEL SISTEMA FINANCIERO

4.3% 5.8%

9.4% 12.3%14.9%

17.3%21.1%

12.3%

20.0%

25.7%

32.6%

38.9%

48.6%

9.4%

1998 1999 2000 2001 2002 2003 2004

% RESPECTO AL PIB % RESPECTO DEPOSITOS SF

2.1 Increase of values on deposit balances

DESMATERIALIZED VRS PHYSICAL SECURITIESSeptember 30th, 2005

DOMESTIC VRS INTERNATIONAL SAFEKEEPINGSeptember 30th, 2005

International37%

Domestic 63%

Physical30%

Desmaterialized70%

Finish the transformation process from phsycal securities to Book-Entry.

The creation of Electronic Register Issues and Securities Accounts.

2.2 Dematerialization: 2003-2005

EVOLUTION BY ISSUE TYPE

1,2251,170787

1,0691,145991

518700

2,863

2,1721,796

1,061

550245

22

0

500

1000

1500

2000

2500

3000

3500

1998 1999 2000 2001 2002 2003 2004 Sep-05

PHYSICAL DESMATERIALIZED

$ MILLIONS US

2.3 International Safekeeping agreements

The Bank of New York, USA

State Street, USA

Latin Clear, Panamá

CEVAL, Costa Rica

Clearstream banking, Luxemburgo

Caja de Valores, Guatemala

Bursatec

Pachuca

EL SALVADOR

Internet

Platform Technologic Certification in terms of information and communication security sistems.

Operations and Values Accounts back-up continue and automatically.

2.4 Technological Systems Security and Technical Support

CEDEVAL is the institution trust conferred of register dematerialized values issued by Central Reserve Bank ans the Goverment of El Salvador

2.5 Special Agreements

3. BENEFITS OFFERED BY THE DEPOSITORY

3. Benefits offered by the Depository

FOR THE SECURITIES´ MARKET.

To Contribute directtly to the VALUE MARKET DEVELOPMENT, within reflects the amount and volume of operations traded trough the Stock Exchange.

Furthermore, to contribute trough:

Clearity in the securities managment by higly secure electronic sistems.

To reduce Disminución de distorsiones de precios generados por la demora ocasionada por entrega física de valores

To become more efficent reducing times for clearing and settlement cycles

To reduce the risk of unexecute operations

To facilitate acces to new investors.

FOR THE SECURITIES´ MARKET.

To Contribute directtly to the VALUE MARKET DEVELOPMENT, within reflects the amount and volume of operations traded trough the Stock Exchange.

Furthermore, to contribute trough:

Clearity in the securities managment by higly secure electronic sistems.

To reduce Disminución de distorsiones de precios generados por la demora ocasionada por entrega física de valores

To become more efficent reducing times for clearing and settlement cycles

To reduce the risk of unexecute operations

To facilitate acces to new investors.

3. Benefits offered by the Depository

FOR THE INVESTORS.

SECURITY. Especialized safekeeping, accomplishing with higly securities standars electronics ans operations.

OPORTUNITY. To make the best decisiton with the cuality and promt information on the first hand of investments and value accounts.

ECONOMY. To reduce the costs of safekeeping and administration.

SIMPLIFY THE INVESTMENT ADMINISTRATION, through the execution of cuopon payments.

FOR THE INVESTORS.

SECURITY. Especialized safekeeping, accomplishing with higly securities standars electronics ans operations.

OPORTUNITY. To make the best decisiton with the cuality and promt information on the first hand of investments and value accounts.

ECONOMY. To reduce the costs of safekeeping and administration.

SIMPLIFY THE INVESTMENT ADMINISTRATION, through the execution of cuopon payments.

3. Benefits offered by the Depository

FOR THE STOCKBROKERS.

AGILITY. To Contribute a minimizar el tiempo de las transacciones efectuándose éstas con mayor rapidez y eficiencia.

TO REDUCE THE RISK FOR THE COUNTERPARTY.

HELPS TO IMPROVE THE SERVICE THAT THE BROKERAGE OFFERS TO THEIR CUSTOMERS.

INFORMATION ON LINE. Direct Participants coul acces their values accounts and facilitate their decisitions to invest and register of values.

INTERNATIONALS: DVP Y FVP.

FOR THE STOCKBROKERS.

AGILITY. To Contribute a minimizar el tiempo de las transacciones efectuándose éstas con mayor rapidez y eficiencia.

TO REDUCE THE RISK FOR THE COUNTERPARTY.

HELPS TO IMPROVE THE SERVICE THAT THE BROKERAGE OFFERS TO THEIR CUSTOMERS.

INFORMATION ON LINE. Direct Participants coul acces their values accounts and facilitate their decisitions to invest and register of values.

INTERNATIONALS: DVP Y FVP.

3. Benefits offered by the Depository

FOR THE SECURITIE´S´ ISSUERS COMPANIES.

COSTS MINIMIZATION. Related to the safekeeping and phisic travel (security vaults, insurance contracts and other),

CONTROL OVER THEIR SECURITIES AND HOLDERS.

REDUCING THE RISKS OF LOST, ROBBER AND FALSIFICATION.

MANAGEMENT FACILITIES. Avoiding the signature process, physical securities transfers, etc.

FOR THE SECURITIE´S´ ISSUERS COMPANIES.

COSTS MINIMIZATION. Related to the safekeeping and phisic travel (security vaults, insurance contracts and other),

CONTROL OVER THEIR SECURITIES AND HOLDERS.

REDUCING THE RISKS OF LOST, ROBBER AND FALSIFICATION.

MANAGEMENT FACILITIES. Avoiding the signature process, physical securities transfers, etc.

3. Benefits offered by the Depository

FOR THE GOVERNMENT OF EL SALVADOR AS SECURITIES ISSUER.

Notes and Bills Dematerialized Issues

Setting a issues calendar

Best opportunities to the market

An atractive market for trading

Issuer´s lower costs

FOR THE GOVERNMENT OF EL SALVADOR AS SECURITIES ISSUER.

Notes and Bills Dematerialized Issues

Setting a issues calendar

Best opportunities to the market

An atractive market for trading

Issuer´s lower costs

4. INITIATIVES IN DEVELOPMENT

WEB SITE IMPLEMENTATION

Principal service: ON LINE CONSULT.

To generate trust to the market.

To give access to foreign investors.

To foment the interest and development of the stock market culture.

WEB SITE:

www.cedeval.com

ANNA’S certification to CEDEVAL as a National Numbering Agency.

To facilitate trading and management of local securities in international operations.

To help the recognition of securites as a unique way around the world.

ASSOCIATION OF NATIONAL NUMBERING AGENCIES

ISIN CODE

To increase share’s market trading.

To make a faster shares’ transfer.

To eliminate the risks los riesgos inherentes al manejo físico de acciones.

Give the oportunity to develop the regional share´s market.

SHARES DEMATERIALIZATION

OTROS PROYECTOS

DESMATERIALIZATION OF CERTIFICADOS DE TRASPASO

Efficent manage of certificados de traspaso through the new Pensions Savings System.

The Integration of cash and securities settlement

Developing an infoprmation system to manage the integration of the clearing and settlement cycle of cash and securities to achieve delivery versus payment.

THANK YOUTHANK YOU