FX CLEARINGHOUSE OPERATING MANUAL
1.
General Provisions
The terms used in this Operating Manual have their meanings defined in Chapter I
(Definitions) of the Clearinghouse Rulebook.
2.
Purpose and Activities
The purpose of the Clearinghouse is to register, analyze, accept, contract, clear, and
settle the foreign exchange transactions performed directly by its participants or via
trading systems, as shown in Illustrations 1 and 2.
Illustration 1 – General Outline of the BM&F FX Clearinghouse
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Illustration 2 – Process Flow Chart
3.
Time
All time references in this Operating Manual, the BM&F Circular Letters, and any
and all other documents and/or reports are in Brasília time, as evidenced by the clocks
in the Clearinghouse computers through which its systems receive or send specific
messages.
4.
Participants and Limit Assignment
Participation in the Clearinghouse is restricted to institutions that, after being
authorized by the Central Bank of Brazil to buy, sell, and intermediate trades in the
foreign exchange market, are in turn duly registered and authorized to use the
Clearinghouse systems.
The following institutions can be authorized to be Clearinghouse participants:
(a)
(b)
Banks authorized to trade foreign exchange; and
Institutions authorized to intermediate FX transactions.
The participants in the Clearinghouse systems are grouped as:
2
(a)
(b)
Member participant, which is an institution that holds a BM&F equity
membership; and
Nonmember participant, which is an institution that does not hold a BM&F
equity membership.
Illustration 3 – BM&F FX Clearinghouse Participants
4.1
Banks Participating in the Clearinghouse Systems
The banks that participate in the Clearinghouse systems can register interbank
foreign exchange spot transactions traded directly between their trading desks or
via electronic or open outcry trading systems.
The authorized banks will be assigned position limits in foreign currency on a
net basis. The participating banks can keep net credit or debit balances in
foreign currency to be settled through the Clearinghouse systems, up to the level
of their corresponding position limits.
4.2
Institutions Authorized to Intermediate FX Transactions
These institutions, when authorized to use the Clearinghouse systems, are
allowed to register interbank foreign exchange spot transactions traded via its
trading systems.
4.3
Position Limit – Attribution and Alteration
Position limits are assigned by the Clearinghouse always by request of the
participating bank. The requested value is assessed by the Clearinghouse by
taking into account the bank size. Therefore, the following variables are
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considered, among others the Clearinghouse may deem necessary for the system
security: Net worth, working capital, rating received from specialized rating
companies, and most importantly bank history in the financial market and in
foreign exchange transactions.
An alteration in the position limit assigned by the Clearinghouse may occur by
formal request of the bank, for an increase or a reduction, or by the decision of
the Clearinghouse itself, always for a reduction, by considering prudential
criteria.
All new granted or altered limits, which are informed by the Clearinghouse,
become effective two business days after the bank request or the Clearinghouse
decisio n.
4.4
5.
Trading Limit
The trading limit is established by the Clearinghouse in foreign currency for the
sum of all transactions in the confirmation process by the buying and selling
banks based on the total amount deposited in the Guarantor Fund, which is
mutualized between all authorized intermediaries and BM&F.
The Clearinghouse monitors the Guarantor Fund throughout the day and, if
necessary, will require new deposits from BM&F, as well as adjust the shares of
participants to better reflect the transactions they have intermediated or which
are in the confirmation process by the buying and selling banks. The
methodology that defines the way the Guarantor Fund is used, is included in the
Clearinghouse Risk Management Manual.
Official Communication
Participants
Systems
Between
the
Clearinghouse
and
Its
The official communication systems between BM&F and its participants have the
following categories: regulatory, operational, and informative.
Regulatory communications are those that inform about the decisions made by the
BM&F under its jurisdiction, as provided by its Bylaws and the Clearinghouse
Rulebook and this Manual, approved by the Central Bank of Brazil, and the
applicable legislation of the Brazilian Payment System (SPB). BM&F publishes its
regulatory communications through Circular Letters; the other information is
published through Communications.
Operational communications relate to the registration, acceptance, and contracting of
transactions, to the requests for Brazilian currency payment and foreign currency
delivery, and to the statements defined in the Clearinghouse Rulebook and this
Operating Manual approved by the Central Bank, among others. All operational
communications are made through SPB messages and the BM&F screen system.
Specific functions applicable to FX contracting formalization in the Central Bank
Information System (SISBACEN) are also used, in addition to other electronic
communication systems used in international markets.
Informative communications are those that disclose information of public interest
concerning the FX transactions in the Clearinghouse systems, such as: High and low
prices, total volumes, and average prices. Such communications are made through
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BM&F and specialized vendor systems. Information that may harm participants or
their clients will not be disclosed.
BM&F maintains contingency systems for all of the official communication systems,
which also become official when they are used as such.
6.
Registration of Institutions Authorized to Trade in the FX Market
Registration is the procedure through which all the information necessary to identify
the institutions that intend to be authorized to perform FX transactions through the
Clearinghouse systems and their representatives is recorded.
The registration process is done by filling out a specific form, published in a BM&F
Circular Letter and also made available by electronic means.
Illustration 4 – Registration of the Institution Participating in the FX Clearinghouse
7.
Authorization of Registered Institutions
Authorization is the procedure through which an institution that is allowed to trade in
the FX market and registered in the Clearinghouse systems accepts all terms and
conditions established in the Clearinghouse Rulebook and this Operating Manual.
The authorization process begins with the filling out and signing of a specific legal
instrument, published in a BM&F Circular Letter and also made available by
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electronic means. After the definition of position limits, the next phase of the
authorization process is the technical validation of the institution’s systems. The
institution must then deposit its share in the Participation Fund or in the Guarantor
Fund, if that is the case. At the end of the process, the institution is informed of its
authorization and its name is published in the BM&F communication systems as a
participant authorized to use the Clearinghouse systems.
The purpose of the technical validation phase during the authorization process is to
verify the proper and correct functioning of an institution’s information technology
and security structures, in order to ensure the perfect operation of the Clearinghouse.
This phase includes among other things:
(a)
(b)
Compatibility verification of security, equipment, software, and data
communications ne twork with the Brazilian Payment System standards, or in
the case of intermediaries with the BM&F systems; and
A series of tests to check functions, message and/or file exchange, and correct
processing of operating rules and criteria.
The technical validation phase is coordinated by BM&F and carried out in
collaboration with the institution under the authorization process. The validation is
made official in a result analysis report that must be filed by BM&F together with the
supporting evidence.
