Thomas Murray Affirms the Central Securities Depository Rating for CDS Clearing and Depository Services Inc. at 'AA'.



    TORONTO, June 9 /CNW/ - Thomas Murray, the specialist custody rating,
risk management and research firm has affirmed the CDS Clearing and Depository
Services Inc. (CDS Clearing) rating as 'AA' which represents very low risk
overall. The rating is made up of the following components:

    
                 --------------------------------------------
                                                 CDS rating
                 --------------------------------------------
                  Asset Servicing Risk               AA-
                 --------------------------------------------
                  Operational Risk                   AA+
                 --------------------------------------------
                  Financial Risk                     AA
                 --------------------------------------------
                  Counterparty Risk                  AA
                 --------------------------------------------
                  Liquidity Risk                     AA
                 --------------------------------------------
                  Asset Commitment Risk              AA+
                 --------------------------------------------
                  Overall Rating                     AA
                 --------------------------------------------
    

    The 'AA' rating as assigned by Thomas Murray recognises CDS Clearing's
ongoing commitment to minimize risk for market participants and the
demonstrated robustness of its settlement process during financial
instability. The outlook has been assigned as 'Stable' which suggests that
there are no imminent developments that may change the rating at this stage.
    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 global market instability, the credit crunch, and price
volatility although fortunately for CDS Clearing it did not have to manage any
significant defaults. Also, CDS Clearing increased its comprehensive internal
stress testing which demonstrated the robustness of the model under an
increased variety of extreme conditions.
    Looking ahead, the introduction of FINet to replace DetNet on 28 April
may prove to have a positive impact on Liquidity Risk. (FINet provides two
rather than one daily net batch process and accepts broader instrument types
including repo.) Also, several medium term projects have been initiated that
should reduce the volume of paper based securities on issue, and reduce the
use of issuer cheques for asset servicing related payments. These measures
respectively have a positive outlook for further reductions in Liquidity Risk
and Asset Servicing Risk.
    Although the overall rating has remained unchanged, CDS Clearing has
nevertheless introduced changes during the past year which have mitigated
risk. Notable actions undertaken by CDS Clearing to further mitigate risk
during the year are:

    
    -   The comprehensive Canadian Institute of Chartered Accountants (CICA)
        5970 audit for 2008 was completed with no major issues raised. This
        provides a high level of assurance that the appropriate controls and
        procedures are in place.
    -   Several technology upgrades were implemented that take advantage of
        technology developments to further improve system reliability,
        increase system processing speed, and capacity, and enhance the
        primary and DR site links.
    -   CDS Clearing introduced the SWIFT MT568 message type which
        complements the MT564 and supports STP, improves efficiency and
        reduces asset servicing risk in respect of the distribution of
        entitlement and corporate action information.
    -   Continual enhancements of Disaster Recovery Plans and Business
        Continuity arrangements have improved their robustness.
    -   The Canadian Depository for Securities Limited (CDS) and its
        subsidiaries (CDS INC. and CDS Innovations) had another profitable
        year and supported a C$11 million rebate to participants and a
        lowering of fees. (CDS reported a small operating loss of C$1.5
        million after the rebate but retains capital of C$41.6 million).
    -   CDS introduced a comprehensive new in-house training programme which
        was developed in conjunction with the Canadian Securities Institute.
    

    CDS 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 CDS Clearing participants, and the inclusion of
participant representatives in the Risk Advisory Committee and other key
committees considering system development opportunities and their priorities.
    Simon Thomas, CEO and Chief Ratings Officer of Thomas Murray said when
announcing the rating of CDS Clearing and Depository Services Inc., "CDS
Clearing has demonstrated the resilience of its complex and sophisticated risk
model through a period of global financial instability. CDS's underlying
financial strength has allowed it to continue to pursue further risk reducing
projects. Furthermore, CDS's strong internal and external audit programmes
confirm its excellence in operational risk management. All of these factors
demonstrate that CDS Clearing continues to remain one of the top rated CSDs in
the world."
    Ian Gilhooley, President and CEO of The Canadian Depository for
Securities Limited, said "CDS has again found it worthwhile to have worked
with Thomas Murray in order to obtain an independent view of our existing
capabilities, processes, outcomes and plans. 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 and the robustness of both the risk model and CDS Clearing
operations during periods of high financial instability". Mr Gilhooley
indicated that he was particularly pleased with CDS's financial outcomes and
its resilient performance over the last year. He added that he expects CDS
will benefit from its medium term projects over the coming years. 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.
    The Central Securities Depository 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.
It assesses six key risks. 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.
    Separately, Thomas Murray maintains proprietary assessments of over 140
CSDs globally as part of the Thomas Murray Depository Risk Assessment
services. These reports are available via Thomas Murray at
www.thomasmurray.com.

    About CDS Clearing and Depository Services Inc.

    CDS Clearing and Depository Services Inc. (CDS Clearing) is Canada's
national securities depository, clearing and settlement hub - supporting
Canada's equity, fixed income and money markets, holding almost C$3 trillion
on deposit and handling over 220 million security 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 Clearing 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, The Canadian Depository for
Securities Limited, (416) 365-8427, jcomeau@cds.ca; John Woodhouse, Thomas
Murray, +44 (0) 207-830-8300, jwoodhouse@thomasmurray.com

Organization Profile

CDS CLEARING AND DEPOSITORY SERVICES INC.

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