Brazil: Institutional Features

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Brazilian Capital Market: Institutional Features

Intermediation System

The distribution and intermediation system of the Brazilian capital market is made up of 566 institutions, of which 227 are brokerage firms dealing in securities, 316 are distributors, 17 are categorized as investment banks and six can be described as development banks. Another three companies are responsible for custody and registration of operations. Bearer shares are not authorized in Brazil and almost all other transactions are registered, a method which demands a high level of operational sophistication from the companies looking after their custody.

All trades on the stock exchanges are made through brokers; that is, even financial institutions must use brokerage services. The commissions levied in Brazil are fixed at competitive rates and all negotiations are performed in the name of the end client.

Stock Exchanges

There are nine different stock exchanges operating throughout Brazil. They are:

  • The São Paulo Stock Exchange - BOVESPA
  • The Rio de Janeiro Stock Exchange - BVRJ
  • The Far South Stock Exchange - BVES
  • The Bahia - Sergipe - Alagoas Stock Exchange - BVBSA
  • The Minas Gerais - Espírito Santo - Brasilia Stock Exchange - BOVMESB
  • The Paraná Stock Exchange - BVPR
  • The Pernambuco - Paraíba Stock Exchange - BVPP
  • The Regional Stock Exchange - BVRg; and
  • The Santos Stock Exchange - BVSt

Of these nine exchanges, BOVESPA is responsible for the greatest part (85%) of the trades made in the country. The remaining eight exchanges are integrated within the SENN - Electronic System for National Negotiation - and account for around 15% of the total volume.

By December, 1995, there was a total of 874 public corporations registered with the Securities Commission, of which 578 with shares quoted on the stock exchanges, representing a total market valuation of US$ 147.6 billion.

The average volume of shares negotiated on a daily basis in Brazil was, in December of 1995, US$ 234.2 million on the sight market and US$ 47.6 million on the futures and options markets. The level of concentration in the Brazilian shares market is high. Also in December, 1995, the 10 most actively traded shares on the BOVESPA were responsible for 83.1% of the total volume negotiated, while at Rio de Janeiro the 10 most active after shares represented 79.8% of the total.