Brazil: Derivatives Market

Brazilian Derivatives Market


Brazil boasts a vast network of financial intermediaries authorized to operate in the derivatives market. Besides the intermediaries linked to the capital market, which has been mentioned above, there are those linked to the exchanges dealing in futures and to banking and non-banking financial institutions, all actively participating in the derivatives market. In addition, Swap operations are carried out by financial institutions in general. On the over-the-counter market, operations are mainly registered in the CETIP. However, the majority of Brazilian financial institutions have the potential to participate in the derivatives markets.

Exchange and over-the-counter markets

The two principal exchanges for Brazilian futures - the Commodities and Futures Exchange (the BM&F) and the Brazilian Futures Exchange (the BBF) maintain systems to scrutinize the market, clearing operations, settling and guarantees which resemble those of the Stock Exchanges.

The transactions involving over-the-counter derivatives predominantly take place through the CETIP, which concludes the process of financial liquidation within one working day. The system also updates and provides daily information throughout the market on the prices of various financial assets and charges levied for the trades registered there. Monitoring operations are also carried out on transactions with a view to identifying and, if necessary, impeding those which deviate substantially from applicable market standards.

Derivatives related to Shares and Indices

Share derivatives, which have been the object of transactions since the beginning of the 1970s, began to be regulated on Brazilian stock exchanges as of 1979. In 1982 was seen the advent of negotiations for options on the BVRJ and, a year later, term and futures operations were being regulated. The futures contract in the Bovespa Index began to attract negotiations in 1989 and is presently one of the most active on the Brazilian market. In addition futures contracts of individual share value and portfolio indices as well as options on futures for share indices are negotiated on the BBF.