BM&F SECURITIES CLEARINGHOUSE RULEBOOK

Transcription

1 BM&F SECURITIES CLEARINGHOUSE RULEBOOK

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3 TABLE OF CONTENTS Chapter I Definitions... 7 Chapter II Purpose Chapter III Clearinghouse Activities Chapter IV Trading and Registration Systems Chapter V Participants Section I General Provisions Section II Clearing Members Section III Centralized Settlement Participants Section IV Securities Trading Participants Section V Settlement Banks Section VI Custodians Chapter VI Limits Established by the Clearinghouse Section I General Provisions Section II Operational Limit and Other Limits Chapter VII Collateral Section I Pledging of Collateral Section II Withdrawal of Collateral Chapter VIII Securities Deposited to Cover Transactions Chapter IX Transactions Section I General Provisions Section II Entering Transactions Into the Clearinghouse Systems Section III Acceptance of Transactions Section IV Specific Transactions Subsection I Purchase and Sale Transactions Subsection II Repo Transactions

4 Subsection III Loans Subsection IV Interchanges Chapter X Clearing and Settlement Section I Clearing Section II Settlement Subsection I General Provisions Subsection II Chain of Responsibilities in Settlement Subsection III Securities Delivery Service Subsection IV Fulfillment of Obligations Chapter XI Failures in the Fulfillment of Obligations Section I General Provisions Section II Operational Defaulters and Defaulters Section III Clearinghouse Actions in the Event of a Specification Failure Section IV Clearinghouse Actions in the Event of a Collateral Recomposition Failure Section V Clearinghouse Actions in the Event of Failure in the Fulfillment of a Payment Obligation Section VI Clearinghouse Actions in the Event of Failure in the Fulfillment of a Delivery Obligation Chapter XII Funds and Safeguards Section I General Provisions Section II Funds Chapter XIII Securities Lending Facility (SET) Chapter XIV Fees, Charges and Fines Chapter XV Penalties Chapter XVI General Provisions

5 CHAPTER I DEFINITIONS Article 1. For the purposes of this Rulebook, the following definitions apply: 1. Acceptance [aceitação] The act by which the Clearinghouse becomes liable, as the central counterparty, to the Direct Participants involved for the Settlement of the Transaction submitted to it; 2. Trading System [ambiente de negociação] An electronic system linked to the Clearinghouse in which the Securities Trading Participants perform and register Securities Transactions; 3. Registration System [ambiente de registro] An electronic system linked to the Clearinghouse in which a Participant effects the Registration of Transactions performed in external systems and involving a Securities Trading Participant; 4. Security [ativo] A bond from a federal government issuer, as well as its coupons, under the custody of the Special System for Settlement and Custody (SELIC), whose trades may be subject to the Acceptance, Netting and Settlement through the Clearinghouse systems; 5. BM&F The Brazilian Mercantile & Futures Exchange (BM&F); 6. Chain of Responsibilities in Settlement [cadeia de responsabilidades na liquidação] The order of responsibilities of the different Participants and the Clearinghouse to each other in the Settlement process; 7. Clearinghouse [câmara] The BM&F Securities Clearinghouse; 8. Participant Registration [cadastramento] The procedure for the admission of institutions as Participants to the Clearinghouse systems; 9. Netting [compensação] The process for calculating the Multilateral Net Result (credits less debits) to be settled through the Clearinghouse on a certain date or among Participants, as established in this Rulebook; 10. Final Buyer [comprador final] The participant that, in any given Transaction, acquires the Security or undertakes a commitment to acquire it on a future date; 11. Deposit Account [conta de depósito] An account maintained by the Clearinghouse in the Special System for Settlement and Custody (SELIC) for the reception, custody and transfer of Securities deposited by Participants for trading; 12. Collateral Accounts [contas de garantias] Accounts held by the Clearinghouse (i) in the Special System for Settlement and Custody (SELIC), and (ii) at banking institutions, the former intended for the reception, custody and transfer of Securities Collateral delivered to the Clearinghouse by Participants, and the latter for the reception, custody and transfer of cash Collateral delivered to the Clearinghouse by Participants; 13. Settlement Accounts [contas de liquidação] Accounts held by the Clearinghouse with the Central Bank of Brazil that may be operated through the Reserves Transfer System (STR) and the Special System for Settlement and Custody (SELIC) for the Settlement of Participants and the Clearinghouse s obligations; 14. BM&F Account [conta de patrimônio] An account maintained by BM&F in the Special System for Settlement and Custody (SELIC) for the reception, custody and transfer of federal government bonds owned by BM&F; 7