Illustration 5 – Registered Institution Authorization
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Illustration 6 – Participant Technical Evaluation
8.
Duties of the Clearinghouse and the Participants
The duties of the Clearinghouse are:
(a)
(b)
(c)
(d)
To receive and analyze, within regular time frames, the proposed FX
transactions registered by participants, and inform them of the analysis results;
To accept and contract, for settlement purposes, the transactions approved in the
analysis process and inform the participants;
To keep participants informed about the whole process of the registered,
analyzed, accepted and contracted FX transactions to be settled through the
Clearinghouse systems, until their final settlement;
To request immediate measures from participants in regard to the transactions
pending in the Clearinghouse systems and monitor those transactions;
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(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
To clear the amounts of the transactions contracted, and keep the participants’
net balances updated and available for consultation;
To issue to all participants, within regular time frames, all statements and
requests concerning net debit balances for Brazilian currency payment and
foreign currency delivery;
To monitor the payment processing of net debit balances;
To keep the correspondent banks informed, when applicable, of the need to buy
and sell FX or to enter into repurchase agreements (repos) or reverse repurchase
agreements (reverse repos), due to a participant’s operational or financial
difficulty during the current settlement session;
To issue payment orders on behalf of the nondefaulting participants, ensure their
finality, and inform the respective creditors;
To conduct all of the procedures needed to resolve matters still pending from the
settlement session, such as tracking payments made by operational defaulters,
buying or selling the currency needed to cover unsettled funds, and executing
the defaulter’s collateral;
To issue reports on the errors committed by participants and forward them to the
directors responsible for the institutions and to the Central Bank, when
applicable; and
To send to the Central Bank all of the information it requests on the behavior of
the market and its participants.
The duties of participants are:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
To register their transactions in a timely fashion, in the systems of the Central
Bank, pursuant to its provis ions, and in the Clearinghouse systems, through the
means defined in its Rulebook and this Operating Manual, and to monitor their
processing, until their final settlement, when applicable;
To maintain an accurate control of the analysis of their transactio ns, until the
final result of the process;
To promptly meet Clearinghouse requests to resolve matters concerning
transactions pending in its systems;
To maintain an adequate control of the transactions accepted and contracted to
be settled through the Clearinghouse systems, especially in regard to position
limits and the amount of deposited collateral at the disposal of the
Clearinghouse;
To monitor and control net credit and debit balances, until final settlement,
resulting from the transactions accepted, contracted and cleared by the
Clearinghouse systems;
To receive, and acknowledge the receipt in a timely fashion, of the requests for
Brazilian currency payment and foreign currency delivery issued by the
Clearinghouse;
To provide within the time frame established by the Clearinghouse the payments
due and required in the requests for payment, and monitor the entire funds
transfer process in Brazilian and foreign currency;
To keep the Clearinghouse informed of any financial or operational difficulty
corresponding to the settlement of funds under their responsibility, and when the
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(i)
(j)
(k)
(l)
9.
case so demands to take the necessary steps together with the Clearinghouse to
resolve that difficulty;
To make sure that the transfer of credits communicated by the Clearinghouse are
confirmed by the respective correspondent banks abroad or by the Central Bank;
To take part together with the Clearinghouse in all of the procedures needed to
resolve, on the same day, pending obligations under their responsibility that
arise from the settlement process;
To make the necessary adjustments to resolve the pending obligations under
their responsibility that are listed in the reports issued by the Clearinghouse; and
To update the institution’s registration data, as well as the data of the personnel
directly or indirectly involved in all of the phases of the FX transactions carried
out through the Clearinghouse systems.
Foreign Exchange Transactions
For Clearinghouse purposes, FX transactions are interbank purchase and sale
transactions of foreign currency performed directly between the participating banks
and the Clearinghouse or through intermediaries in trading systems. They include
trading, registration in the Clearinghouse systems, acceptance, contracting,
registration in the Central Ba nk systems, clearing to calculate the net balances in the
currencies involved, payment of Brazilian currency, and delivery of foreign currency.
Only the FX transactions that are in full compliance with Brazil’s current FX
legislation, the rules of the National Monetary Council and the Central Bank of
Brazil, and with the provisions set forth in this Operating Manual and in the
Clearinghouse Rulebook and Risk Management Manual, can be carried out through
the Clearinghouse systems.
Participants are solely responsible for the information registered in the Clearinghouse
systems, including their compliance with current FX regulations.
The Clearinghouse publishes and updates through BM&F Circular Letters or External
Communications, whenever necessary, the characteristics and conditions of the FX
transactions that can be carried out through the Clearinghouse systems.
10.
FX Trading
An FX transaction, involving the definition of all corresponding variables, is traded
directly between the Clearinghouse buying and selling participants or through
intermediaries in trading systems. The transaction variables are, among others, the
amount in foreign currency, the exchange rate, the foreign currency delivery date, and
the Brazilian currency payment date.
In general, trading is usually carried out by FX traders at the banks’ trading desks by
using the available communication systems, or the trading systems. The latter can be
an open outcry system or an electronic system.
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Illustration 7 – FX Trading
11.
Registration of Proposed FX Transactions in the Clearinghouse Systems
As mentioned previously, participants can register FX transactions that are traded (i)
between themselves, buyer and seller, directly or (ii) through intermediaries in trading
systems.
The Clearinghouse systems are open for the registration of FX transactions, also for
same day settlement, during the hours published by BM&F, in observance of the time
frame established for their registration in the Central Bank systems.
After trading, participants can register their FX transactions so that they can be
analyzed, accepted, contracted, cleared and settled through the FX Clearinghouse
systems.
Every transaction accepted by the Clearinghouse must be registered with the Central
Bank through a specific function which is available for that purpose in SISBACEN,
pursuant to the conditions set forth by the Central Bank.
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Illustration 8 – Registration of FX Transactions Traded Directly Between Banks – Via
SISBACEN/Messages
11.1 FX Transactions Traded Directly by Participating Banks and Registered
with the Clearinghouse Via SISBACEN or Through the Use of Messages
The FX transactions traded directly between banks can be registered in the
Clearinghouse systems through the direct use of a SISBACEN function or
specific SPB or BM&F messages for this purpose.
The FX transactions traded directly between banks that are not accepted by the
Clearinghouse are the sole responsibility of the banks involved.
11.2 FX Transactions Traded by Participating Banks in Electronic or Open
Outcry Trading Systems
The Clearinghouse counts on its own procedures to authorize each of these
trading systems, through which legal and technical issues and risk factors are
evaluated, among others.
