SELIC is the central depository of securities issued by the National Treasury and the Banco Central do Brasil, and a DVP model 1 settlement system for outright and repo transactions with these securities1. All securities are dematerialized and transferred by book entries, while settlement of financial leg of each transaction is processed by means of the STR, to which SELIC is linked.
Besides the National Treasury and the Banco Central do Brasil, commercial banks, universal banks, investment banks, savings banks, dealers and brokers, clearing and settlement system operators, mutual investment funds and many other institutions that integrate the financial system participate in SELIC as custody account holders. To settle obligations, they are classified as settling and non-settling participants according to their nature. The non-settling participants settle their obligations by means of settling participants, which are institutions that hold reserves accounts at the Banco Central do Brasil. Each non-settling participant can use the services of more then one settling participant, except in some specific transactions such as interest payment and redemption of securities, which are settled through a previously indicated settling participant. Non-settling participants are classified as independent or subordinated, respectively those that register their transactions directly or by means of settling participants to whom they are tied. In September 2009, the system was composed of 6,879 participants.
The Banco Central do Brasil manages the SELIC and operates it jointly with ANBIMA. The system has two operational centers – principal and secondary – located in Rio de Janeiro. Settlement participants submit their transactions through RSFN, following standards and procedures set in the specific network manuals. Other participants use different networks, according to the procedures set in the system’s regulation. The system is open from 6:30am to 6.30pm.
Since it is a real-time gross settlement system, the settlement of each transaction is always conditioned to the availability of the traded securities in the seller’s custody account and the availability of funds in the settlement participant's STR account. If the seller’s custody account does not present sufficient balance of securities, the transaction will be held as pending for no longer than 60 minutes or till 6:30pm, whichever occurs first (selling transactions of securities acquired in primary auction carried out at the day do not fit this restriction). Transactions are forwarded to STR to settlement of financial leg only after blockade of the traded securities. The non-settlement of the transaction due to insufficiency of funds implies its prompt rejection by STR, and SELIC as well.
Under the system’s regulation, some associated transactions are allowed. In these cases, though settlement is processed transaction-by-transaction, net positions (securities and funds) of the set of the transactions are considered.
1The final settlement of financial and securities legs occurs all day long, simultaneously, operation by operation.