Four goes into one at new clearing house

Brazilian exchange group BM&F Bovespa has introduced a new centralised post-trade infrastructure for the clearing of multiple asset classes.

 

Brazilian exchange group BM&F Bovespa has introduced a new centralised post-trade infrastructure for the clearing of multiple asset classes.

Launched yesterday, BM&F Bovespa Clearinghouse will clear equities, corporate and government bonds, exchange-traded and OTC derivatives and spot FX transactions, effectively replacing the exchange group’s existing four clearing houses.

Starting with financial and commodity derivatives, migration to the new clearing house will centralise registration, position control, settlement and risk management processes for all major markets operated by Bovespa. Equities are expected to complete migration to the new platform in 2015.

Chief operating officer Cicero Vieira said BM&F Bovespa Clearinghouse would increase efficiency and reduce costs for market participants. “The new clearing house will reduce the market’s back-office costs and make trade settlement and the allocation of collateral more efficient.”

“It will also bring greater flexibility and reduce time frames for the launch of new products. The new technological infrastructure that has been installed will support growing volumes in Brazil’s financial and capital markets for the next 20 years,” he said.

The new infrastructure introduces a new risk management system known as CORE (Closeout Risk Evaluation), which provides integrated evaluation of the market as well as liquidity and cash flow risk of multi-asset portfolios, in part by simulating thousands of potential price trajectories for assets, contracts and collateral in investors’ portfolios, through multiple modeling techniques.

BM&F Bovespa hopes that CORE will improve collateral efficiency by incorporating the effects of clearing and risk diversification in investors’ portfolios. The exchange group said the service will calculate risk in real-time across all instruments once the migration process is complete.

BM&F Bovespa inherited four clearing houses when Brazil’s stock and derivatives exchanges merged in 2008. Clearing integration soon became a strategic priority for the group and the initial blueprint for the ‘Project for Integration of Clearinghouses’ was published in 2010. 

The new, integrated multi-asset clearing system is based on Swedish software provider Cinnober’s TRADExpress RealTime Clearing system. The new platform uses a fault-tolerant architecture, which has initially been scaled to process over 10 million transactions a day across more than 12 million accounts, with real-time risk calculations. 

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