What is Brasil Bolsa Balcão?
Brasil Bolsa Balcão SA (“B3”) is one of the world’s largest market infrastructure providers by market capitalization.
B3 has global offices in Brazil, The United States, China and the United Kingdom.
The enormous reach of its products, clearing and technology services makes B3 one of the preeminent global multi-asset exchange operators.
B3 products and services help individuals and institutions raise capital and provide liquid, global marketplaces to trade and clear a wide array of securities.
The publicly-traded company is headquartered in São Paulo, Brazil, and operates in multiple lines of business:
|Exchange-Traded Markets||B3 develops, implements and operates exchange-traded markets for the following products:|
|Clearing and Settlement||B3 develops, implements and operates clearing and settlement services for the assets that trade on its exchanges.|
|Listings||B3 operates an international marketplace for the listing of financial products including:|
|Central Securities Depository (CSD)||The CSD operates as a central securities depository for B3. This function allows the book-entry transfer of securities rather than the transfer of physical certificates.|
|Over-The-Counter (OTC) Markets||B3 registers trades executed in the OTC market|
|Vehicle and Real Estate Loans|
History of Brasil Bolsa Balcão
B3 formed in March 2017 when two leading Brazilian financial institutions merged:
BM&FBOVESPA S.A. Securities, Commodity and Futures Exchange (BM&FBOVESPA): This relatively new exchange formed in 2008 when the São Paulo Stock Exchange merged with the Brazilian Mercantile and Futures Exchange. The resulting exchange became the leading South American marketplace for trading equities, fixed income, commodities and futures.
Cetip S.A. Organized Markets (Cetip): Latin America’s largest depositary of private fixed income securities and Brazil’s largest private asset clearinghouse. Cetip provides electronic delivery solutions utilized for the registration of vehicle financing contracts and the custody of this information.
BM&FBOVESPA is the division of B3 directly connected to the trading of listed financial markets. Both the Brazilian Mercantile and Futures Exchange (BM&F) and the São Paulo Stock Exchange (BOVESPA) have long and storied histories:
History of BM&F and BOVESPA
|1890||Bolsa Livre, the first incarnation of the São Paulo Stock Exchange, began operations|
|Early 1960s||Became a mutualized not-for-profit exchange|
|1970s||Implemented automated systems and begins price quotes via computer|
|Early 1980s||Introduced mutual funds and began transition to an electronic booking system for trades|
|Consolidated with Bolsa de Mercadorias de São Paulo to form a leading Latin American exchange for the trading of commodities and derivatives||1990s|
|Implemented electronic system for trading derivatives and closed trading floor||2000||Integrated with other eight exchanges in Brazil to become the only local exchange operator for equities|
|2005||Closed trading floor and becomes fully electronic market|
On May 2008, shareholders approved the integration of BM&F and BOVESPA, which created BM&FBOVESPA S.A. Securities, Commodities & Futures Exchange.
History of the Combined BM&FBOVESPA
|2011||Technological cooperation with the Chicago Mercantile Exchange (CME) results in the development of a new multi-market and multi-asset electronic trading platform. The PUMA Trading System began operating in:|
|2013||PUMA Trading System began operating in the following BOVESPA segments:|
|2014||PUMA Trading System began operating in private fixed income markets|
|2017||In March 2017, three key regulators approved the merger of Cetip and BM&FBOVESPA:|
Who Are the Brasil Bolsa Balcão Executives?
The Executive Board of B3 is comprised of five executive officers. Each of these individuals has extensive industry and financial services experience.
Members of Brasil Bolsa Balcão Executive Board
|Gilson Finkelsztain||Chief Executive Officer||Finkelsztain has been the CEO of B3 since May 2017.|
His previous roles include:
Finkelsztain has more than 20 years' experience in financial and capital markets with leading institutions:
He has held management positions in the following areas:
|Cícero AugustoVieira Neto||Chief Operating Officer||Vieira Neto has been Vice-President of Operations, Clearing and Depository of B3 since 2008. His responsibilities include:|
|Daniel Sonder||Chief Financial Officer|
Sonder’s previous roles include:
|José Ribeiro De Andrade||Chief Product and Client Officer||Mr. Andrade’s previous roles include:|
|Rodrigo Antonio Nardoni Goncales||Chief Technology Officer||BM&FBOVESPA Career Highlights:|
His previous experience includes:
How is Brasil Bolsa Balcão Regulated?
B3 sets out some of its policies regarding regulation in its Compliance Policy manual. The document serves as an overview of the areas in which the exchange acts as a self-regulatory organization (SRO).