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FX transactions traded by intermediaries in trading systems can be registered,
cleared and settled through the Clearinghouse systems.
When applicable the Clearinghouse requests that the intermediary, responsible
for the transaction, specifies the buying or the selling bank, and subsequently
requests that the specified bank confirms the transaction.
In the resolution of the transactions that are not confirmed by the specified banks, the following measures will be taken in order to obtain a new
counterparty: (i) the intermediary responsible for trading the FX Transaction
will be allowed to specify another bank; (ii) the Clearinghouse will indicate
another intermediary to trade the opposite FX Transaction; and (iii) the
Clearinghouse will contract the services of one of the correspondent banks by
taking into account the Correspondent Bank that provides the best conditions.
The Clearinghouse will utilize the BM&F Settlement Bank whenever it
becomes impossible to solve the pending transaction pursuant to the provisions
set forth previously, or whenever it is not advisable to use correspondent banks.
If necessary, the Clearinghouse will use the specific safeguards of the system
where the transaction has been traded to cover expenses. This procedure will
follow the provisions set forth in the Clearinghouse Risk Management System
Manual.
In order to carry out FX transactions through the Clearinghouse, the trading
systems will have to rely on their own regulations, which must be approved by
the Clearinghouse, as well as on their own safeguard structures, so as to ensure
the participants and the Clearinghouse that any pending matters that may arise
during trading will be resolved, if such be the case.
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Illustration 9 – Registration of FX Transactions Via Trading Systems – Open Outcry
13
Illustration 10 – Registration of FX Transactions Via Trading Systems – Electronic
12.
Analysis and Acceptance of FX Transactions by the Clearinghouse
Analysis and acceptance of FX transactions integrate the purchase and sale process
for settlement purposes within the scope of the Clearinghouse. In the analysis stage,
the Clearinghouse checks data, terms, conditions and characteristics of each proposed
FX transaction registered in its systems. Special attention is given to the
corresponding risk aspects. In the acceptanc e stage, the Clearinghouse decides
whether or not it will accept to buy from the seller and to sell to the buyer.
Acceptance by the Clearinghouse occurs as follows:
(i)
FX transactions performed directly by participating banks and registered with
the Clearinghouse via SISBACEN
– In this situation, the Clearinghouse receives the transaction registration
directly from SISBACEN. After the transaction is analyzed and is in
condition to be accepted, the Clearinghouse confirms its acceptance through
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SISBACEN and informs the corresponding banks via SPB message system
or BM&F communication systems. In this event, the formal binding of the
Clearinghouse to the transaction as its buyer/seller occurs at the moment the
Clearinghouse confirms its acceptance through SISBACEN and informs the
corresponding banks;
(ii) FX transactions performed by directly participating banks and registered in the
Clearinghouse systems through the use of the specific SPB or BM&F messages
for this purpose
– In this situation, the Clearinghouse receives the transaction registration via
SPB messages or BM&F communication systems. After the transaction is
analyzed and is in condition to be accepted, the Clearinghouse informs its
acceptance through SPB messages and informs the corresponding banks via
SPB message system or BM&F communication systems. In its information
of acceptance, the Clearinghouse requests that the transaction be registered
in the Central Bank systems, thereby binding itself to the transaction as its
buyer/seller;
(iii) FX transactions performed by participating banks in electronic or open
outcry trading systems
– In this situation, the Clearinghouse receives the transaction registration
directly from the trading system, upon which time it formally binds itself
to the transactions as its buyer/seller. This registration is made by the
corresponding intermediaries. The Clearinghouse requests that these
intermediaries specify the buying and selling banks, performs the
previous analyzes of the transaction, and requests that the banks confirm
the transaction. After the transaction is confirmed, the Clearinghouse
makes its final analysis and informs its acceptance through the SPB
message system or the BM&F communication systems. In its
information of acceptance, the Clearinghouse also requests that the
transaction be registered in the Central Bank systems.
15
Illustration 11 – Analysis and Acceptance of Proposed FX Transactions
12.1 Position Limit
Position limits are established for all participants when they are authorized in the
Clearinghouse systems, as explained in subsection 4.3 of this Operating Manual.
During the analysis process, the Clearinghouse risk management system adds
the values of the new FX transaction under analysis, in Brazilian and foreign
currency, to the net bala nces outstanding per settlement date, and compares the
new status of the participants with their position limits.
12.2 Marking to Market
If a participant defaults, the Clearinghouse systems are programmed to manage
the exchange rate fluctuation risk with pre-deposited collateral, pursuant to the
provisions and conditions set forth in the Clearinghouse Rulebook and Risk
Management Manual, as well as in this Operating Manual.
The parameter applied to manage the exchange rate fluctuation risk is
determined based on studies involving the FX market and its variables. These
studies are prepared by the BM&F technical areas, pursuant to the guidelines of
its Risk Committee, whenever they are deemed necessary.
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During the period between the constitution of the balance and its settlement, or
its extinction or modification by netting with other transactions contracted with
the Clearinghouse, the pledge of new collateral for exchange rate fluctuation can
be required from the participants whose marked-to-market balances expose the
settlement process to risk, in accordance with the methodology described in the
Clearinghouse Risk Management Manual. Following this reasoning, the
collateral of participants whose balances no longer expose the settlement
process to risk will be released.
The lack of the pledge of collateral required by the Clearinghouse to keep the
exchange rate of the outstanding net balance marked to market will cause the
suspension of the acceptance of new transactions from the corresponding
participant, except for those that result in the reduction of that balance. In this
case, the Clearinghouse will assess the situation, and it may choose, when
applicable, to contract from correspondent banks an opposite position or other
type of transaction available for risk protection. Any expenses from the
transaction contracted for risk protection, when applicable, will be incumbent on
the participant that originated the situation.
13.
Transaction Registration with the Central Bank of Brazil
The FX transactions traded by participants and registered, analyzed and accepted by
the Clearinghouse are registered with the Central Bank, as determined in FX
legislation.
With the Central Bank registration/confirmation, the Clearinghouse becomes the
contracting party for the purposes of the settlement of obligations, pursuant to the
provisions set forth in Law No. 10214, of March 27, 2001, and further rules and
regulations of the Brazilian Payment System.
When a registration/confirmation is refused, the participant is considered as a
defaulter by the Clearinghouse. In this situation, the Clearinghouse resorts to one of
the correspondent banks to resolve the pending obligation by taking into account the
Correspondent Bank that provides the best conditions.
