CDS Clearing and Depository Services Inc. retains its 'AA' rating from Thomas Murray



    TORONTO, July 30 /CNW/ - CDS Clearing and Depository Services Inc. (CDS
Clearing) has retained its 'AA' rating from Thomas Murray, the specialist
custody rating, risk management and research firm. The rating is made up of
the following components:

    
      -  Asset Commitment Risk
      -  Liquidity Risk
      -  Counterparty Risk
      -  Financial Risk
      -  Operational Risk
      -  Asset Servicing Risk

    --------------------------
    Asset servicing risk   AA-
    --------------------------
    Operational risk       AA+
    --------------------------
    Financial risk         AA
    --------------------------
    Counterparty risk      AA
    --------------------------
    Liquidity risk         AA
    --------------------------
    Asset commitment risk  AA+
    --------------------------
    CDS overall rating     AA
    --------------------------
    

    The 'AA' rating, which represents very low risk overall, recognises CDS
Clearing's ongoing commitment to minimise risk for market participants. The
outlook has been assigned as 'Stable' which suggests that there are no
imminent developments that may change the rating at this stage.
    Although the overall rating has remained unchanged, CDS Clearing has made
significant progress during the past year in taking steps to mitigate risk and
as a result Operational Risk has been upgraded to 'AA+'. The significant
developments that have led to the improved rating in Operational Risk are:

    
      -  The scope of the Canadian Institute of Chartered Accountants (CICA)
         5970 audit has been expanded to include risk management. This has
         resulted in an increased level of comfort that the appropriate
         controls and procedures are in place. The 2007 audit results gave a
         very high level of assurance in this respect.

      -  Some computer hardware has been upgraded to take advantage of
         technology developments to increase: reliability, processing speed,
         and capacity. The systems have been installed in a new and improved
         production system site that is resilient to environmental and
         infrastructure failure.

      -  Business continuity arrangements have been enhanced with increased
         capacity for staff to work from an alternative site.
    

    CDS Clearing operates a sophisticated credit risk model, to protect
participants against the risk of default of their counterparties. The model is
based on loss-sharing arrangements designed in a way in which the defaulter's
collateral is sufficient to cover its obligations in the vast majority of
cases. This highly collateralised risk model proved resilient during the
recent period of market volatility in Canada, and CDS Clearing's comprehensive
internal stress testing demonstrated the robustness of the model under a
variety of extreme conditions.
    Other notable improvements that have been made by CDS Clearing or the
market to help mitigate risk during the year were:

    
      -  The introduction of a CAD 50 million limit on the size of debt
         trades which has lessened the pressure on end of day settlement of
         large trades with a view to reducing trade settlement failures.

      -  The wider use of third party electronic matching utilities, coupled
         with the introduction of trade matching target times supported by
         the regulator, is a further step to reduce the risk of failed
         trades.

      -  Another profitable year in which further rebates were given to
         participants and fee reductions were implemented.
    

    Although governance is not presently rated, CDS Clearing has strong
governance arrangements that support the public interest borne out by their
commitment to system development, ongoing fee reductions and healthy fee
rebates to its participants.
    Ian Gilhooley, president and CEO of CDS Clearing and Depository Services
Inc., said, "CDS is pleased to have again worked with Thomas Murray in order
to obtain an independent view of our existing capabilities and processes. The
rating process involved a thorough review of CDS's clearing and settlement
process and gave special focus to the improvements that CDS and the Canadian
market have implemented over the past year." Mr Gilhooley indicated that he
was particularly pleased to see that the efforts made had resulted in an
improvement in the rating given to Operational Risk. He noted that the
affirmation of the overall rating of AA demonstrates that CDS Clearing remains
in an excellent position to support Canada's capital markets.
    Simon Thomas, CEO and chief ratings officer of Thomas Murray said when
announcing the central securities depositories (CSD) rating of CDS Clearing,
"CDS remains one of the top rated CSDs in the world. The strength of CDS
confirms the excellence of Canada's capital market infrastructure. The rating
reflects the confidence the Canadian market has in CDS's complex and
sophisticated risk model which has proved robust during periods of market
volatility during the past year."
    The CSD rating assesses the risk exposures for investors associated with
the processes the CSD has in place to facilitate the safekeeping and the
clearing and settlement of securities, where applicable. The methodology
considers the capabilities of the depository and the quality and effectiveness
of its operational infrastructure. It also assesses the depository's
willingness and ability to protect its participants or clients from losses. As
part of the rating, the scope and quality of the depository's services is
assessed. The ratings are on a consistent global scale, using the familiar AAA
to C ratings scale. Once the rating is assigned there is an ongoing
surveillance process to monitor the depository.

    About CDS Clearing and Depository Services Inc

    CDS Clearing and Depository Services Inc. is Canada's national securities
depository, clearing and settlement hub - supporting Canada's equity, fixed
income and money markets, holding over $3 trillion on deposit and handling
over 150 million securities trades annually. CDS Clearing is a subsidiary of
The Canadian Depository for Securities Limited - a valued partner to
securities market participants, providing reliable, cost-effective depository,
clearing, settlement, regulatory and information services. CDS delivers
innovative, value-added solutions that help stakeholders maintain a
competitive capital market in Canada and build a strategic global advantage.
    www.cds.ca

    About Thomas Murray

    Thomas Murray is a specialist custody rating, risk management and
research firm specialising in the global securities services industry. Thomas
Murray was established in 1994. The company tracks and analyses over 250
custodians globally and monitors the risk of over 100 capital market
infrastructures. The company has a strong position as a provider of public and
private ratings and risk assessments on global custodians, domestic custodian
banks and capital market infrastructures.
    www.thomasmurray.com





For further information:

For further information: Janet Comeau, CDS Clearing and Depository
Services Inc., (416) 365-8427, jcomeau@cds.ca; Simon Thomas/John Woodhouse,
Thomas Murray, +44 (0) 207-830-8300, sthomas@thomasmurray.com,
jwoodhouse@thomasmurray.com

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CDS CLEARING AND DEPOSITORY SERVICES INC.

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