With Guarantee

Swaps

• The product

  Swap contracts are traded in organized OTC markets. These operations feature cash flow exchanges based on the comparison of profitability between two indexers. Therefore, agents assume both positions – long in an indexer and short in another.

  Profit occurs when the result in a long position (purchased) is greater than the short position return (sold) and vice versa.

  Initial values of operations may be adjusted based on several indexers, including inflation or stock  indexes; interest rates, or foreign exchange rates. 

  B3 provides registration of swaps with and without CCP.

• The asset

  Inflation indexes	Stock indexes	Interest rates	Foreign Exchange rates
  IGP-M	Ibovespa	CDI	USD
  IPCA	IBrX-50	Fixed	EUR
  		TJLP	JPY
  		TR

• Specifications

  Contract size	Freely established between the parties.
  Fixing date	Business day prior to the expiration date (D-1).
  Expiration and settlement day	Freely established between the parties.
  Settlement procedure	With CCP: settlement is cleared through the Clearinghouse. Without CCP: settlement is done directly by the parties.
  Margin requirement	Early deposit of assets – as per regulations – is only required for operations with B3 as CCP.
  Warranty provision	The parties agree to exchange the net result of differences between two income flows.
  Expiration period	Freely established between the parties.

• Benefits
  • Price hedging against unwanted fluctuations;
  • Swap without CCP do not require early or intermediate expenditures cash flows, which occurs when hedging with options (which requires initial premium payments), or when trading futures market instruments (which require daily margin and daily settlements adjustments), providing an effective protection for clients that lack of cash flow management to handle intermediate payments; and
  • Swaps with CCP mitigate credit risks to the parties, since B3 guarantees such operations.