The Clearinghouse will utilize the BM&F Settlement Bank whenever it becomes
impossible to resolve the pending obligation pursuant to the provisions set forth
previously, or whenever it is not advisable to use Correspondent Banks.
All expenses from using the services of correspondent banks or the BM&F Settlement
Bank, as well as from exchange rate equalization, when applicable, will be incumbent
on the defaulting bank. If necessary, the Clearinghouse may also use the collateral
pledged by the Participant that originated the situation.
14.
Netting of Obligations for Net Credit and Debit Balance Calculation
The Clearinghouse systems process the settlement of FX transactions with its
participants on a bilateral net basis. The BM&F Foreign Exchange Clearinghouse,
therefore, operates under the Deferred Net Settlement (DNS) system. This means that
FX purchase and sale transactions contracted with the Clearinghouse for settlement on
a net basis can generate situations where the parties—the Clearinghouse and its
participants—become reciprocal bilateral debtors and creditors in Brazilian and
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foreign currency. Their obligations in both currencies are in full compliance with the
netting procedures set forth in applicable legislation. Netting is then automatic. Thus,
reciprocal obligations in Brazilian and foreign currency will terminate after the y are
netted.
Net credit and debit balances in Brazilian and foreign currency result from automatic
netting between the Clearinghouse and its participants. These net balances are paid
and received on the dates, during the hours and under the forms defined by the
Clearinghouse Rulebook and this Operating Manual.
Net credit and debit balances may be composed of the following amounts:
(i)
In foreign currency
– The amounts corresponding to the FX transactions registered per participant
on the contracting date, and analyzed and accepted by the Clearinghouse for
settlement through its systems;
(ii) In Brazilian currency
– The amounts corresponding to payments made and received for the FX
transactions registered per participant on the contracting date, and analyzed
and accepted by the Clearinghouse for settlement through its systems;
– The costs incurred by the Clearinghouse as a consequence of financial or
operational failures, under a participant’s responsibility, as referred to in the
Clearinghouse Rulebook and this Operating Manual; and
– The basic and extra fees defined in the Clearinghouse Rulebook and this
Operating Manual for the use of the Clearinghouse registration, clearing, and
settlement systems.
15.
FX Transaction Settlement
The Clearinghouse performs the daily settlement of FX transactions for the dates
when the participants have net credit and debit balances in Brazilian and foreign
currency. Settlement occurs pursuant the provisions set forth in Chapter VIII
(Settlement) of the Clearinghouse Rulebook.
15.1 First Phase of the Settlement Session
In the first phase of the settlement session, the Clearinghouse issues the
corresponding messages containing preliminary communications for the
participants with net debit balances in Brazilian currency and in foreign
currency. Such requests are issued immediately after the close of the FX
transactions on the day before the settlement date and sent in a message format,
in accordance with the parameters defined for the communications network of
the Brazilian Payment System, or made available to the participants by a
specific BM&F system. The types of messages or other communications
channels accepted and used by the Clearinghouse are published in the SPB
message catalog or by BM&F. The preliminary communications with net debit
balances in Brazilian currency and in foreign currency remain at the disposal of
the debtors until 06:00 of the settlement date.
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Illustration 12 – First/Third Phase of the Settle ment Session
15.2 Second Phase of the Settlement Session
The second phase of the settlement session is destined to the funds transfer by
participants for the payment or contracting of new purchases and/or sales for
same day settlement. This phase ends precisely at 10:15 for both the registration
and the confirmation of new transactions. Participants with net debit balances in
Brazilian currency must provide the corresponding credit to the settlement
account of the Clearinghouse at the Central Bank. Participants with net debit
balances in foreign currency may provide the corresponding foreign currency
delivery to the settlement account of the Clearinghouse at the correspondent
bank it indicates abroad.
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Illustration 13 – Second/Fourth Phase of the Settlement Session
15.3 Third Phase of the Settlement Session
The third phase of the settlement session begins at 10:45, when the
Clearinghouse issues the “Request for Brazilian Currency Payment” and the
“Request for Foreign Currency Delivery” to all participants with net debit
balances. The requests for Brazilian currency payment or foreign currency
delivery must be confirmed by the participants, also through specific messages
or the BM&F systems, by no later than 11:00. The requests that are not
confirmed in this manner will need to be confirmed by the Clearinghouse
telephone recording system. Telephone confirmation may be charged to the
participant as an extra fee, pursuant to the provisions and values published by
BM&F in its Circular Letters.
15.4 Fourth Phase of the Settlement Session
In the fourth phase, participants must provide Brazilian currency payments
and/or foreign currency deliveries to the Clearinghouse and confirm them. All
participants with total or partial net debit balances to the Clearinghouse must
make the corresponding funds transfers in this phase, which ends precisely at
13:05, by which time all payments should be confirmed to the Clearinghouse.
The Brazilian currency payments and foreign currency deliveries that have not
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been confirmed by this time will cause the participants to be considered as
“operational defaulters” or as “defaulters.”
15.5 Fifth Phase of the Settlement Session
The fifth phase of the settlement session, pursuant to the Clearinghouse Risk
Management Manual, occurs at 14:05. In this phase, the Clearinghouse systems
issue all payment orders: (i) In Brazilian currency, directly to the credit of the
bank reserve accounts of the net sellers or to another account per their
instructions; and (ii) in foreign currency, for delivery through a credit to the net
buyers’ accounts at the indicated correspondent bank. Payment orders in
Brazilian currency are issued by the Reserve Transfer System (STR) of the
Central Bank of Brazil, and deliveries of foreign currency are made in Fed funds
or by internal book transfer to the correspondent bank, whenever admissible.
15.6 Sixth Phase of the Settlement Session
In this phase, which ends at 15:30, the Clearinghouse takes the necessary
measures to ultimate the fulfillment of the obligations that may still be pending
from the other phases.
16.
Forms of Payment
All the payments in Brazilian currency by participants to the Clearinghouse and by
the Clearinghouse to participants must be made by using funds on deposit at the
Central Bank of Brazil. The Clearinghouse holds a settlement account at the Central
Bank to transfer Brazilian currency. Funds transfers to and from the settlement
account consist of the financial results of FX transactions, proceeds from collateral
execution, and Clearinghouse fees.
For foreign currency transfers, the Clearinghouse holds current accounts abroad at
correspondent banks, the names of which are published and updated by BM&F
through Circular Letters. Delivery of United States Dollars can be made in Fed funds
or by book transfer.
