Latin American Capital Markets

ENHANCING MARKET INFRASTRUCTURE IN EMERGING ECONOMIES 253tively traded shares) and outside companies are reducing the size of markets in theregion, which is affecting Argentina, for example.In these circumstances, many markets in Latin America and the Caribbeanare actively undertaking modernization and reform projects.These initiatives extendfrom the largest markets to the smallest and include Brazil, Mexico, Colombia, Peru,Panama, Costa Rica, and Jamaica. The main emphasis has been on improving existinginfrastructure, largely at the national level. Initiatives are continuing in parallel in CentralAmerica and the Caribbean to develop regional market infrastructure. Althoughsome exchanges and CSDs have linkages with other institutions in other countries,usage of these linkages is still limited and individual financial institutions with branchesin many countries continue to play a key role in cross-border clearing and settlementWhile the initiatives vary from country to country, a number of elements arecommon, including introduction of international standards (G-30, IOSCO, and CPSS),DVP settlement, central bank participation, same-day funds finality, immobilization anddematerialization, and measures to assure liquidity and guarantee funds. Internationaland regional institutions and organizations—the IMF, the World Bank, BIS, IOSCO, theInter-American Development Bank, the Centra de Estudios Monetarios Latinoamericano(CEMLA),and the Council of Securities Regulators of the Americas (COSRA)—have been extending their work in standards and best practices for capital markets. 10Increased emphasis on the importance of delivery versus payment for settlementand on the advantage of either real-time or same-day finality has led to morecentral bank participation in capital market infrastructure improvements.This can beseen in the cases of Brazil, Colombia, and Mexico.This section reviews recent developmentsin capital market infrastructure in Latin America and the Caribbean, particularlyin Brazil and Mexico and, to a more limited extent, in other countries. Withwell-designed account structures and risk controls, central bank provision of all orpart of the financial settlement can be effective in reducing risk.While the shift toward immobilization and dematerialization has been unevenfrom country to country, the general trend is clear; in most cases, the key market institutionsare promoting dematerialization. Mexico in 1984 and Brazil in 1990 prohibitedthe issuance of bearer securities, initiating a shift toward more efficiency.Thereis also some progress in the registration of securities, although in some markets theregistration process continues to go on after the settlement, undermining final legaltransfer of ownership. In some cases, securities cannot be traded until after the registration,which can take days after the securities settlement.10 Further information can be found at the following websites: www.imf.org, www.bis.org, www.iosco.org, www.iadb.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/puborg, and www.cemla.org.