CETIP - Organized Over-the-Count Market for Securities and Derivatives (Balcão Organizado de Ativos e Derivativos)
CETIP is depository of corporate bonds1, state and municipal government securities and securities that represent National Treasury's special responsibilities2. As depository, the entity processes issuing, redemption and custody of securities, as well as, when applicable, interests payment. All securities are dematerialized and transferred by book entries and transactions with them are carried out at over-the-counter market, including those traded through CETIP's electronic trading system (Cetipnet).
According to the type of transaction and the time it is carried out, settlement is on T or T+1. Multilateral netting is normally used in the case of primary market transactions. Bilateral netting and real-time gross settlement are used as well, respectively for derivatives transactions and for securities traded at secondary market.
CETIP does not act as a central counterparty. Therefore, if a settlement bank does not confirm the payment of a clearing member obligation, participants' multilateral net positions will be recalculated with the exclusion of transactions cleared through the failing clearing member, and they will be settled bilaterally in RTGS mode. In case of a settlement bank default, multilateral net positions that would be otherwise settled through it can be settled by means of another settlement bank. In any case, DVP is observed and final settlement occurs in settlement accounts held at the Banco Central do Brasil.
Commercial banks, universal banks, savings banks, investment banks, development banks, brokers and dealers, leasing companies, insurance companies and institutional investors, including mutual investment funds and private pension funds, foreign investors, besides other institutions that are also authorized to operate in financial and capital markets, participate in CETIP. Participants not holding bank reserves accounts settle their obligations by means of institutions holding these accounts. The system comprises about 8,400 participants (September, 2009).
CETIP maintains two processing centers (the secondary center works in hot standby) and, in contingency cases, the transaction can be retaken from the secondary center less than one hour later. To register transactions, the Market Telecommunication Network (Rede de Telecomunicações do Mercado - RTM) is used, while RSFN is used for the flow of messages related to the settlement phase. In any event, straight-through processing is used.
1 Certificates of Banking Deposit – CDB, Receipts of Banking Deposit – RDB, Interfinancial Deposits – DI, Bills of Exchange – LC, Bills of Mortgage – LH, debentures and commercial papers, among others.
2 The obligations are mainly related to state companies, some of them extinct, the Fundo de Compensação de Variações Salariais - FCVS (Salary Variation Compensation Fund), the Programa de Garantia da Atividade Agropecuária - PROAGRO (Agricultural Activity Guarantee Program) and Títulos da Dívida Agrária - TDA (Agricultural Debt Securities).