16.1 Payment of Brazilian Currency by the Buyer
Net Brazilian currency funds due by the buyers must be paid through the
transfer of funds from their bank reserve accounts to the settlement account of
the Clearinghouse. Such transfers must be made in accordance with the
instructions contained in the messages with preliminary communications of the
amounts due in Brazilian currency, or in the “Request for Brazilian Currency
Payment.” Payments must be credited through the STR—as prompt funds—and
confirmed to the Clearinghouse by no later than 13:05. Brazilian currency
payments that are not confirmed by that time will cause participants to be
included in the status of “operational defaulters” or “defaulters.”
16.2 Delivery of Foreign Currency by the Seller
Net US Dollars funds due by the sellers must be credited to the account of the
Clearinghouse with the correspondent bank it indicates. Such transfers must be
made in accordance with the instructions contained in the messages with
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preliminary communications of the amounts due in foreign currency, or in the
“Request for Foreign Currency Delivery.” Deliveries must be credited in Fed
funds or by book transfer—as prompt funds—and confirmed to the
Clearinghouse by no later than 13:05. Foreign currenc y deliveries that are not
confirmed by that time will cause participants to be included in the status of
“operational defaulters” or “defaulters.”
16.3 Payment of Brazilian Currency to the Seller
The Clearinghouse will pay the net Brazilian currency funds due to the sellers
that have met their obligations by transferring the corresponding funds from its
settlement account to the sellers’ bank reserves accounts at the Central Bank of
Brazil, via the STR, or to another account as instructed by the particip ants that
do not hold bank reserves accounts. All payment messages and their respective
communications are issued at 14:05.
16.4 Delivery of Foreign Currency to the Buyer
The Clearinghouse delivers the net foreign currency funds to the net buyers who
have met their obligations. These deliveries are made abroad to the net buyers’
accounts at the indicated correspondent bank, which must be registered in the
Clearinghouse systems. The payment instruction is issued by the Clearinghouse
via Society for Worldwide Interbank Financial Telecommunication (SWIFT) or
an alternative means of communication defined by the parties. The
Clearinghouse will instruct its correspondent bank to make delivery by crediting
the bank indicated by the participant. Delivery will be made in Fed funds or by
book transfer.
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Illustration 14 – Payment of Brazilian Currency to the Seller/Delivery of Foreign Currency
Delivery to the Buyer
17. Buyer’s Default
The buyers that fail to pay the net funds due in Brazilian currency by 13:05, as
instructed in the messages with the preliminary communications of the amounts due
or in the “Request for Brazilian Currency Payment,” will be immediately considered
as “operational defaulters,” when payment is not made for operational reasons, or as
“defaulters,” when the lack of payment results from total incapacity to pay. If the
Clearinghouse does not receive the funds in Brazilian currency for any reason it will
suspend the corresponding delivery of foreign currency.
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Illustration 15 – Buyer’s Default
Operational defaulters must adjust the payment of the funds due with the Payment and
Settlement Department by no later than 15:30 on the day in question; otherwise they
will be considered as defaulters. The Head of the Payment and Settlement Department
will immediately report any unreceived payment to the FX Clearinghouse Director,
with a view on the circumstances that led the participant to be in such a situation. The
FX Clearinghouse Director will propose to the BM&F Chief Executive Officer the
suspension or exclusion of the participant from the Clearinghouse systems.
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Illustration 16 – Buyer Becomes an Operational Defaulter – Sale of Foreign Currency
All decisions made by the FX Clearinghouse Director will be submitted to the BM&F
Chief Executive Officer, who is empowered to make all final determinations.
Participants that are considered as defaulters, or that are suspended or excluded
cannot register new FX transactions in the Clearinghouse systems as long as their
pending issues remain unresolved. The BM&F Chief Executive Officer, together with
the FX Clearinghouse Director, must seek the means to resolve these issues in a
coordinated effort with the participants. Such events will only be reported to the
Central Bank of Brazil after all possible solution alternatives have failed.
Transactions that are already registered for a settlement date occurring after the
default will remain in the Clearinghouse systems and will be settled on their
respective dates, pursuant to the provisions of the Clearinghouse Rulebook and this
Operating Manual.
The Clearinghouse will use the foreign currency funds which were not delivered to
the operational defaulter or defaulter to obtain, through a repo or a sale, the Brazilian
currency amount needed to pay the nondefaulting participant. Foreign currency sales
will be made by the Payment and Settlement Department to the correspondent bank
that presents the best bid.
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In a foreign currency sale, if a negative exchange rate fluctuation occurs it will be
covered by using the defaulter’s deposited collateral. If a positive exchange rate
fluctuation occurs, it will be included in the deposited collateral account and will be
treated in accordance with the Clearinghouse Rulebook, its Risk Management
Manual, this Operating Manual and the SPB legislation. The use of collateral will
follow the provisions set forth in Chapter IX (Safeguards) of the Clearinghouse
Rulebook.
Illustration 17 – Buyer Becomes an Operational Defaulter – Repurchase of Foreign Currency
A foreign currency repo will always be made when a debit is identified by the
Payment and Settlement Department as the lack of payment for operational reasons,
that is, when the buyer’s capacity to pay is not in question. A repo will therefore have
the sole purpose of solving purely operational issues concerning the payments of net
buyers, and must be resolved by no later than 15:30 of the day scheduled for the
settlement of the FX transaction. If the problem remains unresolved after this time,
the operational defaulter, at the discretion of the Clearinghouse, can be considered as
a defaulter. In this case, the repo will become a sale.
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The FX Clearinghouse Director will examine special situations, and he can then
propose to the BM&F Chief Executive Officer that a special treatment be applied on a
case-by-case basis.
A repo will always be subject to the conditions agreed upon between the
Clearinghouse and one of the correspondent banks. In order to make a repo, the
participant considered as an operational defaulter must previously transfer to the
Clearinghouse, as collateral, the amounts corresponding to the fees/costs, as well as to
the exchange rate fluctuations. Such a transfer must be made in Brazilian currency, in
foreign currency, or in federal government bonds, and confirmed to the Clearinghouse
by no later than 13:15.
Partial deposits to the settlement account will be received as additional collateral in
the participant’s accounts with the Clearinghouse.
18.
Seller’s Default
The sellers that fail to deliver the net funds due in foreign currency by 13:05, as
instructed in the messages with the preliminary communications of the amounts due
or in “Request for Foreign Currency Delivery,” will be immediately considered as
“operational defaulters,” when delivery is not made for operational reasons, or as
“defaulters,” when delivery is not made for total incapacity to pay. If the
Clearinghouse does not receive the funds in foreign currency for any reason it will
suspend the corresponding payment of Brazilian currency.
