Circular No. 2.495

CIRCULAR N. 002495 ------------------ Define the systematics of foreign currency purchase and sale operations by the Central Bank of Brazil in the interbank market. The Board of Directors of the Central Bank of Brazil, in a session held on 18.10.94, having regard to the provisions of art. 11, item III, of Law No. 4.595, of 31.12.64, and Resolutions Nos. 1.690, of 18.03.90, and 2.087, of 30.06.94, both of the National Monetary Council, D E C I D E D: Art. 1 The foreign currency purchase and sale operations by the Central Bank of Brazil, in the interbank market, shall be carried out with institutions previously selected and accredited for this purpose ("dealers"), as well as with any others authorized to operate in the Free Rate and Floating Rate Exchange Market, in the following modalities: I - computerized system "electronic auction"; II - telephone auction system; or III - regardless of auctions, operating directly with selected institutions. Art. 2 The operations in question shall be conducted by the Department of International Reserve Operations (DEPIN); Art. 3 The validity period of each accreditation of "dealers" shall be 6 (six) months, covering the months of February to July and August to January. Sole paragraph. Exceptionally, for the period now beginning, the validity of the accreditation shall be until January 1995. Art. 4 The minimum number of "dealers" accredited to operate with DEPIN shall be 10 (ten). Sole paragraph. DEPIN may, for reasons of force majeure, temporarily operate with a number of "dealers" lower than that established in this article. Art. 5 The "dealers" shall be selected based on the calculation of a weighted average, taking into account the volume of operations of the institution in the primary market (with clients), assigned a weight of 8 (eight), and in the interbank market, a weight of 1 (one), considering the movement of the last 6 (six) months. Sole paragraph. For the evaluation of the first period (October/94 to January/95), the movement of the institution between 15.04 and 14.10.94 shall be considered. Art. 6 The prerequisites for the accreditation of an institution as a "dealer" are: I - being authorized to operate in the Free Rate and Floating Rate Exchange Markets; II - having an exclusive telephone communication line with the DEPIN exchange desk, with the costs of its installation and maintenance borne by the institution; III - the absence of restrictions or reservations with the Central Bank of Brazil that, at its sole discretion, discourage the accreditation in question. Art. 7 The accreditation or de-accreditation of "dealers" shall be communicated to the institution by telephone, and the institution must respond within the period stipulated at the time of communication. Art. 8 Accredited institutions shall observe the following requirements: I - provide the Central Bank with all information necessary for the proper functioning of the exchange markets. II - participate in all auctions promoted by this
Central Bank, in the manner defined in this Circular; III - quote, whenever requested, purchase and sale rates for foreign currencies; IV - provide liquidity to the exchange markets; Art. 9 It is expressly prohibited, under penalty of loss of the status of accredited institution for a period of at least 12 (twelve) months, the disclosure, advertising or any other form of market exploitation of the mentioned status. Art. 10 The accreditation of an institution does not generate any right to remain in that status, and the Central Bank may, at any time and at its sole discretion, make changes to the group of "dealers". Art. 11 A factor for de-accreditation of an institution includes, among others, the use of the "dealer" status to dominate, manipulate or impose conditions that lead to the artificial formation of prices, as well as the use of other methods that, in the assessment of this Central Bank, contravene regular and healthy market practices. Art. 12 DEPIN shall issue the complementary norms and adopt the measures aimed at complying with the provisions of this Circular. Art. 13 This Circular enters into force on the date of its publication. Art. 14 Circular No. 2.480, of 12.09.94, is revoked. Brasília, 19 October 1994 Gustavo H. B. Franco Director of International Affairs