Brazil: Regulatory Agencies and Regulation

Article Index

Regulation of the Derivatives Market

The market in Brazilian derivatives, formed after the legal structure to regulate financial markets was set up, is regulated, depending on the type of derivative, by three regulatory groups: the Central Bank, the CVM and the self-regulating bodies themselves.

Generally speaking, Brazilís legal macro-structure has facilitated development of the Brazilian derivatives market. The existence of a regulating structure for the banking system and other financial intermediaries has lent flexibility and dependability to the countryís financial transactions.

Regulation of the Brazilian financial system as far as it concerns the derivatives market can be summarised as follows:

  • The Securities Commission: Regulates all activities in the derivatives market concerning securities, such as: options, future options and futures on shares, futures share indices and options on futures share index.
  • The Central Bank: Regulates all international operations which take place in the derivatives market, since the monitoring of all operations involving foreign currency is its responsibility Regulates all the country's financial institutions when these touch upon aspects concerning the expansion of the money supply and credit Regulates all financial activities with derivatives which do not fall under the control of the CVM, for example, the over-the-counter market in swaps and the bulk of the contracts negotiated on the exchanges dealing with Commodities and Futures Stock and Future Exchanges Regulate all trading activities or in the systems for electronic trade administered by them.
  • The exchanges are self-regulating bodies which are nevertheless, subject to the above-mentioned regulatory organs. Various types of derived contracts are negotiated on the Brazilian exchanges.