Latin American Capital Markets

ENHANCING MARKET INFRASTRUCTURE IN EMERGING ECONOMIES 259a clearing and settlement platform for government securities, and Bolivia has legislationin place to support modern infrastructure.The Bolivian Stock Exchange is workingwith CAVALI in Peru to develop depository and settlement services. Modernizationof market infrastructure is still in the early stages in Venezuela.ColombiaColombia illustrates how a comprehensive strategy for modernizing and reforming marketinfrastructure can be put in place. A critical element of this strategy is a cooperativemarketwide approach with market participants, the CSD, stock exchanges, the centralbank, and securities regulators playing key rolesThe traditional institutional arrangementwas similar to that in other countries in the region: a CSD with no linkages to the paymentsystem, continued use of checks for some financial settlements, multiple stock exchanges(three), bearer securities and no or limited dematerialization, no central counterpart,and decentralized risk management for over-the-counter trades.In the case of Colombia, the CSD, DECEVAL (Deposito Centralizado deValoresde Colombia) has been playing a key role in the improvement of market infrastructure.18 Strong planning and implementation capability support the initiative, andrecognition that institutional and regulatory changes take time has helped. DECEVALhas developed both short- and long-term strategies, planning for 2003 a central counterpart, collateral management system, and improved information services for themarket. These plans are developed in consultation with market participants, regulators,and other stakeholders and approved by the board of directors of DECEVAL.The president of the stock exchange has led the board, which included thevice presidents of treasury and operations of the most prominent banking entities inthe financial sector. By tradition and practice, the board focuses on market developmentand not on private or individually driven initiatives. In addition, the superintendencealso plays an important role in reviewing decisions, reports, and pronouncementsof the General Assembly.Following the consolidation of the three Colombian stock exchanges in 2001,a new settlement process is to be introduced. Linkages between the CSD (DECE-VAL), settlement systems, the trading systems of the stock exchange, and the paymensystem of the central bank will become operational and will support a gross settlementmodel I for all securities except equities.' 9 These will continue to follow a model18 DECEVAL's website is www.deceval.com.19 Information on the central bank's payment system can be found at www.bannep.gov.co.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub