44 Financial Services Research Q2 2011 Capital markets infrastructure markets Capital though, the African markets have less developed infrastruc- developed less have markets African the though, Generally, region. African the in Africa South and Namibia Mauritius, and region; East Middle the in Turkey and Jordan , Egypt, include exposures risk settlement and custody reduce to effectively more operate CSDs the where markets The mitigation. risk effi and ciency settlement custody, in success varying with sophistication of degrees different at operate (CSDs) depositories securities central their and size, and complexity different of are markets The markets. East Middle and Africa the for ratings the show page next the on charts The regulations. local and systems, payment securities, physical of settlement for arrangements market, the in depositories securities central all including whole, a as infrastructure market the to assigned are ings rat- The risk. servicing asset and risk operational risk, fi risk, nancial counterparty risk, liquidity risk, commitment asset are which components risk six of average weighted a is (CMIRR) rating risk infrastructure market capital The infrastructure within these regions these within infrastructure market and regulation to changes review and Africa and East Middle Murray Thomas Infrastructure Risk Ratings: Ratings: Risk Infrastructure Markets Capital Middle East Middle analyse capital markets infrastructure risk in the the in risk infrastructure markets capital analyse and Africa Africa and example Egypt, Bahrain, Tunisia and the Ivory Coast). Coast). Ivory the and Tunisia Bahrain, Egypt, example (for region the in turmoil political the to related issues and DFM), and example (for infrastructures market in consolidation Emirates), Arab United the and Qatar of examples the by illustrated (as exposure risk party counter- and liquidity mitigate to initiatives notably region, the in developments major three discuss will article This BBB. and B between rated markets of number a with ratings, refl as the by tures, ected of a delivery versus payment (DVP) settlement and optional optional and settlement (DVP) payment versus delivery a of implementation the following practices best market with aligned more become have (DFM) Market Financial Dubai and (ADX) Exchange Securities Dhabi Abu (QE), Exchange Qatar East, Middle the Within exposure. risk counterparty and liquidity reduce to designed measures of mentation imple- the been has markets global in development key A Exposure Risk Counterparty and Liquidity Financial Services Research Q2 2011 45 - - - - Capital markets infrastructure DFM system. However, NASDAQ Dubai has now proposed to return to settlement a T+3 cycle for its listed stocks in order to allow foreign institutional investors more time to settle their trades and, subject to regulatory approval, the settlement T+3 cycle will be implemented in July 2011. the Egyptian depository (MCDR) managing the lending pool. Mauritius, Turkey and South Africa are the only markets within the region to date that have implemented securities borrowing and lending. Consolidation in Markets The second significant development within the region has been the horizontal integra tion of infrastructures. NASDAQ Dubai consolidated its key opera tional functions for equities (i.e. trading, clearing, settlement and custody) with DFM in July 2010. Earlier in May DFM2010, ac quired two thirds of the shares in NASDAQ Dubai from and NASDAQ OMX. The consolidation was intended to make it easier for many of DFM’s 500,000 retail investors to trade NASDAQ Dubai stocks. The consolidation resulted in the settlement cycle for NASDAQ Dubai stocks being shortened from into acT+2, T+3 cordance with the settlement cycle in the only NASDAQ Dubai and the AvivTel (TASECH) act as for on-exchangeCCP transactions. The requirement for securities to be pre- validated prior to trading at QE, ADX and DFM, and the blocking of securities upon trade execution, effectively help mitigate failed trades and liquidity risk. QE, ADX, and DFM have also implemented a buy-in arrangement (although optional) as part of the fails management procedures for the broker to source the necessary securities to cover a short position in the event that the custodian invalidates or rejects the sell trade. Most markets in the Middle East and Africa have a buy-in arrangement in place. increaseTo market liquidity and facilitate fails management, QE, ADX and DFM plan to implement securities borrowing and lending (and short selling). Also the ­Egyptian market plans to implement same-day short selling within July 2011,

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and the project to implement settlement a T+3 cycle continues to progress. ­established on 18 February 2010. ­Chengetedzai Depository Company in Zimbabwe, which was expected to take place in June 2011, has been postponed. in 2008 for the clearing and settlement of equities. established in 2008. GSD is a wholly owned company of the . ­Automated Trading System in 2009. on 4T+3 July 2011. market for inter-bank participants in September 2008. The dematerialisation of money market instruments STRATE joined Link-Up Markets in November 2010. The Uganda Securities Central Depository was The commencement of operations of the The BSE implemented a Central Securities Depository The Ghana Securities Depository Company (GSD) was The Ghana Stock Exchange implemented the The settlement cycle for equities was shortened to The Central Bank of Kenya introduced a horizontal repo • • Uganda: • Zimbabwe: • Other developments in Africa: Botswana: • Ghana: • • Kenya: • • South Africa: - - - - -

the Middle East: repo market on 7 January 2011. nection facility that allows custodians to connect electronically to the depository’s system. The Muscat Clearing & Depository Company (MCD) plans to implement a new settlement system, known as ‘The Universal Clearing, Settlement and Depository System (UCS)’. The expected launch date of the UCS is Q2 2012. In April MCD introduced 2011 a new online con The Istanbul Stock Exchange launched the interbank gross settlement for broker-to-broker trading, automation of processes including registration, a dedicated platform for repo transaction manage ment, and segregation of accounts by client at CSD level. TASECH extended the settlement cycle for corpo rate bonds from on 29T+0 to November T+1 2010. Maroclear implemented a new IT system in Sep tember which2010, includes the following features: (TASECH) plans gradually to implement a SWIFT capability to improve the straight-­ through-processing of services. centre to meet business contingencies. A new exchange called Bahrain Financial Exchange was launched on 1 February 2011. MCDR joined Link-Up Markets in November 2010. The Stock Exchange Clearing House posal for the construction of a business continuity The Bahrain Stock Exchange has approved a pro • Turkey: • Oman: • • Morocco: • Israel: • • Egypt: • in Bahrain: • Other developments