6 15. SELIC Accounts [contas Selic] Accounts maintained by Participants in the Special System for Settlement and Custody (SELIC) for the reception, custody and transfer of Securities, including transfers related to the Settlement process, to the pledging and withdrawal of Collateral, and to the services provided by the Clearinghouse; 16. Fees [custos] Costs payable by Participants to the Clearinghouse or to Trading or Registration Systems for using their systems and other services; 17. Operational Defaulter [devedor operacional] The qualification of a Participant by the Clearinghouse upon the former s failure to fulfill, within the time frame and in the manner established by the latter, a Delivery, Payment or Collateral Recomposition duty; 18. Final Lender [doador final] The Participant having the duty, in a Loan or an Interchange, to deliver a certain Security on the agreed date, and the right to receive it on the maturity date of the Transaction; 19. Loan [empréstimo] The loan of securities for a certain period and upon payment of a Premium by the Final Borrower; 20. Charges [encargos] Funds payable by a Participant to the Clearinghouse with respect to the reimbursement of any amounts the latter may have spent to meet the needs arising from any act directly or indirectly attributable to such Participant; 21. Delivery [entrega] The deposit of Securities for Settlement that must be made in the Clearinghouse Settlement Account within the time frame established by the Clearinghouse, or in the Direct Participant s or other holder s SELIC Account, according to the Specification; 22. Specification [especificação] The procedure followed by Securities Trading Participants or Centralized Settlement Participants to designate the SELIC Account to be used in the Settlement of the Transaction and, in the event of any General Collateral Repo Transactions, the traded Securities; 23. Collateral [garantias] Securities and funds delivered to the Clearinghouse by Participants to guarantee fulfillment of obligations arising from or related to Transactions; 24. Defaulter [inadimplente] A Participant s qualification by BM&F whenever the latter deems the former incapable of making a Delivery or a Payment due to the Clearinghouse, within the time frame and in the manner established by it, for other than operational reasons, at the discretion of the Clearinghouse; 25. Settlement Window [janela de liquidação] The period during which Settlement is processed, with Deliveries and Payments due being made by Participants and by the Clearinghouse; 26. Repo Collateral [lastro] The Security underlying a Repo Transaction; 27. General Collateral [lastro genérico] A Security which, prior to its Specification, integrates a basket of mutually fungible Securities characterized as such by the Clearinghouse; 28. Settlement [liquidação] The fulfillment of the Clearinghouse s or Participants obligations; 29. Gross Settlement [liquidação bruta] The fulfillment of the Clearinghouse s or Participants obligations one by one; 30. Negotiability Clause [livre movimentação] The rule that allows the trading of Securities received as the result of Transactions settled through the Clearinghouse, without prejudice to any commitment undertaken to resell those 8

7 Securities or to the duty to return them as the result of a Loan or an Interchange having reached its respective maturity date; 31. Fine [multa] An amount payable by the Participant to the Clearinghouse as a penalty for failing to comply with any obligation or provision set forth in this Rulebook; 32. Transaction [operação] Any and all trades registered in a Trading or Registration System, and any commitment arising from a Repo Transaction registered in the Special System for Settlement and Custody (SELIC), resulting in an obligation to be settled through the Clearinghouse; 33. Repo Transaction [operação compromissada] An accepted Security purchase or sale Transaction cumulated with a commitment to resell or repurchase that same Security; 34. Purchase and Sale Transaction [operação definitiva] A Transaction for the purchase and sale of a Security, including each one of the Transactions comprised by a Repo Transaction; 35. Payment [pagamento] The funds transfer between the Settlement Accounts of the Clearinghouse in the Reserves Transfer System (STR) and the Bank Reserves account of a Settlement Bank for Settlement purposes; 36. Participant [participante] The institution registered with the Clearinghouse in any of the categories referred to in this Rulebook, and subject to its rules and procedures; 37. Direct Participant [participante direto] Any Clearing Member and Centralized Settlement Participant; 38. Net Financed Balance [posição líquida financiada] A Participant s right to receive funds, calculated as the result of the netting of the purchase and sale Transactions pertaining to a General Collateral Repo Transaction whose Settlement is scheduled for that day, and has the same Settlement date as the resale and repurchase transaction; 39. Net Financing Balance [posição líquida financiadora] Any Participant s duty to pay funds, calculated as the result of the netting of the purchase and sale Transactions pertaining to a General Collateral Repo Transaction whose Settlement is scheduled for that day, and has the same Settlement date as the resale and repurchase transaction; 40. Reference Price [preço de referência] A value established by the Clearinghouse for any given Security, considered in risk management and in any cash Settlement of the Delivery duty of the Clearinghouse in that Security; 41. Premium [prêmio] Funds payable as the result of a Loan or an Interchange; 42. Pre-Registration [pré-registro] The act by which Participants formalize, to the Clearinghouse and the Registration System, the execution of a Transaction for which Acceptance in the Clearinghouse systems and Registration in the Registration System are conditional upon other requirements being met; 43. Collateral Recomposition [recomposição de garantias] A demand for additional cash Collateral to adjust the Participants limits to a risk identified by the Clearinghouse; 44. Central Bank Credit Facility [redesconto] A mechanism by which the Central Bank of Brazil provides the market with liquidity by means of Repo Transactions; 45. Intraday Central Bank Credit Facility [redesconto intradia] A Central Bank Credit Facility for which the settlement date of the sale or purchase transaction coincides with the settlement date of the repurchase or resale transaction; 9

