Latin American Capital Markets

264 ANDREW HOOKthe modernization and success of a particular market infrastructure.This requires anexcellent understanding not only of conditions in the market in question but also ofrelevant worldwide developments that could influence an effective solution. Someof the industry and company initiatives impose a standard for transactions processingin the United States with an emphasis on straight-through processing. Some of the industrywork on establishing standards for transactions processing in the United Stateswill support market infrastructure development in other countries. The experienceof Euronext in consolidating the three markets and infrastructure in Belgium, Francand the Netherlands should also be relevant in other countries. Partnerships or otherbusiness arrangements with experienced companies can save time and cost in themodernization effort.In these partnership and technology issues, vision is needed to inform finaldecisions.The IT and financial sectors are very competitive, meaning that many solutionsdo not succeed. Identifying the needs of a market, its participants, and infrastructureis as essential as evaluating the partners and the business plan and understandingcurrent and future demand for services. The partnership between MorganStanley and OM (a Swedish technology and financial sector company) to provide aEurope-wide securities platform for retail trades is an example of a partnership thathas been facing difficult times because of the market slump. Other partnerships couldbe with consulting firms, particularly those specializing in securities processing, and/ortechnology companies.Similar to asset managers, some custodian banks are outsourcing securitiesprocessing, a move that may be appropriate in Latin America and the Caribbean.Thiscould be at the level of an individual institution or a marketwide institution, such as aCSD or clearinghouse.This approach may make sense for regional markets with sharedclearing and settlement capabilities. One innovative approach is that of Bolivia, whictis working with CAVALl.the CSD in Peru, in developing its own CSD.The plan is tohave the settlement done on a remote site, in Lima, by CAVALl.This would allow theexisting capabilities in Peru to be more fully utilized and would save Bolivia the expenseof building an entirely new system.The resolution of legal and regulatory issuesis clearly essential for this type of arrangement It is precisely for this reason that theexperience in Bolivia and Peru should be valuable for other markets in the region.Two regional initiatives are already under way in Central America and theCaribbean, and others could be undertaken for the Andean markets or the SouthernCone.The existing efforts deserve close attention, as they may initiate viable modelsfor other regions. Currently, the tendency seems to be toward a common clearing antsettlement platform, but with a depository in each country.To the extent that a com-Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub