Brazilian stock exchange BM&FBOVESPA has begun operating the BM&FBOVESPA Clearinghouse, a new post-trade infrastructure for exchange-traded and OTC derivatives; equities and corporate bonds; spot FX; and federal government bonds, aimed at consolidating the trading of all these asset classes into a single platform.
As well as unifying the four existing clearing houses, the Brazilian exchange will also introduce Closeout Risk Evaluation (CORE), a new secure risk management system.
“Sometimes the market goes for several years without any changes. In this case we’ll leap forward several years in a single day,” said BM&FBOVESPA chief executive Edemir Pinto. “The Single Clearinghouse and CORE represent a revolution in modernity, security and efficiency in central counterparty and risk management services.”
The first phase of the project for the integration of the clearing houses (IPN) involves the migration of the financial and commodity derivatives markets to the new clearing house. Once the migration of the other markets is concluded, the exchange will have brought together into its new clearinghouse the registration, position control, settlement and risk management processes of the trades executed in its several market segments.
“This pioneering project will result in one of the most secure and sophisticated clearing systems in the world,” said Cícero Vieira, BM&FBOVESPA’s chief operating officer. “The new clearinghouse will reduce the market’s back-office costs and make trade settlement and the allocation of collateral more efficient. It will also bring greater flexibility and reduce time frames for the launch of new products.”
CORE
The new risk management system CORE simulates thousands of possible price trajectories for assets, contracts and collateral in investors’ portfolios, through different modeling techniques that complement each other, providing more robust risk calculation.
According to the exchange, CORE will assess market risk, liquidity risk and cash flow risk of multimarket and multiproduct portfolios in an integrated manner, encompassing exchange-traded and OTC contracts, and will make collateral allocation more efficient.
Once all of the assets and products have migrated to the new clearinghouse, CORE will calculate the risk in near real time, of tens of thousands of investor portfolios with exchange-traded and OTC derivative positions.
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