EMERGING MARKETS TRADERS ASSOCIATION 1995 ANNUAL REPORT MISSION STATEMENT The Emerging Markets Traders Association is a not-for-profit corporation dedicated to promoting the orderly development of fair, efficient and transparent trading markets for Emerging Markets instruments. 1 Co-Chair Letters 3 Executive Director Letter 4 About the Emerging Markets 6 About EMTA 8 Local Markets 10 EMTA Working Group Reports 12 1995 Financial Report 20 Board of Directors 1995 Annual Meeting EMTA Fifth Anniversary 22 EMTA Members 24 EMTA Staff EMTA’s 1995 Annual Report describes EMTA and its activities in the context of visual images that reflect the diversity, complexity and global significance of today’s Emerging Markets. LETTER FROM LONDON CO-CHAIR Peter R. Geraghty is EMTA’s London Co-Chair for 1996. He is a Managing Director of ING Barings and a member of the Global Management Committee of Baring Investment Bank. He has been a member of EMTA’s Board of Directors since EMTA’s formation in 1990. Mexico’s December 1994 high levels, as investors contin- Markets, and, in that context, devaluation caused a temporary ued to take advantage of the we were very pleased to loss of investor confidence diversity of investment opportu- welcome Pedro Malan and that rippled throughout the nities available throughout the Guillermo Ortiz, Ministers of Emerging Markets in early Emerging Markets. Finance of Brazil and Mexico, 1995. Market conditions respectively, as keynote speak- improved considerably as the The implications of these devel- ers at EMTA’s 1995 Annual year progressed, although our opments highlight the continu- Meeting. Our latest Volume market’s recovery was hampered ing importance of EMTA’s role Survey underscores the impor- by the strong performance of in promoting orderly trading tance of Brazil and Mexico the U.S. equity markets. markets. During 1995, EMTA’s to our marketplace, and we efforts to help reduce risk and expect EMTA’s future agenda Emerging Market fundamentals increase efficiency were led by to include greater emphasis were generally characterized the formal introduction of on local market activities in by continuing reforms and by Match-EM, EMTA’s electronic these countries. steady progress in the remain- post-trade confirmation and ing debt reschedulings, particu- matching system. By streamlin- larly in Ecuador, Panama, Peru ing the confirmation process, and Russia. Activity in the pri- Match-EM enables market mary markets was characterized participants to better manage by substantial innovation, their trading positions and to Peter R. Geraghty and capital flows into the meet settlement deadlines. In Emerging Markets during addition, Match-EM is making 1995 exceeded expectations. our marketplace more transpar- ent by permitting the wide- Despite some pessimistic spread dissemination of daily predictions, trading of Brady market volume and price data. Bonds and other Emerging Markets debt instruments Although loan trading volumes (especially local market generally slowed in 1995, instruments) remained at as expected, we are pleased at the new efficiency that EMTA’s Standard Terms and Multilateral Netting Facility have brought to the often diffi- cult process of documenting and settling loan trades. EMTA continues to strongly support the economic and polit- ical reforms that are occurring throughout the Emerging 1 LETTER FROM JOINT NEW YORK CO-CHAIRS Jorge V. Jasson and Daniel J. Canel were elected joint New York Co-Chairs of EMTA in March 1996. They are Co-Heads of Global Emerging Markets at The Chase Manhattan Corporation, responsible for origination, sales, trading and research for all Emerging Market fixed income securities, loans, equities, foreign exchange and derivatives, on a global basis. Our markets opened 1996 in a role in helping to bring greater the volume of cross-border climate of continued growth efficiency and transparency to transactions, while minimizing marked by the return of sub- our marketplace. counterparty risk and opera- stantial voluntary capital flows tional barriers. into the Emerging Markets. One of EMTA’s most significant Renewed investor confidence projects, the Match-EM elec- In the past five years, our has been based in large part on tronic matching system, has industry has established a the strengthening of the applied technology against the strong track record for working Mexican economy and a per- challenges of increased trading together, within EMTA, as a ception that other Emerging volumes and volatility, enhanc- forum for voluntary self-regula- Market countries are also main- ing trading efficiency and access tion and for the orderly devel- taining their commitment to the to better market information. opment of our trading market. economic reform process. Strong We expect that, by building on Building on this record, EMTA fundamentals in many countries Match-EM, EMTA will soon be is well-positioned to deal effec- and reduced price levels for in a position to create an inte- tively with the challenges that many assets combined to attract grated trading infrastructure for lie before us. Through EMTA’s new investors to