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Illustration 18 – Seller’s Default
Operational defaulters must adjust the delivery of the funds due with the Payment and
Settlement Department by no later than 15:30 on the day in question; otherwise they
will be considered as defaulters. The Head of the Payment and Settlement Department
will immediately report any unreceived delivery to the FX Clearinghouse Director,
with a view on the circumstances that led the participant to be in such a situation. The
FX Clearinghouse Director will propose to the BM&F Chief Executive Officer the
suspension or exclusion of the participant from the Clearinghouse systems.
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Illustration 19 – Seller Becomes an Operational Defaulter – Purchase of Foreign Currency
All decisions made by the FX Clearinghouse Director will be submitted to the BM&F
Chief Executive Officer, who is empowered to make all final determinations.
Participants that are considered as defaulters, or that have been suspended or excluded
cannot register new FX transactions in the Clearinghouse systems as long as their
pending issues remain unresolved. The BM&F Chief Executive Officer, together with
the FX Clearinghouse Director, must seek the means to resolve these issues in a
coordinated effort with the participants. Such events will only be reported to BACEN
after all possible solution alternatives have failed.
Transactions that are already registered for a settlement date occurring after the
default will remain in the Clearinghouse systems and will be settled on their
respective dates, pursuant to the provisions of the Clearinghouse Rulebook and this
Operating Manual.
The Clearinghouse will use the Brazilian currency funds not paid to the operational
defaulter or defaulter to obtain, through a reverse repo or a purchase, the foreign
currency amount needed to be delivered to the nondefaulting participant. Reverse
repos will be made by the Payment and Settlement Department with the
correspondent bank that presents the best offer.
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In a foreign currency purchase, if a negative exchange rate fluctuation occurs it will
be covered by using the defaulter’s deposited collateral. If a positive exchange rate
fluctuation occurs, it will be included in the deposited collateral account and will be
treated in accordance with the Clearinghouse Rulebook, its Risk Management
Manual, this Operating Manual and the SPB legislation. The use of collateral will
follow the provisions set forth in Chapter IX (Safeguards) of the Clearinghouse
Rulebook.
Illustration 20 – Seller Becomes an Operational Defaulter – Resale of Foreign Currency
A foreign currency reverse repo will always be made when a debit is identified by the
Payment and Settlement Department as the lack of payment for operational reasons,
that is, when the seller’s capacity to pay is not at stake. A reve rse repo will therefore
have the sole purpose of solving purely operational issues concerning the payments of
net sellers, and must be resolved by no later than 15:30 of the day scheduled for the
settlement of the FX transaction. If the problem remains unresolved after this time,
the operational defaulter, at the discretion of the Clearinghouse, can be considered as
a defaulter. In this case, the reverse repo will become a purchase.
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The FX Clearinghouse Director will examine special situations, and he can then
propose to the BM&F Chief Executive Officer that a special treatment be applied on a
case-by-case basis.
A reverse repo will always be subject to the conditions agreed upon between the
Clearinghouse and one of the correspondent banks. In order to make a reverse repo,
the participant considered as an operational defaulter must previously transfer to the
Clearinghouse settlement account with the Central Bank of Brazil, as collateral, the
amounts corresponding to the fees/costs, as well as to the exchange rate fluctuations.
Such a transfer must be made in Brazilian currency, in foreign currency, or in federal
government bonds, and confirmed to the Clearinghouse by no later than 13:15.
Partial deposits to the settlement account will be received as additional collateral in
the participant’s accounts with the Clearinghouse.
19.
Safeguards
Safeguards are the mechanisms that compose the security structure of the
Clearinghouse and that guarantee the necessary conditions for the settlement of
transactions carried out through its systems, pursuant to the provisions of article 4,
paragraph 2, of Law No. 10214, of March 27, 2001.
The Clearinghouse safeguards are of operational, administrative and financial nature,
as follows:
(a)
(b)
(c)
Operational safeguards refer, among othe r things, to the technological support,
its accessories, and the communication systems used to connect the
Clearinghouse with its participants or other entities that are directly or indirectly
involved in the achievement of its purposes in Brazil and abroad;
Administrative safeguards refer, among other things, to the specialized staff
members who belong to the BM&F workforce and undertake Clearinghouse
activities; and
Financial safeguards refer, among other things, to the collateral pledged by
participants with the Clearinghouse; the constitution of the funds established by
the Clearinghouse to cover possible operational or administrative failures; and
the formation of a segregated capital by BM&F to guarantee, as a last recourse,
the fulfillment by the Clearinghouse of the obligations concerning the accepted
FX transactions. Pursuant to the provisions of Law No. 10214, financial
safeguards are intended to guarantee the cash settlement of transactions that are
registered, analyzed, accepted and contracted for settlement through the
Clearinghouse systems.
To guarantee the cash settlement of transactions carried out through its systems, the
Clearinghouse will make use of the safeguards that follow.
Concerning the Principal
(i) Every FX transaction for which the Clearinghouse becomes the contracting
party is subject to the payment versus payment (PVP) settlement. The
Clearinghouse will settle the transactions registered in its systems through the
DNS process, in both foreign and Brazilian currency, which will reduce the
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(ii)
amount of funds to be transferred and will allow a greater control of principal
risk. PVP settlement is possible because FX transactions are bilateral
agreements for the purchase and sale of foreign currency. A Brazilian currency
payment or a foreign currency delivery will only be made to the participants that
have not defaulted in their obligations to the Clearinghouse.
The establishment of position limits for participants based on the Clearinghouse
rating system restricts net debit balances, in both currencies, to the actual
payment capacities of the participants, thereby keeping them from assuming,
within the scope of the Clearinghouse, commitments and risks which are beyond
their capabilities.
Concerning the Exchange Rate
(i) Exchange Rate Fluctuation in a Default Situation
To guarantee the variation of the exchange rate when a participant defaults, the
Clearinghouse will use, whenever necessary, the participant’s pre-deposited
collateral. To define the size of this fluctuation, the Clearinghouse will employ a
combination of objective and subjective factors. The objective factors will be
obtained through equations applied to an exchange rate fluctuation database
verified in past periods. The subjective factors will be obtained through
information from the FX market and other domestic and international financial
markets, with reflections on the exchange rate formation. Such information will
be obtained by the Clearinghouse Analysts from the participants’ trading desks,
BM&F futures markets, and other market sources. At the close of the daily FX
market operations, the Clearinghouse Director, the Head of the Registration and
Contracting Department, the Head of the Payment and Settlement Department,
their respective Analysts, and optionally the BM&F Chief Executive Officer and
other directors, will meet to analyze market behavior and economic and political
scenarios that influence the exchange rate formation. For the establishment of
the exchange rate fluctuation index that will provide the Clearinghouse and its
participants with the best security, the BM&F Risk Committee, if necessary,
will examine the results of statistical studies along with the day-to-day market
information. The FX Clearinghouse Director is one of the members of the
BM&F Risk Committee. The index is published in the BM&F systems.
