The BM&FBOVESPA Securities Clearinghouse is a multilateral net settlement system of government securities, and went live on May 17, 2004. The system settles both transactions traded at SISBEX, which is an electronic trading platform operated by BM&FBOVESPA, and traditional OTC transactions. BM&FBOVESPA is central counterparty for all of these transactions, and DVP model 3 is observed..
The system settles outright transactions (both spot and term transactions) and repurchase agreements as well. Spot transactions can be settled at the same day (T), if they are traded and registered up to 11am. Term transactions are settled in the future date contracted between the original counterparties, which can be up to T+23 (T+1 is more usual). Regarding repurchase agreements, the front leg is usually settled at the same day, and the back leg is usually settled in T+1 (it is allowed up to T+23)1. Short sales are allowed only with securities integrating the securities loan program provided by SELIC or BM&FBOVESPA itself.
Settlement of cash leg is made, via STR, at accounts maintained at the Banco Central do Brasil, and 45 settling banks are used for this purpose. Securities transfer leg is made in the environment of the relevant central depository (SELIC).
All participants are subject to transactional limits, which are based on the collateral previously posted, and assets traded as well. These limits are monitored in real time, and all assets are marked-to-market in ‘quasi real time’. For managing its risk exposure, the clearinghouse adopts the so-called portfolio risk methodology, and considers different sceneries (stress testing). Risk exposure is assessed using the same methodology observed by the Derivatives Clearinghouse, which is based on the analysis of primitive risk factors.
As a complementary mechanism, the clearinghouse has a guarantee fund, whose contributor is the BM&FBOVESPA itself. This fund can be used to cover both the participants’ default losses and losses imposed to a third party due to the incorrect registering of its operations by its broker in the SISBEX system.
For further information, please access BM&FBOVESPA’s website (this link will open in a new window).
1 Repurchase agreements can have specific collateral, in which case it is specified since the beginning of each transaction, or, in some cases, according to the clearinghouse's rules, generic collateral (specific collateral is indicated at the end of the day and regarding the participant net position).