8 46. Transaction Registration [registro] The act formalizing a Securities Transaction for a proprietary account or for a third party s account, in a Trading or Registration System; 47. Net Multilateral Result [resultado multilateral líquido] Rights and duties arising from Direct Participants Netting of funds or Securities with the Clearinghouse and the latter s with respect to such Participants, as well as a Securities Trading Participant with respect to the Clearing Member and the latter s with respect to the Securities Trading Participant; 48. Safeguards [salvaguardas] Principles, rules, criteria and mechanisms adopted to ensure, either directly or indirectly, the Settlement process and the integrity of the systems maintained by the Clearinghouse; 49. SELIC Special System for Settlement and Custody managed by the Central Bank of Brazil; 50. Securities Lending Facility (SET) [serviço de empréstimo de títulos] A type of facility available in the Trading and Registration Systems for performing a Securities Loan or Interchange; 51. STR The Reserves Transfer System managed by the Central Bank of Brazil; 52. Final Borrower [tomador final] The Participant having the right, in a Loan or an Interchange, to receive a certain Security on the agreed date, and the duty to deliver it on the maturity date of the Transaction; 53. Interchange [troca] Loans of different Securities for the same tenor, for which Transaction Registrations are made concurrently and in a linked manner; and 54. Final Seller [vendedor final] The Participant that, in any given Transaction, sells the Security or undertakes a commitment to sell it on a future date. CHAPTER II PURPOSE Article 2. This Rulebook regulates the activities carried out nationwide by the BM&F Securities Clearinghouse and its Participants regarding the Acceptance, the Netting and the Settlement of Securities Transactions, and the Settlement, through the Clearinghouse, of other Transactions. Sole paragraph. The Clearinghouse Risk Management System, Procedures and Technology Manuals, in addition to Circular Letters and External Communications published by BM&F, are integrated into this Rulebook. CHAPTER III CLEARINGHOUSE ACTIVITIES Article 3. The Clearinghouse effects the Registration, Acceptance, Netting, and deferred Settlement of Securities Transactions which are subject to Registration in Trading or Registration Systems. Paragraph 1. Paragraph 2. The Clearinghouse defines those Securities which may be subject to the Transactions submitted to it, as well as the criteria for Acceptance, Netting and Settlement of such Transactions. In the performance of its functions, the Clearinghouse may carry 10

9 Paragraph 3. out other activities aimed at decreasing or managing the risk in its Settlement of Transactions, as well as fostering the development of Participants risk management procedures. The Clearinghouse may sign agreements or create other relationships with: (i) Trading or Registration Systems, and use their other services or systems; and (ii) service providers whose services are instrumental to Clearinghouse activities. Article 4. Article 5. Article 6. The Clearinghouse also effects the registration, Acceptance, Netting, and deferred Settlement of the following Transactions in regard to Repo Transactions with the Negotiability Clause: (i) purchase or sale from a resale or a repurchase commitment to be settled in the SELIC; and (ii) resale or repurchase from commitments undertaken in the SELIC, whenever duly informed by SELIC to do so. The Clearinghouse may also provide other services to Participants and its customers pursuant to the provisions set forth in this Rulebook. The Clearinghouse may also effect the Gross Settlement of Delivery obligations pertaining to accepted Transactions, as well as the Gross Settlement of trades in which it assumes no obligation to guarantee their Settlement, even if the Settlement, in any such event, is deferred relative to the time of Acceptance of the Transaction or of the performance of the trade. CHAPTER IV TRADING AND REGISTRATION SYSTEMS Article 7. It is incumbent upon the Trading or Registration Systems with which the Clearinghouse has signed an agreement or created another relationship to apply all necessary control mechanisms for Transaction Registration in order to meet the needs of the Clearinghouse and adopt any practices for reducing operating risks. Sole paragraph. The control mechanisms referred to in this article include, inter alia: (i) conditioning the Registration of any Transaction to be settled through the Clearinghouse to the Acceptance thereof; (ii) informing the Clearinghouse, upon the entry of any trade in its systems, that such Transaction is based on an order pending electronic confirmation, in the Trading System, by the Participant for whose account and on whose behalf it is being carried out; (iii) setting upper and lower limits for the trading price of the Security or for the rate agreed upon in the Transaction; and (iv) offering conditions for its Participants to set limits for the number of Securities traded or for the amount of each Transaction. 11

10 CHAPTER V PARTICIPANTS SECTION I GENERAL PROVISIONS Article 8. Article 9. Article 10. Article 11. Article 12. Clearinghouse Participants are distinguished into the following categories according to the rules and criteria set forth in this Rulebook: (i) Clearing Members; (ii) Centralized Settlement Participants; (iii) Securities Trading Participants; (iv) Settlement Banks; and (v) Custodians. BM&F establishes the requirements, criteria and procedures for Participant Registration, defining, inter alia: (i) the set of information to be provided to the Clearinghouse; (ii) the minimum technological infrastructure and qualification standards to be met; (iii) the proper instruments for formalizing adherence to the Clearinghouse Rulebook; and (iv) minimum equity and capitalization levels. Sole paragraph. The requirements to which Participants are subject pursuant to the provisions set forth in this article are related to their respective categories. Upon a Participant Registration, Participants must expressly adhere to the rules and procedures established by the Clearinghouse, and are responsible for fully complying with such rules and procedures. Sole paragraph. All registered Participants are assigned a code to be used for their identification in the Clearinghouse systems. Participants must ensure that the information provided to the Clearinghouse is accurate, and keep their registration data updated. Limited access to the Clearinghouse systems by Non-Members is permitted pursuant to the provisions set forth in this Rulebook. Paragraph 1. A Non-Member is a financial institution which is not a BM&F member, but which is authorized to intermediate Securities transactions. Paragraph 2. BM&F publishes the requirements, criteria and procedures to register Non-Members. Paragraph 3. A Non-Member is authorized to intermediate any Securities Transactions, for Settlement through the Clearinghouse, having the same characteristics as those established in article 29 and, cumulatively, meeting the following requirements: (i) participation of at least one Securities Trading Participant, acting as an intermediary, a Final Buyer or a Final Seller; and (ii) Registration in a Registration System for Settlement through the Clearinghouse. 12