our market- the Emerging Markets trading continuing efforts to improve place from other markets, such industry that also includes net- market efficiency and trans- as the U.S. high-yield market. ting and clearing functions. parency, we hope to reinforce the confidence that investors Prospects this year remain During 1996, EMTA will add to have placed in the integrity of relatively buoyant, and interna- its past initiatives to increase our marketplace. tional investors are seeing the efficiency and reduce risk in the benefits of long-term participa- loan market by broadening our tion in the Emerging Markets. multilateral netting efforts to Even the ratings agencies have include a facility to net and expressed their confidence in settle residual Argentina interest the economic fundamentals of payments. We also intend to Daniel J. Canel these economies, as evidenced continue our industry’s strong by the recent investment-grade support of the country debt ratings for certain countries. rescheduling process by, among other things, working with the Our market’s continued growth Russian financial authorities to and vitality is in part a tribute facilitate their debt restructuring. Jorge V. Jasson to its orderliness and efficiency. 1995 marked EMTA’s fifth In an effort to build a global anniversary. Since 1990, much network, EMTA is also actively progress has been made in the providing market and infra- development of the Emerging structure support to several Markets trading industry, and emerging local markets. EMTA has played a leading Through our efforts to promote consistency between local and international trading stan- dards, EMTA hopes to increase 2 LETTER FROM 1996 EXECUTIVE DIRECTOR Michael M. Chamberlin has been EMTA’s Executive Director since January 1994. Previously, he was a partner of Shearman & Sterling, where he concentrated on international financings, including Mexico’s restructuring under the Brady Plan and global debt offerings for Petróleos de Venezuela. Our experience in the Emerging ture that will eventually ensure our industry by minimizing or Markets teaches us to expect high efficiency and a minimum removing operational obstacles the unexpected, and we are of risk from time of trade and undue risks that would rarely disappointed. 1995 was through settlement. In 1996, impede the smooth functioning no exception. Mexico’s stumble working with representatives of a global electronic market- and the collapse and rebirth of from ISCC, Euroclear and place. Looking ahead, we Barings remind us why EMTA Cedel, we expect to take the envision a critical need for was formed – to promote the next important step toward this documentation, clearance and orderly development of our goal--designing and construct- settlement systems that link marketplace so that it can bet- ing an industry-owned clearing local market financial centers ter withstand external shocks utility that will take much of with major international finan- and changing conditions. the current risk and operational cial centers, and with each uncertainty out of screen-based other, as efficiently as possible. Confidence quickly returned to Brady Bond trading. Not only must each local market our marketplace, and EMTA’s have its own soundly designed momentum continued during As if we needed more evidence, systems, but to ensure maximum 1995. In a year when other sec- EMTA’s 1995 Volume Survey efficiency on a global scale, these tors of the financial community confirms that our marketplace local systems must be designed rode through storms of criti- is rapidly evolving. In five to integrate easily into the glob- cism, we made quiet progress years, Brady Bonds have al operational framework. toward stronger systems that replaced loan trading at the are necessary and desirable for core of our business, and local In short, the globalization of the continued growth and pros- market trading activities, as the world’s capital markets perity of the Emerging Markets well as voluntary sovereign requires harmony among them. trading industry. refundings, continue to grow In 1996, EMTA hopes to play a in importance to the future useful role in encouraging the EMTA’s accomplishments over direction of our industry. To requisite cooperation among the past five years have been meet the growing needs of global and local interests to the result of a remarkable team these local markets, EMTA ensure that the risks of incon- effort that has been guided by a has begun to devote greater sistency are minimized. clear vision – that the Emerging resources to projects involving Markets trading industry have local market instruments and There is no sure blueprint for an effective forum for industry trading practices. these tasks. But EMTA’s aggres- discussion, problem-solving sive approach toward identify- and voluntary self-regulation. We now take for granted that ing needs and solutions and As much progress as the indus- our marketplace operates glob- building industry consensus has try has made since 1990 toward ally and as a part of the broad- proven successful so far, and we the development of an orderly er capital markets.