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ACSDA International Seminar Johannesburg, South Africa November 19-21,2003

ACSDA International Seminar Johannesburg, South Africa November 19-21,2003 Centralized X Decentralized Systems Amarílis Prado Sardenberg November 21, 2003. BRAZILIAN INFRASTRUCTURE. MAIN CHARACTERISTICS. Three depositories/securities settlement systems (SSS)

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ACSDA International Seminar Johannesburg, South Africa November 19-21,2003

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  1. ACSDA International Seminar Johannesburg, South Africa November 19-21,2003 Centralized X Decentralized Systems Amarílis Prado Sardenberg November 21, 2003

  2. BRAZILIAN INFRASTRUCTURE MAIN CHARACTERISTICS • Three depositories/securities settlement systems (SSS) • Two central counterparties Hybrid model combining integrated depositories and/or clearinghouses for several instruments and specialized institutions.

  3. BRAZILIAN INFRASTRUCTURE • CENTRAL COUNTERPARTIES CBLC • Equities (cash and derivatives) • Fixed income instruments (cash markets) BM&F • Derivatives • Forex • DEPOSITORIES/SSS • CBLC • Equities (single depository) • Fixed income instruments • CETIP • Fixed income instruments • SELIC • Government bonds

  4. BRAZILIAN INFRASTRUCTURE The Brazilian clearance, settlement and depository infrastructure is decentralized However, the Brazilian financial institutions, the clearinghouses and the depositories are amalgamated by the National Brazilian Financial Net called RSFN and the Central Bank Money Transfer System named STR. Core components of the New Brazilian Payment System (SPB) implemented in April, 2002.

  5. THE NEW BRAZILIAN PAYMENT SYSTEM • MAIN FEATURES (I) • Gross settlement systems that works in a RTGS fashion (SELIC, the Central Bank depository and settlement system for government bonds and STR, the Central Bank Money Transfer System) Depositories and Clearinghouses • Direct access to Central Bank Money Transfer System (STR)

  6. BM&F CBLC account CETIP account SELIC account BM&F account SELIC CBLC CETIP Bank A account Bank B account THE CENTRAL BANK MONEY TRANSFER SYSTEM (STR) STR Banks Market Participants Funds transfer Instructions Zero-balance accounts Regular accounts

  7. Two different communication lines • XML protocol THE NEW BRAZILIAN PAYMENT SYSTEM MAIN FEATURES (II) • Standardized messaging system connecting in real-time all financial institutions, depositories and clearinghouses in the National Financial System Net (RSFN)

  8. THE NATIONAL FINANCIAL SYSTEM NET (RSFN) Brazilian Central Bank CBLC BM&F SELIC RSFN STR BANKS OTHERS CETIP

  9. CBLC – A CENTRALIZED MODEL CBLC IS A CENTRALIZED SYSTEM IN A DESCENTRALIZED ENVIRONMENT SINGLE CLEARANCE, RISK MANAGEMENT, SETTLEMENT AND DEPOSITORY SYSTEM

  10. DEPOSITORY SERVICES CBLC PROVIDES DEPOSITORY SERVICE FOR: • Equities (single depository) • Fixed income instruments • Corporate bonds • Mortgage-backed securities • Real state investment trusts • Others INTEGRATED DEPOSITORY SYSTEM

  11. CBLC DEPOSITORY SYSTEM DEPOSITORY SERVICES STATEMENTS FOR BENEFICIAL OWNERS • Post office - monthly statement • Fax - access to daily aggregate position and securities movements • Internet – access 24 hour a day. A SINGLE STATEMENT FOR THE WHOLE SECURITIES PORTFOLIO DEPOSITED AT CBLC

  12. TRADING SYSTEMS STOCK EXCHANGE OVER-THE-COUNTER • Somatrade • SomaFix • MegaBolsa • BovespaFix Fixed income instr Fixed income instr Options Forward Equities Equities Forward Futures Options STP CBLC

  13. CBLC CLEARANCE AND SETTLEMENT SYSTEM ONE SINGLE NETTING FOR: • Equities: • Cash (T+3) • Forward (T+n) • Futures (T+3 of the expiry date) • Options premiums (T+1) • Futures variation margin (T+1) • Fixed income instruments • Guarantees accepted as collateral for open positions in derivatives markets and regular settlement cycle; • Other obligations related to the settlement process, like delivery failures penalties. T+0 T+1 SINGLE NET POSITION FOR A WIDE RANGE OF MARKETS, INSTRUMENTS AND DIFFERENT TRADING SYSTEMS

  14. CBLC RISK MANAGEMENT MODEL CCP: SINGLE RISK MANAGEMENT POSITION • Open positions in derivatives • Equities derivatives (options, forwards, futures) • Securities lending • Regular settlement cycle • Equities • Fixed income instruments • Equities derivatives (options, forwards, futures) COLLATERAL OPTIMIZATION

  15. SECURITIES LENDING PROGRAM • CBLC acts as a CCP in this service • Service whereby investors can make their securities available for lending or whereby investors, who temporarily need securities, may borrow them. • BTC is automatic, mandatory and fully integrated with CBLC settlement system. REDUCTION OF DELIVERY FAILURES

  16. CONCLUSIONS CBLC: AN INTEGRATED SYSTEM • Multilateral netting across several markets and instruments REDUCTION OF LIQUIDITY REQUIREMENTS • Unified clearance and settlement systems • Risk management COLLATERAL OPTIMIZATION

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