11 Paragraph 4. Paragraph 5. A Non-Member must appoint, for the Clearinghouse, a Clearing Member with which it has a contractual relationship in order to receive any funds by virtue of the Transactions it intermediates. The Non-Member is fully responsible for choosing any given Clearing Member. Article 13. Direct Participants and Securities Trading Participants must keep available to the Clearinghouse such documents and records as pertain to the Settlement of Transactions carried out through the Clearinghouse. SECTION II CLEARING MEMBERS Article 14. Article 15. Clearing Members are the holders of a DL Member membership, as defined in the BM&F Bylaws, and any institutions equated to those holders, as such registered with the Clearinghouse. A Clearing Member provides Netting and Settlement services to Securities Trading Participants and Non-Members, and must keep the Clearinghouse informed about the Securities Trading Participants and Non-Members with which it maintains a contractual relationship. Paragraph 1. The Clearing Member is fully responsible for the decision to provide services to any given Non-Member or Securities Trading Participant and the limits to be set for the latter. Paragraph 2. For risk management purposes, the Clearing Member sets the following limits for each Securities Trading Participant with which it maintains a contractual relationship: (i) a maximum operational limit, corresponding to the maximum amount the Clearing Member allows to be calculated by the Clearinghouse, pursuant to the provisions set forth in Chapter VI, as the operational limit for a Securities Trading Participant with which it maintains a contractual relationship; (ii) a risk limit, taken into account by the Clearinghouse in the calculation of the Securities Trading Participant s operational limit, pursuant to the provisions set forth in the Clearinghouse Risk Management System Manual; (iii) a telephone order risk limit, taken into account by the Clearinghouse upon Acceptance of the Transaction indicated by the Securities Trading Participant as originating from an order pending electronic confirmation, in the Trading System, by another Participant; (iv) a financial limit, taken into account by the Clearinghouse in the Transaction Acceptance and determining the maximum amount for the duty to transfer funds from the Securities Trading Participant to the Clearing Member; and (v) a quantitative limit, taken into account by the Clearinghouse in the Transaction Acceptance and determining the maximum number of any given Security for the duty to deliver and the 13

12 Paragraph 3. Paragraph 4. right to receive such Security by the Securities Trading Participant with respect to the Clearing Member. The limits set forth in paragraph 2 of this article may be changed by the Clearing Member at any time, after a notice is given to the Clearinghouse and the Securities Trading Participant, pursuant to the provisions established by the Clearinghouse and effective in accordance with its rules, without prejudice to any obligations undertaken prior to the change made and pending Settlement. The Clearinghouse makes available to Clearing Members the means for monitoring the utilization of the limits of each Securities Trading Participant with which they maintain a contractual relationship, including those limits established by the Clearinghouse pursuant to the provisions set forth in Chapter VI. Article 16. Article 17. Article 18. Article 19. The Clearing Member must adopt reasonable control mechanisms so as not to compromise its ability to fulfill any undertaken Delivery and Payment duties, abiding by the limits established by the Clearinghouse, monitoring the utilization levels of the limits which it sets for each Securities Trading Participant with which it maintains a contractual relationship, and making sure such limits are complied with. The Clearing Member must contract a Settlement Bank for the fulfillment of Payment obligations between it and the Clearinghouse resulting from accepted Transactions, in observance of the terms and conditions established by the Clearinghouse. Paragraph 1. The Clearing Member is fully responsible for choosing any given Settlement Bank. Paragraph 2. The Clearing Member must provide the Settlement Bank with all the information necessary for the latter s activities. Paragraph 3. In addition to the Settlement Bank indicated pursuant to the provisions set forth in this article, the Clearing Member must maintain a contractual relationship with a second Settlement Bank in order to make, whenever deemed necessary by the Clearinghouse, the latter s Payment to the Clearing Member, informing the Clearinghouse of the transfer made. The Clearing Member must contract a Custodian for making such Securities transfers as necessary for it to perform in the Clearinghouse, as well as for receiving interest, amortization or redemption income from Securities deposited in the Clearinghouse. Sole paragraph. The Clearing Member is fully responsible for the decision to contract any given Custodian. The Clearing Member must provide for its contribution to the Guarantor Fund referred to in Chapter XII in the manner and within the time frames established by the Clearinghouse. SECTION III CENTRALIZED SETTLEMENT PARTICIPANTS Article 20. Centralized Settlement Participants are investment funds, open-end pension funds, 14

