Latin American Capital Markets

ENHANCING MARKET INFRASTRUCTURE IN EMERGING ECONOMIES 245Box 8-1 I Recommendations for Securities Settlement SystemsIn 2001, a task force established by the Committee on Payments and Settlement Systems andthe Technical Committee of the International Organization of Securities Commissions jointly issuedRecommendations for Securities Settlement Systems. The recommendations build on andextend the Group of 30's recommendations published in 1989.The task force was composed of28 central bankers and securities regulators from 18 countries. A consultative report was circulated,and input was received from central bankers and securities regulators who together representedabout 30 countries, as well as from representatives of the International Monetary Fundand World BankThe report presents 19 recommendations on key functions in securities settlement, includinglegal, pre-settlement, settlement, operational, and custody issues. The work builds on and is complementaryto other international initiatives that focus on strengthening financial infrastructure.The emphasis is not prescriptive; it allows for significant flexibility in the implementation of therecommendations. As in the Core Principles for Systemically Important Payment Systems, participantsare expected to be responsible for identifying and managing their own risks within a systemwhere such risks are well defined.These recommendations identify essential elements of securities settlement from a public sectorperspective and provide officially endorsed standards for promoting improvements in thesafety and efficiency of securities settlement systems. Recognizing the institutional diversity andcountry differences in securities systems, the recommendations focus on functions rather thanspecific types of institutions. While the recommendations themselves are fairly general, additionalexplanations and questions are provided to assist in their implementation. National authorities areresponsible for the actual implementation of the recommendations.• More emphasis on competition policy, particularly in the European Union forsecurities clearing and settlement• A shift to settlement at T+1 in the United States, which is scheduled for 2004and likely to be introduced in other securities markets.Core PrinciplesIn the past five years, international initiatives sponsored by international institutionsand associations have complemented national initiatives to strengthen the regulatoryframework Although the Group of 30 recommendations on clearing and settlementdate from the late 1980s, in many cases serious efforts were not undertaken to implementthese principles until the late 1990s. A wide range of international institutionsand associations are now developing best practices, core principles, and standards forvarious aspects of financial sector infrastructure.The institutions include the IMF, theWorld Bank, the BIS, lOSCO.the Group of 30, and various private sector internationalCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub