Foreign Currency

Brazil’s B3 begins operation of cloud-based foreign exchange clearing house


Brazilian stock exchange group B3 has begun operating its foreign exchange clearing house with 100% cloud-based infrastructure – in what it claims to be an industry first. 

The modernisation of its platform comes as part of B3’s aim to stimulate development within the country’s interbank market through the creation of products and developing new business opportunities.

B3’s foreign exchange clearing house was established in 2002 as the infrastructure responsible for the registration, clearing, settlement and risk management of foreign exchange transactions in Brazil.

The clearing house’s principal function is to serve banking institutions as central counterparty in spot US dollar transactions and to assure the appropriate execution of foreign currency buy and sell transactions, avoiding systemic risks.

Average daily trading volume at B3’s foreign exchange clearing house last year stood at approximately $10 billion.

“We have mapped clients’ demands and discovered opportunities to make the foreign exchange market more sophisticated through creating new products and initiatives dependant on updating the available technology infrastructure, and also on updating the existing rules – which is a subject already on the regulator’s agenda,” said Mario Palhares, chief operating officer, electronic trading and CCP at B3.

B3 has also revealed ongoing discussions with the Central Bank of Brazil and other financial institutions on updating interbank market regulation to make these benefits viable for market participants.

The exchange group’s foreign exchange clearinghouse is currently utilising by Brazil largest banks for OTS spot US dollar transaction for T0, T+1 and T+2 settlement, as well as US dollar “Casado” transactions – a combination of spot and futures US dollar transactions – carried out in electronic trading.

“With the regulatory changes that are being discussed and a more modern platform we will enable more efficient development of products such as US dollar Casado with automatic acceptance, and guaranteed exchange rates, which allows transactions with higher volumes and settlement beyond T+2”, said Juca Andrade, B3’s chief product and client officer at B3.

US dollar Casado electronic trading currently requires a transaction at B3 and then trade confirmation in the Central Bank of Brazil’s system. However, the potential product innovation would allow for automatic calculation, eliminating the manual phase.

Guaranteed exchange rates will also provide benefits such as higher-volume transactions without having to post 100% of the transaction as collateral, as well as more flexible tenors.

Starting from today, all transactions will be migrated to the cloud platform.

“Migration of infrastructure to the cloud is a trend in the main global markets. The modernisation of the foreign exchange clearing house is part of B3’s strategy to provide more efficient solutions, so as to meet our clients’ demands in a more agile manner and to support market growth,” said Rodrigo Nardoni, chief information officer at B3.



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