13 closed-end pension funds, insurance companies and local reinsurers, registered with the Clearinghouse in such category. Article 21. Article 22. Article 23. Article 24. Article 25. Article 26. The Centralized Settlement Participant may, as regards any Transactions for its proprietary account: (i) carry out their Netting and Settlement through the Clearinghouse; (ii) directly effect their Registration in the Registration System whenever a Securities Trading Participant appears as its counterparty in the trade; or (iii) have their Registration effected in the Trading or Registration System by any Securities Trading Participant with which it maintains a contractual relationship. The Direct Settlement Participant must, in the manner and within the time frame established by the Clearinghouse, make a timely Specification for the Transactions under its responsibility. Paragraph 1. A Transaction Specification is conditional on compliance with the Centralized Settlement Participant s limits, and may be rejected by the Clearinghouse. Paragraph 2. Any lack of Specification or any untimely Specification is dealt with by the Clearinghouse pursuant to the provisions set forth in this Rulebook and in the Procedures and Risk Management System Manuals. The Clearinghouse makes available to Centralized Settlement Participants the means for monitoring the utilization of their limits. The Centralized Settlement Participant must adopt reasonable control mechanisms so as not to compromise its ability to fulfill any undertaken Delivery and Payment duties, in observance of the limits established by the Clearinghouse. The Centralized Settlement Participant must contract a Settlement Bank for the fulfillment of Payment obligations between it and the Clearinghouse resulting from accepted Transactions, abiding by the terms and conditions established by the Clearinghouse. Paragraph 1. The Centralized Settlement Participant is fully responsible for choosing any given Settlement Bank. Paragraph 2. The Centralized Settlement Participant must provide the Settlement Bank with all the information necessary for the latter s activities. Paragraph 3. In addition to the Settlement Bank indicated pursuant to the provisions set forth in this article, the Centralized Settlement Participant must maintain a contractual relationship with a second Settlement Bank in order to make, whenever deemed necessary by the Clearinghouse, the latter s Payment to the Centralized Settlement Participant, informing the Clearinghouse of the transfer made. The Centralized Settlement Participant must contract a Custodian for making such Securities transfers as necessary for it to perform in the Clearinghouse, as well as for receiving interest, amortization or redemption income from Securities deposited in the Clearinghouse. 15

14 Sole paragraph. The Centralized Settlement Participant is fully responsible for the decision to contract any given Custodian. SECTION IV SECURITIES TRADING PARTICIPANTS Article 27. Article 28. Article 29. Securities Trading Participants are holders of a DO Member membership, as defined in the BM&F Bylaws, and any institutions equated to those holders, as such registered with the Clearinghouse. The Securities Trading Participant may, in Trading and Registration Systems, and for the Settlement of Transactions through the Clearinghouse: (i) effect the Registration of Transactions for its proprietary account or for the account and on behalf of customers; (ii) effect the Registration of Transactions for the account and on behalf of Centralized Settlement Participants, or other Securities Trading Participants; (iii) have, for its proprietary account or for the account and on behalf of its customers, Transactions registered by another Securities Trading Participant; and (iv) effect the Registration of Transactions which it intermediates for Centralized Settlement Participants, or other Securities Trading Participants, pursuant to the provisions set forth in article 29 Sole paragraph. The Securities Trading Participant must maintain a contractual relationship with customers and other Participants for whose account it registers Transactions or has its Transactions registered. The intermediation activity by the Securities Trading Participant is, for the purposes of this Rulebook, characterized by the Registration, in a Trading or Registration System, of the following Transactions where at least two other Participants appear: (i) a purchase and sale Transaction in which the intermediating Securities Trading Participant is entitled to compensation corresponding to the positive difference between the sale and purchase Settlement amounts; or (ii) a Loan or an Interchange in which the intermediating Securities Trading Participant is entitled to compensation corresponding to the positive difference between the Premium Settlement amounts to be paid by the Final Borrower and received by the Final Lender. Paragraph 1. The Intermediation activity is only permitted to the Securities Trading Participant whenever it is acting in intermediation for a Final Buyer, Final Seller, Final Lender or Final Borrower which is a Clearinghouse Participant, and consequently up to two intermediaries are allowed per Transaction. Paragraph 2. The Securities Trading Participant s intermediation activity in any given Transaction, for the purposes of this Rulebook, can no longer be characterized as such if that Participant appears in the Transaction as a Final Buyer, Final Seller, Final Lender or Final Borrower Paragraph 3. The transactions referred to in item (i) of this article may be related to repurchase or resale commitments, in which event intermediation may also be characterized by the positive difference between the Settlement amounts of cash obligations resulting from such resale and repurchase. 16

15 Paragraph 4. Paragraph 5. After all other provisions set forth in this article are complied with and there is no difference between the Settlement amounts of cash obligations as referred to in items (i) and (ii) of this article, intermediation can no longer be characterized, and the Securities Trading Participant is deemed to be providing a Transaction Registration service for Settlement through the Clearinghouse. In the event referred to the previous paragraph, the Securities Trading Participant s compensation for providing the service is settled by a means which is external to the Clearinghouse. Article 30. Article 31. Article 32. Article 33. Article 34. The Securities Trading Participant must, in the manner and within the time frame established by the Clearinghouse, make a timely Specification for the Transactions it has registered or which have been registered for its own account and on its behalf. Paragraph 1. A Transaction Specification is conditional on compliance with the Securities Trading Participant s limits and those of its Clearing Member, and may be rejected by the Clearinghouse. Paragraph 2. Any lack of Specification or any untimely Specification is dealt with by the Clearinghouse pursuant to the provisions set forth in this Rulebook and in the Procedures and Risk Management System Manuals. Each Securities Trading Participant must appoint, before the Clearinghouse, a Clearing Member with which it maintains a contractual relationship for the Settlement of any Delivery and Payment obligations arising from Transactions for its proprietary account and Transactions for the account and on behalf of customers, as well as for the receipt of any funds resulting from the Transactions it intermediates. Paragraph 1. In Transactions whose Registration is effected by the Securities Trading Participant for the account of a Centralized Settlement Participant, or another Securities Trading Participant, whenever indicated as such, the Centralized Settlement Participant, or the Securities Trading Participant for whose account the Transaction Registration has been effected is not deemed a customer of the Securities Trading Participant for the purposes of this article. Paragraph 2. The Securities Trading Participant is fully responsible for the decision to contract any given Clearing Member. Paragraph 3. The Securities Trading Participant must inform its customers of the Clearing Member responsible for the Settlement of any obligations arising from accepted Transactions. The Clearinghouse makes available to Securities Trading Participants the means for monitoring the utilization of their limits as established by the Clearing Member or by the Clearinghouse. The Securities Trading Participant must adopt reasonable control mechanisms so as not to compromise its ability to fulfill any Delivery and Payment duties undertaken vis-à-vis the Clearing Member or its customers, abiding by the limits established by the Clearing Member or by the Clearinghouse. The Securities Trading Participant must contract a Custodian for making such Securities transfers as necessary for it to perform in the Clearinghouse, as well as for 17