(ii) Exchange Rates Contracted Out of Market Parameters
The proposed FX transactions whose rates are not within the parameters defined
by the Clearinghouse will only be accepted after collateral is pledged, as
determined by its systems. The systems will include parameters and algorithms
to identify and calculate, if necessary, the amount of equalization to be
deposited by the participant that is exposed to risk in those transactions.
(iii) Losses in FX Transactions for Same Date Settlement
For each proposed FX transaction registered by participants with an opposite
sign to the existing balance (debit or credit), for the same settlement date, the
Clearinghouse systems, before accepting the FX transaction, will simulate the
resulting balance in both currencies through the calculation of the average
exchange rate of that balance and its marking to market, as described in The
Clearinghouse Risk Management Manual. Therefore, any negative results from
transactions will be covered by collateral.
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Concerning Clearinghouse Liquidity in the Event of Operational Problems and
Defaults
The Clearinghouse counts on liquidity assistance facilities in foreign currency from
the correspondent banks. These liquidity facilities provide the Clearinghouse at any
time with enough liquidity to face, if necessary, an operational problem or the default
of a participant. The agreements the Clearinghouse has entered into with the
correspondent banks specify the amounts and conditions fo r the use of those facilities.
Operationally, a failure of payment by a participant will generate an excess amount of
the other currency in the Clearinghouse accounts. This excess amount will be used in
the purchase or sale to the correspondent banks of the other currency needed to meet
the obligation with the nondefaulting participant. Taking into consideration the
average turnover in the interbank FX market during the last few years, the liquidity
assistance facilities will be enough for the Clearinghouse to meet its obligations,
pursuant to the provisions of the regulations set forth by the Central Bank for the
Brazilian Payment System.
19.1 Intermediaries’ Collateral
Intermediaries pledge collateral in order to cover risks during the trading
process in trading systems. This collateral is posted in the Guarantor Fund.
Yields from federal government bonds and other assets deposited in
Clearinghouse accounts will be released to their holders, provided they have met
their obligations with the Clearinghouse.
Custody expenses that are debited by the institutions that render custody
services will be charged to the holders of the assets pledged as collateral with
the Clearinghouse.
The Clearinghouse, after prior negotiation between the participant and the
Registration and Contracting Department, can invest cash collateral posted in
Brazilian currency.
Guarantor Fund
This fund, which is made up of deposits made by the Clearinghouse and the
intermediaries, has the purpose to ensure the soundness of the trading systems
until the bank identified by the intermediary confirms to the Clearinghouse its
acceptance of the transaction.
The Guarantor Fund is mutualized and its shares may be refundable, provided
the applicant has no pending obligations to the Clearinghouse.
BM&F will define and revise periodically the total amount of the Guarantor
Fund, as well as the value of its share and those of the participants, and the
assets that can compose it.
19.2 Buyers’ and Sellers’ Collateral
Its purpose is to eliminate the settlement risk of the Brazilian and foreign
currency balances belonging to the buyers and sellers. Eligible assets are
published and periodically updated in BM&F Circular Letters.
The assets pledged as collateral with the Clearinghouse are included in the
deposited collateral account, which is related to the used collateral subaccounts,
and these assets are used to cover risks that may arise in the settlement process,
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as defined in this Operating Manual and in the Clearinghouse Risk Management
Manual. The assets accounted as used collateral will be transferred to the
deposited collateral account whenever the principal obligation is fulfilled. These
assets may be transferred by the nondefaulting participants.
Participants must promptly replace the federal government bonds pledged as
collateral in the Clearinghouse accounts that, for any reason, are no longer
eligible for discount at the Central Bank of Brazil.
Yields from federal government bonds posted by the Central Bank in the
Clearinghouse settlement account will be immediately released to their holders,
provided they have met their obligations with the Clearinghouse.
Custody expenses that are debited by the institutions that render custody
services will be charged to the holders of the assets pledged as collateral with
the Clearinghouse.
The Clearinghouse, after prior negotiation between the participant and the
Registration and Contracting Department, can invest cash collateral posted in
Brazilian and foreign currency.
In addition to the above- mentioned collateral, BM&F has created funds, a
segregated capital, and a loss sharing mechanism, composed of participants’ or
BM&F’s own funds, in order to provide the Clearinghouse safeguard structure
with more strength.
Participation Fund
The Participation Fund is the initial pledge required by the Clearinghouse from
all participants when they are authorized to carry out their transactions through
its systems. The Participation Fund is not mutualized and is composed of
individual shares whose value will differ from participant to participant and will
be refundable to those that, having met all obligations with the Clearinghouse,
cease to participate in the Clearinghouse.
The shares are calculated and updated monthly, based on the position limits
assigned each participant by the Clearinghouse, pursuant to the provisions set
forth in subsection 4.3 of this Operating Manual. BM&F will publish and update
the value of the shares that compose the Participation Fund in its Circular
Letters.
In accordance with the conditions established and published in BM&F Circular
Letters, the assets accepted to make up this fund include all federal government
bonds eligible for discount at the Central Bank of Brazil. Other assets can be
accepted as well, after prior consultation with the Clearinghouse. With the
exception of cash deposits, the values of the assets accepted to compose the
Participation Fund will be defined and marked to market, in accordance with the
criteria defined by the Clearinghouse.
The Clearinghouse member participants can use their BM&F Clearing Member
membership to constitute their share in the Participation Fund, up to the limit of
fifty (50) percent of its equity value, provided such membership is free of any
and all charges or debts, and it does not exceed seventy five (75) percent of the
Participation Fund share value.
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The participants’ shares in the Participation Fund can be used to cover their
possible participation in a loss sharing process, and the participants must
recompose their shares by the end of the day in which such an event takes place.
Operational Fund
This fund is designed to cover losses arising from operational, administrative or
functional failures in the process of management or conduction of
Clearinghouse activities. BM&F is responsible for its composition, management
and maintenance. The amount of this Operational Fund is fifty- million Reals
(BRL50,000,000.00).
