TORONTO, Jan. 11 /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
CDS Clearing rating
Asset Servicing Risk
Asset Commitment Risk
The 'AA' rating, as assigned by Thomas Murray, recognises CDS Clearing's
ongoing commitment to minimise risk for market participants and the
demonstrated robustness of CDS Clearing's settlement processes 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 that protects
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 has
proved resilient during periods of global market instability and price
volatility without any significant defaults. Regular transparent
comprehensive internal stress testing undertaken by CDS Clearing
demonstrates the robustness of the model under a variety of potentially
Although the overall rating has remained unchanged, CDS Clearing has
nevertheless introduced changes during the past year which have further
mitigated risk. Notable actions undertaken by CDS Clearing are:
Although debt and equity securities are largely dematerialised, CDS
Clearing has introduced several ongoing measures (including
disincentives to provide new issues in certificate form), to support
the achievement of full dematerialisation by 2014.
The comprehensive Canadian Institute of Chartered Accountants (CICA)
5970 audit for 2010 was completed with no major issues raised. Such
annual audits provide a high level of assurance that the appropriate
controls and procedures are in place.
The mainframe and data storage was recently upgraded ensuring CDS
Clearing has modern reliable supported systems and maintains excess
processing capacity to meet any significant unforeseen spikes in
The Canadian Depository for Securities Limited (CDS) reaffirmed its
effective business continuity capacity with a successful 'live' test
during the G-20 in Toronto in June 2010. It also maintains a high
standard of readiness for other unexpected Disaster Recovery events
CDS Clearing has continued to add new electronic services to support its
corporate information and corporate action activities. Also, they have
introduced functionality that enables them to act as paying agent , via
its designated banker, for issuer clients' dividend and interest
payments - further improving efficiency and reducing risk
CDS has continued its strong financial performance for the fifth
consecutive year and was able to provide both significant end of year
rebates to its participants in addition to several price discounts
through 2010. CDS Clearing's exposure to operational claims is limited
by the terms and conditions of its rules. CDS and its subsidiaries (CDS
INC. and CDS Innovations) all remain profitable.
A number of changes designed to enhance the control environment for the
setup, monitoring and handling of money market issues was implemented
by CDS Clearing that provide added assurance that money market
securities are properly deposited and processed.
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 their 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 CSD rating of CDS Clearing and Depository Services Inc,
"CDS Clearing has demonstrated the resilience of its complex and
sophisticated risk model through periods of global financial
instability. The stress testing that is regularly undertaken has proven
to be a key factor in ensuring the resilience of controls. It is noted
that CDS Clearing has an ongoing commitment to system and process
development, and to the introduction of new electronic services, as a
means to increase efficiency and reduce risk for both the participants
and CDS Clearing. The strength of CDS Clearing confirms the excellence
of Canada's capital market infrastructure and the 'AA' rating of CDS
Clearing, one of the top ratings assigned by Thomas Murray, reflects
the ongoing confidence the Canadian market has in CDS."
Ian A. Gilhooley, President and CEO of CDS Clearing and Depository
Services Inc, said "CDS Clearing is delighted to have again been
awarded such a high rating, which reflects the robustness of both the
risk model and CDS Clearing's operations during the recent period of
financial instability. We are pleased to have an independent view of
our operations that has examined the associated processes and controls.
Maintaining the 'AA' rating over the period has vindicated the
considerable efforts of our staff and directors in ensuring CDS
Clearing remains a top-rated depository on a global basis."
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. is Canada's national
securities depository, clearing and settlement hub - supporting
Canada's equity, fixed income and money markets, holding over CAD 3
trillion on deposit and handling over 350 million domestic and
cross-border 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 delivers innovative, value-added solutions that help stakeholders
maintain a competitive capital market in Canada and build a strategic
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
SOURCE CDS Clearing and Depository Services Inc.
For further information:
CDS Clearing and Depository Services Inc
+1 416 365 8427
+44 (0) 207-830-8300