16 receiving interest, amortization or redemption income from Securities deposited in the Clearinghouse. Sole paragraph. The Securities Trading Participant is fully responsible for the decision to contract any given Custodian. SECTION V SETTLEMENT BANKS Article 35. Article 36. Article 37. Settlement Banks are financial institutions, registered as such with the Clearinghouse, which are holders of a Bank Reserves account with the Central Bank of Brazil. It is incumbent upon the Settlement Bank, in observance of established time frames and procedures: (i) to effect transfers related to the Settlement of Direct Participants Payment obligations; (ii) to confirm the total or partial availability of funds intended for fulfilling the Payment obligations of the Clearinghouse or of those Direct Participants for which it provides any services; and (iii) to communicate to the Clearinghouse and its Participants any problem that may involve a total or partial inability to transfer, within the established time frame, any funds pertaining to the Settlement of Payment obligations. Netting by the Settlement Bank is precluded of any amounts that must be paid to the Clearinghouse or received from the latter by the various Direct Participants for which it provides any services. SECTION VI CUSTODIANS Article 38. Article 39. Custodians are institutions that maintain proprietary custody accounts and customer custody accounts with SELIC. It is incumbent upon the Custodian, in observance of established time frames and procedures: (i) to adopt the measures for effecting, as required by Participants, the necessary Securities transfers for the process of Settlement of obligations, deposit of Securities for trading, or pledging of Collateral, as well as any transfers pertaining to services provided by the Clearinghouse and involving a Securities transfer among accounts managed by the Custodian; (ii) to confirm the availability of the necessary Securities for effecting any of the transfers referred to in the previous item; and (iii) to communicate to the Clearinghouse and its Participants for which it provides any services any problem that may involve a total or partial inability to effect, within the established or required time frame, any of the transfers referred to in item (i) of this article. Paragraph 1. The Custodian must appoint a Settlement Bank, before the Clearinghouse, for receiving interest, amortization or redemption income from Securities which are deposited with the Clearinghouse and 18

17 Paragraph 2. which must be transferred to the Custodian by the Clearinghouse, and adopt the necessary measures for their transfer to the owners of such Securities, whenever applicable. In addition to the Settlement Bank appointed pursuant to the provisions set forth in paragraph 1 of this article, the Custodian must maintain a contractual relationship with a second Settlement Bank for the purpose indicated in said paragraph. CHAPTER VI LIMITS ESTABLISHED BY THE CLEARINGHOUSE SECTION I GENERAL PROVISIONS Article 40. Article 41. Article 42. For risk management purposes, the Clearinghouse calculates and/or sets limits for Direct Participants and Securities Trading Participants. The limits set by the Clearinghouse for Participants may be changed at any time, at the sole discretion of the Clearinghouse, including due to general market conditions. Lowering any of the limits set by the Clearinghouse occurs without prejudice to the obligations arising from Transactions accepted when the previous limit was in effect. SECTION II OPERATIONAL LIMIT AND OTHER LIMITS Article 43. Article 44. The operational limit is calculated by the Clearinghouse for Direct Participants and Securities Trading Participants based on the provisions set forth in this Rulebook and the methodology contained in the Clearinghouse Risk Management System Manual. Paragraph 1. The operational limit corresponds to the difference, as calculated by the Clearinghouse under stress scenarios, between the rights and duties of those Participants listed in this article. Paragraph 2. The Clearinghouse may, for prudential reasons and at its sole discretion, set a maximum amount as the operational limit of any given Participant, notwithstanding the Collateral pledged by said Participant and its accepted Transactions. The Clearinghouse may, at its sole discretion and taking into account market conditions and prudential aspects, set a financial limit for Direct Participants, limiting each Participant s Payment duty, and a quantitative limit, limiting the right to receive and the duty to deliver any given Security per Participant, and the proper provisions contained in the Clearinghouse Risk Management System Manual shall apply to such limits. Sole paragraph. Pursuant to the provisions set forth in its Risk Management System Manual, the Clearinghouse sets the maximum amount Clearing Members may assign a Securities Trading Participant as a telephone order risk limit. 19

18 CHAPTER VII COLLATERAL SECTION I PLEDGING OF COLLATERAL Article 45. Article 46. Article 47. Article 48. The Clearinghouse accepts funds in national currency and Securities as Collateral. Paragraph 1. The Clearinghouse determines which Securities are acceptable as Collateral, the criteria for valuing such Securities and the procedures to be followed by Participants for pledging Collateral. Paragraph 2. Direct Participants are always liable to the Clearinghouse for the pledging of Collateral. The Collateral pledged by a Direct Participant to the Clearinghouse is intended to guarantee, pursuant to the rules and procedures herein set forth, the Participant s fulfillment of its Delivery or Payment obligations to the Clearinghouse, in the event the Participant breaches such obligations. The Clearinghouse may, at any time, require a Collateral Recomposition from any given Direct Participant, and suspend the Acceptance of new transactions involving an increase of its risk exposure to the Participant, as long as this requirement is not met. Sole paragraph. Collateral Recomposition is always required to be made in funds, which is a requirement that may be met through a deposit of Securities in those events and under the conditions established in the Clearinghouse Risk Management System and Procedures Manuals. The Clearinghouse may, based on prudential reasons, limit its acceptance of certain Securities as Collateral or any given Participant s ability to deposit such Securities or use the rights appurtenant thereto for purposes of setting operational limits. SECTION II WITHDRAWAL OF COLLATERAL Article 49. Any Collateral pledged pursuant to the provisions set forth in this Rulebook which, at the discretion of the Clearinghouse, is unrelated to the Settlement of obligations may be transferred, at the Participant s request and always with the prior authorization of the Clearinghouse, from the latter s Collateral Account: (i) to such Participant-held accounts as indicated by the Participant; (ii) to other Clearinghouse accounts; or (iii) on the Participant s behalf to a Collateral Account in other clearing and settlement systems managed by BM&F. Paragraph 1. Paragraph 2. The Clearinghouse defines the procedures, as well as the criteria, for authorizing such withdrawals of Collateral as referred to in this article. In order to authorize any withdrawal of Collateral, the Clearinghouse determines, among other issues of a prudential nature, at its 20

19 own discretion, any effects on the operational limit and on the set of Transactions under the Participant s responsibility. CHAPTER VIII SECURITIES DEPOSITED TO COVER TRANSACTIONS Article 50. Article 51. Article 52. Securities are deemed to be deposited to cover Transactions when they are: (i) for such purpose kept in the Clearinghouse Deposit Account until the deadline which the Clearinghouse has set for final processing of the Settlement of the corresponding Delivery obligation; or (ii) to be received for the Settlement of an acquisition in a public offering or a Central Bank Credit Facility operation under article 74. Sole paragraph. The making of a deposit to cover Transactions and the Acceptance of a Transaction for which Securities have been deposited under this article may alter the Participants limits pursuant to the provisions set forth in the Clearinghouse Risk Management System Manual. While kept as a deposit pursuant to the provisions set forth in item (i) of the previous article, Securities shall, prorated to the quantities deposited, meet the Delivery obligations arising from Transactions accepted from the Direct Participant to the Clearinghouse and from the Securities Trading Participant to the Clearing Member. Paragraph 1. A Delivery obligation which is met pursuant to this article, while remaining as such, is not subject to Netting as referred to in Chapter X, and is terminated upon Gross Settlement. Paragraph 2. The Clearinghouse may, as provided for in its Risk Management System and Procedures Manuals, establish a priority order for obligations to be met as set forth in this article. Paragraph 3. Final processing of the Settlement of the Delivery obligation as set forth in this article takes place at such time as the Clearinghouse shall set which is comprised between the closing time for the Acceptance of Transactions with Settlement scheduled for that very date and the Settlement Window on the same date. Securities deposited pursuant to the provisions set forth in item (i) of article 50 may be withdrawn by the Participants or earmarked for other purposes, at their request, provided the requirements pertaining to risk management and the established operating procedures are met. CHAPTER IX TRANSACTIONS SECTION I GENERAL PROVISIONS Article 53. The following types of Securities Transactions, which are entered into the Clearinghouse systems pursuant to the terms and conditions set forth in the Rulebook, may be subject to Acceptance, Netting and Settlement by the Clearinghouse: 21

20 (i) same day or forward Purchase and Sale Transactions; (ii) Repo transactions; (iii) Loans; and (iv) Interchanges. Paragraph 1. The Settlement date of obligations pertaining to accepted Transactions cannot exceed the maturity date of any underlying Security. Paragraph 2. Obligations in funds derived from amounts paid by issuers as interest, amortization and redemption income from Securities traded in the Transactions may be settled through the Clearinghouse in the events referred to in this Rulebook or defined by BM&F in a Circular Letter. Paragraph 3. In the event of an early redemption, by the issuer, of the total number of any given Security underlying Transactions with Settlement scheduled for a date later than the redemption date, or any other occurrence which may, at the discretion of the Clearinghouse, result in extraordinary difficulties or in the impossibility of the Participants or the Clearinghouse to meet future Delivery obligations of the Security, the Clearinghouse may, as regulated in the Procedures Manual or in Circular Letters and Communications from BM&F, provide for the adoption of exceptional measures and criteria, such as an earlier date for Settlement or for maturity of Transactions, as well as the cancellation of Transactions and of other obligations deriving therefrom, such as those involving intermediate interest payments. SECTION II ENTERING TRANSACTIONS INTO THE CLEARINGHOUSE SYSTEMS Article 54. Transactions subject to Acceptance by the Clearinghouse are entered into its systems through Trading or Registration Systems in observance of the rules applicable to each case. Sole paragraph. The Clearinghouse may set rules, procedures and specific control mechanisms to be observed by the Trading or Registration Systems, as well as requiring the Pre-Registration of certain Transactions. SECTION III ACCEPTANCE OF TRANSACTIONS Article 55. The Acceptance of any Transaction is conditional upon: (i) observance of the involved Participants limits in accordance with the provisions set forth in the Clearinghouse Risk Management System Manual; and (ii) adoption of all established operating procedures and conformity to all controls established in the Trading or Registration System used. Sole paragraph. Without prejudice to such procedures as adopted in exceptional situations, the analysis under item (i) of this article is conducted upon entry of the Transaction into the Clearinghouse. 22

