01 - Brazilian Financial Market Structure
Regulatory environment
The Brazilian capital markets and financial systems are regulated and monitored by the National Monetary Council (Conselho Monetário Nacional - "CMN"), the Brazilian Central Bank (Banco Central do Brasil - "Central Bank") and the Brazilian Securities and Exchanges Commission (Comissão de Valores Mobiliários - "CVM").
In accordance with Brazilian regulations, the creation and operation of organized securities markets and custody and settlement systems require prior authorization by the CVM and the Central Bank, depending on the market. Furthermore, entities that engage in these activities and their agents are subject to specific and strict regulatory oversight.
National Monetary Council (CMN)
The CMN is the highest regulatory entity within the national financial system and is responsible for setting the inflation target, to be pursued by the Central Bank. It is also responsible for guiding the Brazilian monetary, credit and foreign exchange policies.
Brazilian Securities and Exchanges Commission (CVM)
CVM is an independent federal regulatory agency with nationwide jurisdiction over securities markets. Its responsibilities include commodities and financial derivatives markets and exclude government debt markets. Besides regulating and enforcing the related laws and its own rules, CVM has the power to investigate market participants and apply sanctions.
Brazilian Central Bank (BCB)
The core objectives of the Central Bank are ensuring the stability of the purchasing power of the national currency and the soundness of the financial system. The Bank also has a mandate to regulate issues related to safety and efficiency in Brazilian Payment.
BSM
Subsidiary of B3 group, inspects and supervises market participants and B3 itself and has the capacity to establish and conduct disciplinary administrative proceedings.
B3 – Brasil, Bolsa, Balcão
- Manages the organized securities and derivatives markets, providing registration, clearing and settlement services. It acts as central counterparty, guaranteeing financial liquidity for the trades executed in its environments.
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Central Counterparty/ Settlement System: B3 acts as CCP for all the transactions carried out on its trading systems and all of them are integrated with the settlement systems so that the trading information is captured in its entirety immediately following trade execution. No further confirmation by the original counterparties is needed.
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Central Depository Services: Provides centralized deposit service of assets for all the market participants with accounts identified at final investor level.
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Investor (Final Beneficiary Owner): Non-resident inventor’s representatives in Brazil will have to identify the final client owning responsible for every transaction carried out at B3’s trading systems, and the assets will be held under an individual account in the B3 Central Depositary. This is an extremely relevant aspect of the Brazilian financial and capital markets regulation.