1 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 9 – Financial Services Bilateral screening: Chapter 9 PRESENTATION OF MONTENEGRO Brussels, 11 June 2013

2 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services SECURITIES SETTLEMENT SYSTEM IN MONTENEGRO Milivoje Popović Securities and Exchange Commission of Montenegro

3 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services CONTENT  Relevant Acquits  Legal framework in force  Institutional Framework  Settlement system  Assessment of compliance  Convergence dynamics

4 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services RELEVANTE ACQUITS Directive 98/26/EC of the European Parliament and of the Council of 19 th of May 1998 on settlement finality in payment and securities settlement systems (OJ L p ) Directive 2009/44/EC amending the Settlement Finality Directive and the Financial Collateral Arrangements Directive

5 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services LEGAL FRAMEWORK IN FORCE Law on Securities (Official Gazette of Republic of Montenegro no. 59/00 and 28/06 and Official Gazette of MNE No 53/09, 73/10, 40/11 and 06/13 ) Rules on control over securities business (Official Gazette of MNE No 28/07, 19/12, 09/13) Rules on issuing license to the Central Depository Agency (Official Gazette of MNE No 02/01)

6 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services INSTITUTIONAL FRAMEWORK Central Depositori Agency (CDA) o CDA performs the activities of depositing of dematerialized securities, clearing and settling of securities transactions and other business associated with dematerialized securities (Article 89 of LS). o CDA is central registry. o CDA was organized as a joint stock company whose shareholders may only be the State of Montenegro, licensed market participants, Stock Exchanges, banks and other legal persons.

7 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services SETTLEMENT SYSTEM Each shareholder has an individual account with the CDA (i.e. direct holding system). The CDA statement is the only legal proof of ownership of securities. CDA is divided in two operational components: Registry and Depository department. System is the beginning and the end of each stock-exchange transaction and over the previous period CDA has performed clearing and settlement of stock-exchange transactions timely and in accordance with the procedures.

8 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services SETTLEMENT SYSTEM Main principles of settlement are: DVP(delivery versus payment principle - money to the seller and securities to the buyer are transferred simultaneously, this eliminating the main settlement risk, include full automation with RTGS, using Central bank money), T+3 settlement cycle (rolling settlement on third business day after the conclusion of trade on stock exchange), Trade for trade settlement (TFT) - each trade settles separately as per a gross principle (BIS Model 1), Continuous trade settlement (CNS) using the Guarantee Fund – funds transfers occur on a net basis, while security transfer is done as per a gross principle (BIS Model 2).

9 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services SETTLEMENT SYSTEM Guarantee Fund serves as security for the settlement of CNS transactions ( model of contractual settlement). Assets of Guarantee Fund currently stand at around 15,000€ cash, and consists of contributions of all Participants(basic and additional contributions, the amount of which is determined by the size of exchange turnover). Established clear procedures for dealing with cases of violations and settlement failures, with penalties for members in the form of suspension and financial penalties defined by the contract to be distributed to the Guarantee Fund.

10 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services STATISTICS

11 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services ASSESSMENT OF COMPLIANCE At this point as regards the securities settlement, the provisions of the Directive 98/26/EC are not transposed in the Montenegrin legislation. The terms “system”, “central counterparty”, “settlement agent”, “clearing house”, etc. are not defined in the Montenegrin legislation. No provisions regarding the insolvency proceedings against a participant in the system and the outcome of such proceedings towards the system.

12 Financial Services M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Chapter 9 Financial Services CONVERGENCE DYNAMICS According to the Government of Montenegro agenda for 2013, the New Law on Capital Market will be adopted by the end of the fourth quarter of 2013, in which the full compliance with the relevant EU acquis governing this area will be reached. According to the Government of Montenegro agenda for 2013, the New Law on Capital Market will be adopted by the end of the fourth quarter of 2013, in which the full compliance with the relevant EU acquis governing this area will be reached.

13 Thank you for your attention! QUESTIONS