This document and BM&FBOVESPA Corporate Governance Guidelines set out the principles that underpin B3’s regulatory and compliance framework:
|Monitor Regulatory Environment||The exchange monitors changes in regulatory policies so it can assure that the appropriate group within B3 adheres to laws and regulations.|
|Verification of Compliance|
|Independence and Autonomy||B3 believes its compliance personnel should act independently and autonomously to assure impartiality in all its operations.|
|Periodic Review of Integrity Program||The exchange proactively endeavors to prevent, detect and combat violations of laws and regulations.|
|Cooperation with Regulators||B3 endeavors to do the following:|
|Reporting||B3 reports information related to compliance activities to the Board of Directors and Executive Board.|
The Compliance Manual delineates the specific responsibilities of each department within the self-regulatory framework:
|Executive Board||Conducts business policies that comply with norms issued by regulatory authorities.|
|Department of Internal Controls, Compliance & Corporate Risk|
|Department of Communications, Human Resources & Financial Market Education||Hold periodic mandatory staff training courses on the Integrity Program|
In addition to the self-regulatory compliance function within B3, outside regulators also have responsibility over enforcing regulations.
The Brazilian financial sector regulatory structure is comprised of four specific regulators. Each one of these plays a role in regulating different aspects of B3’s businesses:
- Securities and Exchange Commission (CVM): Responsible for business conduct and market regulation of intermediaries and the other secondary markets, equity, derivatives and non-governmental debt
- Central Bank: Responsible for prudential and financial institution supervision
- Superintendent of Private Insurance (SUSEP): Responsible for regulation of the insurance sector
- National Superintendency of Complementary Social Security (PREVIC): Responsible for regulation of pension sector
What Products Does Brasil Bolsa Balcão Trade?
|Cateogry||Products||Products (See Codes Below)|
|Commodities||Anhydrous Fuel Ethanol||F|
|Arabica Coffee 4/5||F, O, SO|
|Arabica Coffee 6/7||F, O, SO|
|Corn||F, CSF, O, SO|
|Crystal Sugar||CSF, O, SO|
|Gold||F, O, FWD, SPOT|
|Hydrous Ethanol||CSF, O, SO|
|Live Cattle||CSF, O, SO|
|Oil||CSF (based on CME mini WTI future)|
|Soybeans||CSF, O, SO|
|Exchange Rates*||Australian Dollar||CSF|
|CSF available for both regular and mini|
|New Zealand Dollar||CSF|
|South African Rand||CSF|
Mini US Dollar
|CSF available for both regular and mini|
|Fixed Income||Government Bonds||SPOT, FWD, REPO, AUC|
|Sovereign Debt Instruments||10-year US Treasury Cash Settled Future|
|Interest Rates||One Day Interbank Deposit (DI)||CSF, O, SO|
|DI x Extended Consumer Price Index (IPCA) Spread Futures||CSF|
|DI x US dollar Spread Futures||CSF, SO, SWAP|
|US Dollar Spread Futures Contract Referencing One-Day Repurchase Agreements||CSF, SO, SWAP|
|Futures on the Average Rate of One-Day Repurchase Agreements||CSF, O|
|Equities||Brazilian Depositary Receipts (BDRS)||Financial and physical settlement for both sponsored and unsponsored BDRs, FWD|
|F, O, SO|
|Brazil Index 50||CSF, O|
|Certificates of Potential Additional Construction (CEPACs)||Cash market|
|Stock ETFs||Both physical (delivery of the components in the fund) and financial settlement|
|Investment Funds||Cash market for:|
|S&P 500 Index||CSF, O, SO|
|OTC Market||Flexible Options||Defined at the parties’ discretion|
|Swaps||Cash flow exchanges based on the comparison of profitability between two indexers.|
|Indexes||B3 offers trading in a variety of indexes:||Traders can consult the Products section of the B3 website for details about each of these categories of products.|
|Alternative||Tesouro Direto||An alternative investment in which the investor knows, at the time of investment, how his/her money will yield in the future.|
*Currencies trade in terms of Brazilian Reals (BRLs)
F = Futures for physical delivery
O = Options on futures
SO = Structured Operations (futures calendar spreads)
CSF = Cash Settled Futures
FWD = Forward Contract
SPOT – Spot Trading
REPO = Repos
AUC = Auction Forwards
SWAP = Swap
How Does Brasil Bolsa Balcão Conduct Trading?
