Latin American Capital Markets

260 ANDREW HOOK2 settlement, with gross settlement of securities and net settlement of funds. Investorswill have the option of choosing the DVP settlement or the free-of-payment settlementDECEVAL will oversee the DVP settlement, and securities will be transferred directlyfrom the seller's account to that of the purchaser Funds and securities will beimmediately available for retransfer on receipt Initially, equities transfers will be executedon a free-of-payment basis, with the stock exchange continuing to operate theoverall settlement for equities, which account for only 5 percent of the total marketOther elements in the strategy include DECEVAL's promotion of the dematerializationof all securities in Colombia. Although a large part of securities in thecountry are still held outside DECEVAL, the intent is to dematerialize all securities andhave these deposited with DECEVAL. Mechanisms to support securities lending andcollateral management are also being developed, and investors will have access toreal-time information concerning clearing and settlement through an Internet application.Off-site processing capability is also being developed for the new clearing andsettlement systems.Central AmericaIn Central America, market infrastructure is less developed than in most South Americanmarkets, as capital markets remain limited in size and dominated by money marketand fixed-rate instruments. CSDs have been introduced in most countries, althoughthese institutions are still relatively new. Considerable progress has been madeon both the regulatory and institutional sides in Costa Rica and Panama, while the depositoryin Nicaragua is developing a new clearing and settlement system.A new securities law has recently been passed in Panama, and the internalregulations for LatinClean the CSD, were approved by the regulatory authority in2001.These deal with issues such as immobilization and dematerialization. 20 Latin-Clear has introduced a DVP mechanism with settlement at the National Bank ofPanama (equivalent to the central bank). Checks are no longer used for financial settlementTo achieve DVR securities are blocked on the trade date, but plans are inplace to reduce the settlement period, currently T+3, and thus the period of time betweenthe delivery of securities and the receipt of funds (asset commitment risk).In most other countries in Central America, modernization of market infrastructureis in an early phase. Checks continue to be the most frequently used noncashpayment instrument, although an RTGS has been established in Costa Rica. ACopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub20 Information on developments in Panama can be found at www.latinclearcom.pa.