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Introduction

 
 

The Central Depository & Settlement Co. Ltd (CDS) was established by the Stock Exchange of Mauritius in 1996 to provide centralized depository, clearing and settlement services for the Mauritian equity and debt markets. The company became operational in January 1997. The setting up of CDS has brought about prompt and efficient clearing and settlement of trades while at the same time reducing some of the inherent risks in the process. The CDS has brought the Mauritian stock market on an equal footing with developed markets as far as the clearing and settlement infrastructure is concerned.

 

The CDS complies with the international standards on depository, clearing and settlement systems, namely the Principles for Financial Market Infrastructures (PFMIs) issued by the Committee on Payment and Market Infrastructure (CPMI) of the Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO), and the G30 Recommendations. The disclosure regarding compliance with the PFMIs is published on the website of CDS.

 

The CDS qualifies as an Eligible Securities Depository under the US Investment Company Act Rule 17f-7. This rule requires US registered investment companies to hold their securities only in Eligible Securities Depositories to reduce risks associated with offshore investments. The company participates on a regular basis in the Depository Information Gathering Project of the Association of Global Custodians (AGC). The objective of this project is to assist the members of the AGC in meeting their regulatory obligations under the U.S Investment Company Act Rule 17f-7 which sets forth the circumstances under which U.S investment companies may hold securities through the facilities of non-U.S securities depositories. The AGC questionnaire can be viewed on the web site of CDS (www.stockexchangeofmauritius.com).

 

The CDS is also covered by the Thomas Murray Capital Market Infrastructure Risk Ratings Service. The ratings service of Thomas Murray provides an independent, objective analysis of local post trade capital market controls and procedures. It examines the extent to which each local infrastructure minimises recognised risks and maximises asset safety for investment. Following its annual review, Thomas Murray maintained the private rating of CDS to A+ (low overall risk) in January 2018.

 

The CDS provides its services within an online computer system with Participants having direct online access to the system. Trades are settled within a rolling T+3 settlement cycle on a strict Delivery versus Payment (DvP) basis.  Final and irrevocable transfer of funds occurs through the central bank with same-day funds on settlement date.

 

The CDS has established a Guarantee Fund to guarantee the settlement of transactions in the event of a default by a Participant.  The Fund is managed by a Business Conduct Committee that monitors operations relating to risk management. The CDS Board of Directors appoints the five members of this committee, three of whom, including the Chairman are independent (not Directors or Employees of CDS or of its Participants). The composition of the committee ensures that independent views from qualified and respected professionals are expressed on key aspects of the CDS operations.

 

External independent auditors perform both financial and operational audits of the CDS on an annual basis. An information systems security audit is carried out by audit firms specialized in IT security, on a regular basis. Internal auditors perform operational audits on a monthly basis.

 

The CDS has been actively marketing its system and operational model to African stock exchanges and depositories. These marketing efforts were rewarded by the award of a few major contracts on the African continent. A consortium comprising Millennium IT Ltd (Sri Lanka, now part of LSEG) and CDS have successfully implemented the central depository system as well as the automated trading system at the Nairobi Stock Exchange (2004), the Dar es Salaam Stock Exchange (2006), Lusaka Stock Exchange (2009) and Botswana Stock Exchange (2008 and 2012). The consortium has also implemented the central depository system at the Bank of Ghana (2004) and the Bolsa de Valores de Mocambique (2014). The Managing Director of CDS was the Project Director for all the above projects. The CDS has also provided consultancy and training services to the Capital Markets Authority of Uganda. In December 2014, CDS provided consultancy services to the Lusaka Stock Exchange (LuSE) for the audit of LuSE’s ATS and CSD system. As independent consultant, the CDS has spearheaded the implementation of an automated trading system at the Zimbabwe Stock Exchange which went live in July 2015 and recently supervised the replacement of the trading and depository systems at the Lusaka Stock Exchange. LuSE’s new systems went live in December 2017.

 

The CDS also offers IT outsourcing services to the Stock Exchange of Mauritius Ltd for the technical management of the automated trading system. The CDS also provides a registry system to registrar and transfer agents, on an application service provider basis.