PUMA Trading System
PUMA is the feature-rich electronic trading platform that traders on B3 use to execute trades in different asset classes as well as manage risk. B3 offers developers many tools to help connect to the platform.
Some of the key architecture of the PUMA platform includes the following:
- EntryPoint: A multi-asset order entry messaging format for PUMA. Some advantages of using EntryPoint include the following:
- Messages remain the same across all markets
- Low latency for order processing
- All PUMA Trading System functionality available via FIX messaging
- Possibility to implement multiple trading strategies
- United Market Data Feed (UDMF): This is a service that provides low latency access to market data. UMDF allows client systems to access the full set of exchange-traded instruments in different asset classes:
- Derivatives (futures, options on futures, forwards, private bonds, cash equities, ETFs and options on equities)
- BM&FBOVESPA’s indexes including Ibovespa and IBRX-50
- The UMDF PUMA Conflated platform: A service that uses the TCP protocol, unlike UMDF which uses UDP.
- This platform costs less to implement and maintain:
- It requires reduced bandwidth due to the subscription mechanism (Client systems select what market data information they would like to receive.)
- It throttles order book updates
- This platform costs less to implement and maintain:
What Types of Memberships Does B3 Offer?
The full trading member (PNP) is a broker or securities distributor that holds the right to access all BM&FBOVESPA’s trading markets.
Commodities brokers can access financial derivatives, commodity and gold only.
The financial requirements are as follows:
|Membership Category||Equity Capital (min.)||Operating Performance Fund|
|Full||BRL 3.75 million||Not Required|
|Fixed Income and Counter||Not Required|
Financial Derivatives, Commodities and Gold Only
|Membership Category||Equity Capital (min.)||Net Worth||Deposit Collateral|
|Financial Derivatives, Commodities and Gold||BRL 4 million||BRL 7.5 million||BRL 6 million|
The membership accreditation process involves four steps:
- Definition of Access Model: Applicant presents a business model to the exchange that outlines its needs to access particular categories of trading.
- Admission Procedure:
- Applicant must submit registration documents to the particular category for analysis by the exchange.
- BM&F Markets Supervision (BSM) conducts a pre-operation audit to verify compliance with the Professional Qualification Program.
- BSM then forwards documents to the Board of Directors for final approval.
- Operation and Technological Infrastructure SetupThe institution, once admitted for membership, finalizes the contracting of access to operational and technological infrastructure.
- The institution finalizes contracting of services and solutions appropriate for its business model.
- BM&FBOVESPA requires these steps for participants to go into operation.
- Institution deposits securities for safeguarding funds.
- Institution assures that its employees are accredited and qualified to transact business on the exchange.
- After these steps are completed, the participant can transact in the exchange markets.
Traders can obtain additional details about the registration and accreditation process along with fees and documents at the Trading Members section of the B3 website.
What Are Brasil Bolsa Balcão Margin Requirements?
B3 analyzes risk of traders’ portfolios by calculating the risk of a closeout of a portfolio consisting of several markets and asset classes. This risk measure is known as Closeout Risk Evaluation (CORE).
CORE accomplishes the following:
- Calculates the worst case for accumulated cash flow during the portfolio closeout process
- Considers the joint risk for positions and collateral
- Models three types of risk: market, liquidity for positions and collateral and cash flow
- Forecasts an accurate closeout strategy: position closeout transactions and collateral execution
- Severe loss (stress test): confidence level of 99.96% or a 10-year crisis
- Considers 10,000 scenarios: historical (since 2002), quantitative and prospective
- Looks at positions over multiple horizons
- Applies full valuation
Traders can learn the margining cycle and see examples of how CORE is used in the Risk Management section of the BM&FBOVESPA website.
What Fees and Charges Does B3 Assess?
B3 charges trading, settlement, custody and registration fees for products traded on the exchange. These fees vary by product category.
In addition, the exchange charges fees for services such as market data feeds, colocation of servers, infrastructure and other information services.
B3 also charges fees to issuers and commodity grading and agricultural commodities depositary fees.
Traders can find a full detailed explanation of these fees at the Fee Schedule section of the website.
What Market Data Does B3 Make Available?
BM&FBOVESPA market participants can access real-time market data through authorized distributors of the exchange. Authorized distributors have different rights depending on the market segment they cover.
