Federal Government Bond

Federal Government Bond Lending and Repo

• The product

  B3 is always seeking the best functioning and expansion of the Brazilian capital markets and is now providing new solutions to trade, register and settle OTC transactions – Federal Government Bond Lending and Repo.

  These transactions allow securities to be transferred from the original holder to the counterparty and be available for free transfer.

  As B3 acts as central counterparty, transaction risks are no longer assumed by counterparties and more financial institutions may access this type of trade thus boosting market growth.

  HOW IT WORKS

  The custody of Government Bonds (GBs) will remain in the Special System for Settlement and Custody (Selic) and B3 will provide solutions focused on registration and settlement of trades executed in the OTC environment with a central counterparty.

  Both products will be available through the BTB Platform, which is the Brazilian stock exchange system already used for lending listed assets. The platform can be accessed through the BTB Terminal graphical interface and via the BTB API. In this environment, B3 ensures settlement commitments and optimizes the allocation of capital to participants.

  Direct Trade Execution: Participants (PNP/PL) enter a direct trade with information from the borrower/buyer and the lender/seller, both under their responsibility.

  Lender [Seller] Execution: Borrower/buyer participants (PNP/PL) select a lend/sell order. Available for Lending and Repo.

  Borrower Execution: Lender participants (PNP/PL) select a borrow order. Available only for  inbound Public Lending Orders.

  Remember that the Buy side may access the public lending book via API and the Terminal via BTB screen, thus facilitating the book follow-up for any inbound orders.

• Eligible assets

  Are accepted for negotiation of Lending and Repos the Government Bonds that simultaneously meet the following criteria:

  1. Be priced on ANBIMA
  2. Meet criteria 2.A or 2.B
     Criterion 2.A: Be on the list of securities scheduled for auction in the next quarter by the National Treasury of Brazil
     Criteria 2.B:
  • Median of Financial Volume in the reference quarter must be greater than or equal to:
    (i) R$ 200.000.000 for LFT;
    (ii) R$ 75.000.000 for LTN;
    (iii) R$ 170.000.000 for NTN-F;
    (iv) R$ 45.000.000 for NTN-B;
  • The median number of records Bonds must be greater than or equal to 10 in the previous quarter.
  • Must have been traded on all days within B3 trading calendar days the previous quarter.
    The records observed in the SELIC environment for extra-group operations in the previous quarter are considered for assessing criterion 2.B.
  3. The Government Bond must have a total issue size, at the time of reviewing these criteria, equal to or greater than R$20 billion.
  4. Only Government Bonds types LFT, LTN, NTN-F e NTN-B are accepted.

   

  The list of Government Bonds accepted for negotiation of Lending and Repos will be reviewed quarterly. Exceptionally, B3 may, at its discretion, change the parameters and rules described above, as well as make any Government Bonds ineligible

  

  List of Government Bonds accepted for negotiation
• Benefits

  

  Streamlined operations

  Easy to operate and maintain contracts via BTB Plataform, B3’s Securities Lending platform.

  

  Credit optimization

  Single registration with the Clearinghouse, thus eliminating the need to open credit limits for counterparties.

  

  Easy to settle

  Participants will have the possibility of settling only the net result.

  

  Greater safety

  Counterparty credit risk equalization through the Central Counterparty (CCP) service.

  

  Public Lending Book

  Possibility of borrowing/lending on-screen Lending positions.

  

  Statistics available to participants

  Consolidated statistics on securities trading by product will be published.

• How it works

  GB lending and repo transactions were designed and enhanced in partnership with the market to bring greater safety, efficiency and commercial advantages to all.

  GB lending should open up several opportunities and enable a totally new market, while benefiting institutions (i.e. pension funds and foundations) wishing to monetize their portfolio and increase revenues.

  GB repo is currently focused on a restricted market with bilateral trade and will open up the market to players without previous access to this product in terms of strategy and size.

   

  OPERATING DETAILS

  Asset management for trading and settlement purposes will be done in a new RTC (Real Time Clearing) system module. This module will mirror the balances of GBs from the Selic and Funds accounts to the Clearinghouse structure.

  Custodians will be responsible for requesting the deposit, withdrawal or transfer of GBs using their clients' deposit accounts, as well as the funds deposit or withdrawal.  

  Investors, through their custodians, must transfer the GB balance to their Selic deposit account prior to carrying out lending trades or repo selling transactions.

  The funds for repo purchases must be previously deposited with the Clearinghouse. 

   

  Do you have any doubts or need more information?

  On the product page on the B3 Clients website, you will find the product specifications and various support materials to move forward, such a, documents to guide the execution of trades, instructions for using the API and a link to a workshop video addressing all the operational steps.

  Click to visit the website.