19.3 Segregated Capital
Segregated capital is a portion of BM&F’s equity that was segregated upon
decision of the Special General Meeting of Members on March 27, 2001. The
segregated amount is one hundred million Reals (R$100,000,000.00). The
amount deposited for the purposes of article 5 and its paragraphs of Law No.
10214 and Central Bank of Brazil regulations was ten million Reals
(BRL10,000,000.00).
19.4 Loss Sharing Mechanism
The Clearinghouse systems were designed to enable the Clearinghouse to settle
each participant’s FX transactions in Brazilian and foreign currency on a net
basis. The stages comprised were carefully elaborated to make it possible to
settle net credit and debit balances between the Clearinghouse and its
participants by using PVP settlement.
Exchange rate fluctuations are covered by pre-deposited collateral, whose
amount is recalculated whenever the magnitude of the se fluctuations exceeds the
parameters defined by the Clearinghouse. However, any losses that exceed the
safeguards established by the Clearinghouse will be shared pursuant to the
provisions set forth in Chapter IX (Safeguards) of its Rulebook.
The methodology that defines the application of the loss sharing mechanism is
described in item 8.2.1 of the Clearinghouse Risk Management Manual.
In the event the loss sharing mechanism is applied, the Clearinghouse will
become a creditor of the defaulter, or of its estate, pursuant to the provisions set
forth in article 8 of Law No. 10214, and it will take the necessary measures to
recover the corresponding credit. The amounts eventually recovered will be
transferred to the nondefaulting participants in the exact proportion of their
participation in the loss sharing process.
20.
Costs
Costs represent the charges incurred by the Clearinghouse as the result of a financial
or operational failure committed by a participant. Those costs will be charged to the
participant involved and augmented by the fine defined and published in BM&F
Circular Letters.
Financial costs, among others, are charges that arise from the use of operational limits
in Brazilian or foreign currency with correspondent banks by the Clearinghouse, in
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order to cover a lack of payment for any reason, as well as any judicial or
extrajudicial payment the Clearinghouse may be obliged to make directly or indirectly
in connection with a participant’s failure.
Operational costs, among others, are those that arise from the use of third-party
services in the solution of a participant’s failure in meeting obligations with the
Clearinghouse, as well as any judicial or extrajudicial payment the Clearinghouse
may be obliged to make directly or indirectly in connection with a participant’s
operational failure.
Participants must pay these costs as soon as they are charged by the Clearinghouse. A
lack of payment under these conditions may result in the suspension of the
registration of new FX transactions and the use of a participant’s deposited collateral
in the Clearinghouse systems, including its share in the Participation Fund.
21.
Fees
Fees must be paid by participants for their use of the Clearinghouse registration,
clearing and settlement systems. Such fees, which are calculated and paid in Brazilian
currency, are divided into basic and extra fees.
(i)
(ii)
Basic Fees
Basic fees are charged for the use of the conventional Clearinghouse processing
systems, pursuant to the provisions set forth in the Clearinghouse Rulebook, for
trading, registration, clearing and settlement of FX transactions.
Extra Fees
Extra fees, among other things, are charged for the extraordinary services
requested by participants, such as registration of transactions by unconventional
means of communication, issuance of additional statements, or statements in a
format different from the ones defined by the Clearinghouse. The fees for
extraordinary services will be published in BM&F Circular Letters.
Each day the Clearinghouse will issue, through specific messages, the “Requests for
Payment of Fees/Costs.” Payment instructions will be published in BM&F Circular
Letters. Participants that fail to pay fees/costs, as defined by the Clearinghouse, can
be subject to the suspension of the registration of new proposed FX transactions.
The fees for the transactions registered directly by the buying and selling banks will
be established based on a percentage of the sum of the Brazilian currency amounts of
all transactions registered in the Clearinghouse systems by each participant, as
defined in BM&F Circular Letters.
22.
Penalties
The Clearinghouse systems will count on mechanisms to register, automatically
and/or manually, all occurrences verified during the daily FX sessions. Occurrences
are the events classified as out of routine, such as: the absence of transaction
registration (confirmation); exceeded position limits; the delay in adjusting exceeded
limits; the lack of collateral upon transaction registration and settlement; the delay in
funds transfers to settle net debit balances; the delay and the lack of payment of
36
fees/costs; errors in communications with the Clearinghouse in the registration,
confirmation and funds transfer processes. Occurrences are registered in specific
reports, which are sent to the responsible officers in the corresponding banks and to
the Central Bank of Brazil, pursuant to its instructions.
The BM&F Chief Executive Officer can decide on the application of the following
penalties:
(a)
(b)
(c)
A warning, which, at the Clearinghouse discretion, will be given for those
practices that make the processing of transactions in the Clearinghouse systems
difficult, and thus generate market disturbances, such as: constant delays in
registration (confirmation), in funds transfers to settle net debit balances, and in
fee/cost payments; exceeded position limits; and lack of collateral in transaction
registration or settlement;
A suspension, which will be imposed on the participant that accumulates five
(5) warnings over a period of no more than thirty (30) consecutive business
days. The suspended participant cannot register new proposed FX transactions
in the Clearinghouse systems during the suspension period; and
An exclusion, which will be applied to the participant that defaults, that does not
transfer the funds due, in the conditions defined by the Clearinghouse, and that
has been suspended five (5) times within a twelve (12)- month period.
The Heads of the two Departments will jointly propose to the Clearinghouse Director
that a warning be issued. The Clearinghouse Director and the Heads of the two
Departments will jointly propose to the BM&F Chief Executive Officer that a
suspension or an exclusion be issued.
An appeal, which will not suspend the punitive actions, may be made to the BM&F
Board of Governors within ten (10) days, counting from the date the penalty is
communicated. Upon the Clearinghouse’s or the participant’s decision, unresolved
pending matters can be submitted to the BM&F Arbitration Panel.
All penalties applied to an institution will be hand delivered, with the receipt
confirmed in writing by the responsible officer, and also sent to the Central Bank of
Brazil, pursuant to its instructions.
23.
Data Confidentiality
The BM&F FX Clearinghouse is responsible for the confidentiality of the data
registered in its systems, pursuant to legislation currently in force applicable to bank
secrecy, as well as the regulations of the Central Bank of Brazil.
The Clearinghouse, however, can disclose or order the disclosure, by any means
available, of information considered important for the financial market and the
economy as a whole, with the exception of the information that through its
identification may cause damages to participants or their clients.
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