- Financial and commodity derivatives
- Foreign exchange (spot US dollar)
- Federal securities (cash or forward and repo and lending transactions) for certain trades
- News about the derivatives markets
- Quotes for equities trading on the cash, forward and options markets, including companies listed on the Novo Mercado and at Corporate Governance Levels 1 and 2
- Indexes (Ibovespa, IGC, ISE and others)
- Quotes for corporate fixed-income securities, securities lending and trades on the organized OTC Market
- News about the market and the companies listed on the exchange
The exchange also makes a variety of types of historical data available for additional fees:
- Daily Bulletins: Data from previous trading sessions
- Equities: Historical quote data
- Derivatives: Settlement prices, statistical summaries and information recovery systems
- Foreign exchange: A variety of market statistics and summaries
What Educational Materials Does B3 Offer?
B3 encourages visits to its headquarters in São Paulo. Visitors can go on guided tours and learn about financial and capital markets through several interactive resources:
- 3D Cinema
- Display Panels
- Memory Center
Traders also have online resources for learning about B3 products and strategies for trading them successfully. B3 has a section of its website called the B3 Educational Institute. Although the site is in Portuguese, web browser services allow easy translation into other languages.
The Institute lists different Knowledge Areas and provides study guides that traders can download to get certified in different areas:
- Back Office
- Sale Off (settlement professionals)
- Customer Base
The Institute also offers online courses on areas such as fixed income, derivatives, clearing financial markets and behavioral finance.
Does Brasil Bolsa Balcão Have Vendor Partners?
B3 lists the following companies that are licensed as market data distributors on is BOVESPA and/or BM&F platforms:
- Activ Financial Systems, Inc
- Agencia Estado Ltda
- Apligraf Aplicativos Graficos Ltda
- Banco Bnp Paribas Brasil S.A.
- Banco Jp Morgan S/A
- Banco Btg Pactual S.A.
- Barchart.Com, Inc
- Bco Brasil S.A.
- Blk Sistemas Financeiros
- Bloomberg Finance Lp
- Bolsa Financeira
- Bovestor Online Midia Ltda
- Cedro Technologies Ltda
- Cedro Bpo E Soluções Em Tecnologia Ltda
- Cma – Consultoria, Metodos, Assessoria E Mercantil S.A.
- Cqg, Inc
- Datagro Consultoria
- Ecm Consultoria S/C Ltda (Traderdata)
- Enfoque Informacoes Financeiras Ltda
- Eversystems Informatica Com Rep Imp E Exp Ltda
- Factset Research System
- Fis Global Trading
- Fmr Llc (Fidelity)
- Fidessa Plc
- Goldman Sachs, Inc
- Guanahaní Participações S.A. (Cell Broker)
- Imagine Software, Inc
- Infoselective S.A. De C.V.
- Infostocks Informacoes E Sistemas Ltda (Infomoney)
- Instinet Llc
- Interactive Brokers Llc
- Interactive Data Corporation
- Internet Group Do Brasil Ltda
- Investcenter Sistemas De Informação Ltda.
- InvestflexInvestment Technology Group Inc (Itg)
- It Evolution Informações Ltda
- Lopes Filho Assoc Cons Invest Ltda
- Lote 45 Participacoes Ltda
- Markit Group Limited
- Morgan Stanley & Co Incorporated
- Morningstar Real-time Data
- Nelogica Sistemas De Software Ltda
- Neovest Inc.
- Neuralsof Softwares Ltda
- Quanthouse Sas
- S10i – Soluções De Software Iinteligentes Ltda (Smarttbot)
- Saxo Bank S/A.
- Six Telekurs Usa Inc
- Sofimerc Tecnologia Em Informática Ltda. // Trader Gráfico / Sofimerc Ti
- Sterling Trader Sistemas Financeiros Ltda
- Telvent Dtn
- Thomson Reuters
- Timber Hill LlcT
- ownsend Analytics Ltd
- Toro Investimentos Ltda
- Tradingscreen, Inc
- Universal Telecom S/A.
- Valemobi Consultoria Empresarial S/A.
- Valor Econômico S.A.
How Can You Get Started Trading?
Memberships on the B3 exchange are costly and impractical for most retail traders. However, many regulated brokerage firms offer contracts for difference (CFDs) based on products traded on B3 such as commodities, foreign exchange and shares of companies.
CFDs are a derivative instrument that offers retail traders a different way to invest in financial markets. CFDs allow traders to use leverage to bet on the price of financial assets. The value of a CFD is the difference between the price of a financial instrument at the time of its purchase and its current price.
Many regulated brokers worldwide offer CFDs on shares, commodities, indices, forex and other financial assets Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that traders can have exposure to financial assets without having to purchase shares, ETFs, futures or options.
Traders can open an account at one of these regulated brokerage firms and begin trading CFDs based on B3 products.