21 Article 56. The Clearinghouse takes the position of central counterparty for Settlement purposes of accepted Transactions, ensuring the settlement thereof pursuant to current legislation and the rules, procedures and criteria set forth in this Rulebook. Paragraph 1. The Acceptance of Repo Transactions comprises the Acceptance of both the purchase and sale Transaction and the Transaction pertaining to the corresponding resale and repurchase commitment. Paragraph 2. The Acceptance of Transactions which are subject to Pre-Registration is conditional upon all necessary requirements being met as established in this Rulebook and other applicable rules. Paragraph 3. The cancellation of any accepted Transaction, upon request by the involved Participants, before the Settlement of any of the corresponding obligations is subject to the analysis and other provisions concerning risk set forth in the Clearinghouse Risk Management System Manual. When a cancellation is complied with by the Clearinghouse, it may change the operational limit of the involved Participants, including the Clearing Member of the Securities Trading Participant that has required this cancellation, in addition to causing the Clearinghouse to be no longer characterized as the central counterparty for Settlement purposes of any corresponding obligations. SECTION IV SPECIFIC TRANSACTIONS SUBSECTION I PURCHASE AND SALE TRANSACTIONS Article 57. The Settlement of Securities Purchase and Sale Transactions may be: (i) same day, when their Settlement date is the same as their Acceptance date; or (ii) forward, when their Settlement date is on a date which is subsequent to their Acceptance date and up to the business day preceding the redemption date of the Security, observing the maximum tenor set by the Clearinghouse. Paragraph 1. The amounts paid by the issuer as interest or amortization income from Securities traded in accepted forward Purchase and Sale Transactions, from the business day following the Acceptance date of the Transaction to, and including, the Settlement date thereof, updated according to the criteria published by BM&F, make up the Final Buyer s rights and the Final Seller s duties in funds on the Settlement date of the Transaction. Paragraph 2. The updating referred to in the previous paragraph is calculated from the date of payment by the issuer until the Settlement date of the Transaction. Paragraph 3. BM&F may establish an operating mode in which amounts paid as interest or amortization income from Securities traded in accepted forward Purchase and Sale Transactions, from the business day following the Acceptance date of the Transaction to the Settlement date thereof, do not make up the Participants rights and duties in funds scheduled for the Settlement date of the Transaction. 23

22 Article 58. Forward Purchase and Sale Transactions on a when-issued basis may be based on a Security offered in a public offering, irrespective of any Securities of the same kind (type, issuer and maturity) outstanding in the market, in which event the Settlement thereof must coincide with the date set for the Settlement of the relevant public offering. Paragraph 1. Paragraph 2. Paragraph 3. The Forward Purchase and Sale Transactions referred to in this article may be subject to Pre-Registration from the moment the public offering of the relevant Securities is officially announced by the issuer, with their Acceptance and Registration being subject to compliance with the conditions to be published by BM&F and established by taking into consideration the National Monetary Council s and the Central Bank of Brazil s own regulations for forward purchase and sale commitments based on the Securities referred to in this article. Any obligations arising from the Acceptance of forward Purchase and Sale Transactions referred to in this article shall prevail even if the Participant appearing as seller of the Security underlying the Transactions is unable to acquire said Security in the public offering, in which event it must resort to other sources to obtain it. The Clearinghouse Risk Management System Manual provides a specific treatment for the forward Purchase and Sale Transactions referred to in this article, to be applied as long as their Acceptance is not made effective. SUBSECTION II REPO TRANSACTIONS Article 59. A Repo Transaction is the purchase or sale of a Security, called Repo Collateral, accumulated with a commitment consisting of the resale or repurchase of the same Security, where the Settlement of obligations arising from the purchase and sale Transaction takes place: (i) on the same date as the Acceptance date of the Transaction, with the obligations arising from the resale and repurchase Transaction having a future Settlement date; or (ii) on a future date after the Acceptance date of the Transaction, with the obligations of the resale and repurchase Transaction having a Settlement date subsequent to that of the obligations arising from the purchase and sale Transaction. Paragraph 1. In the event under item (i), it is admissible for the Settlement date of the resale and repurchase Transaction to be the same date as the Settlement date of the purchase and sale Transaction, in the case of any Repo Transactions referred to in article 4, where the purchase and sale Transaction has its Settlement through the Clearinghouse or SELIC and the resale and repurchase commitments consist of a Transaction for which the obligations shall be settled, respectively, through SELIC or the Clearinghouse. Paragraph 2. The amounts paid by the issuer as interest or amortization income from Securities traded in accepted Repo Transactions, from the business day following the Settlement date of the purchase and 24