1. 1 SAME DAY SETTLEMENT WITH DVP Rogerio Martins November 14, 2002 ACSDA LIMA

2. 2 Tópicos Contents 1. The New Brazilian Payments System 2. CETIP Overview 3. Same day net settlement 4. Same day gross settlement 5. Same day guaranteed net settlement CENTRALCLEARING

3. 3 Tópicos Contents 1. The New Brazilian Payments System 2. CETIP Overview 3. Same day net settlement 4. Same day gross settlement 5. Same day guaranteed net settlement CENTRALCLEARING

4. 4 Objectives  Reduce systemic risk - credit risk management transferred to the private sector  RTGS and money market securities depositary in Central Bank  Private DNS clearing houses for securities, derivatives, interbank payments and foreign exchange  Certainty and finality of settlement  Reduce gap between trading and settlement  Legal certainty of multilateral netting and execution of guarantees

5. 5 Actions  Credit risk management and support migrates from Central Bank to market participants through clearing houses  Central Bank acts as:  System regulator  Risk control supervisor  RTGS operator  Money market CSD operator

6. 6 The new scenery FX SELIC BM&F CETIP CB MONEY ACCOUNTS CENTRAL CBLC COMPE CHECKS & DOCS STOCK EXCHANGE CIP INTERBANKS PAYMENTS MONEY MARKET FIXED INCOME AND DERIVATIVES COMMODITIES & FUTURES EXCHANGES

7. 7 Topics Contents 1. The New Brazilian Payments System 2. CETIP Overview 3. Same day net settlement 4. Same day gross settlement 5. Same day guaranteed net settlement CENTRALCLEARING

8. 8 Profile  One of the main Latin American fixed income securities depositories  Private and public securities  OTC registration and settlement  Electronic trading system - CetipNET  Non-profit organization  Nation-wide coverage

9. 9 Planet CETIP  US$ 156 billion in Custody  US$ 3 billion in average daily turnover  US$ 2 billion in daily financial settlement  4,430 participants  43 types of securities and derivatives

10. 10 Participants Total: 4,430

11. 11 Custody by volume

12. 12 The new CETIP Settlement Alternatives CETIP Secondary Public / Private Multilateral Netting Gross Settlement And Bilateral Netting New Issues Redemption and Events Multilateral Netting CENTRALCLEARING STR Central Bank

13. 13 How we operate  Primary and secondary markets  Transactions registered by double entry  Segregation of assets held by participants  STP - integrated trading, book entry, settlement and custody  DVP - delivery versus payment  Financial settlement in Central Bank money  CETIP is not a Central Counterpart

14. 14 How we operate OTC Registration Electronic Trading System Central Bank Financial Settlement CustodyCustody STP

15. 15 Custody  Dematerialized electronic registry  Segregated by participant  Custody watch over the ‘life’ of securities, automatically executing known events

16. 16 Topics Contents 1. The New Brazilian Payments System 2. CETIP Overview 3. Same day net settlement 4. Same day gross settlement 5. Same day guaranteed net settlement CENTRALCLEARING

17. 17 DNS Settlement  Input data checking and matching  Securities flagged in seller´s account until payment finality  Confirmation by settling banks  Settlement in T+0  BIS type 2 (gross/net)

18. 18 DNS Financial Settlement  Integrated to Custody  Issuer risk only  Multilateral netting  Buyer´s bank pays to CETIP´s central bank money account  CETIP pays to seller´s bank central bank money account

19. 19 DNS Delivery Versus Payment SELLER Custody BUYER Custody Reserve Account Bank A Reserve Account Bank B GROSS NET

20. 20 Topics Contents 1. The New Brazilian Payments System 2. CETIP Overview 3. Same day net settlement 4. Same day gross settlement 5. Same day guaranteed net settlement CENTRALCLEARING

21. 21 RTGS Matching and Settlement  Input data checking and matching  Securities flagged in seller´s account until payment finality  Same day settlement in real time  BIS type 1 (gross/gross)

22. 22 RTGS Financial Settlement  Primary and secondary markets  Integrated to Custody  Real Time Gross Settlement  Buyer´s bank pays to CETIP´s central bank money account  CETIP pays to seller´s bank central bank money account

23. 23 Delivery Versus Payment SELLER Custody BUYER Custody Reserve Account Bank A Reserve Account Bank B GROSS

24. 24 Topics Contents 1. The New Brazilian Payments System 2. CETIP Overview 3. Same day net Settlement 4. Same day gross Settlement 5. Same day guaranteed net settlement CENTRALCLEARING

25. 25 Guaranteed Settlement - CENTRAL  DNS Settlement in T+0 or T+1  Real Time Novation  Securities move to CENTRAL in real time  Real time collateral management  Day trades and short selling  DVP  BIS type 3 (net/net)

26. 26 Guaranteed Settlement - CENTRAL  Private and public securities  Secondary market  Double entry checking and matching done by CETIP  Limits and trades approval by CENTRAL  STP Participant/CETIP/CENTRAL  Securities lending

27. 27 Delivery Versus Payment SELLER Custody BUYER Custody Reserve Account Bank A Reserve Account Bank B NET

28. 28 www.cetip.com.br www.centralclearing.com.br rogeriomartins@cetip.com.br www.cetip.com.br www.centralclearing.com.br rogeriomartins@cetip.com.br