Circular No. 3057 — Approves Regulation Governing the Operation of Systems Operated by Clearing Houses and Clearing and Settlement Service Providers in the Payments System

CIRCULAR NO. 003057

Approves regulation governing the operation of systems operated by clearing houses and clearing and settlement service providers that are part of the payments system.

The Collegiate Board of the Central Bank of Brazil, in a session held on August 31, 2001, considering the provisions of Law 10.214 of March 27, 2001, and Article 11 of Resolution 2.882 of August 30, 2001,

DECIDED:

Art. 1. Approve the attached Regulation, which governs the operation of systems operated by clearing houses and clearing and settlement service providers that are part of the payments system.

Art. 2. Establish that the application for authorization to operate, referred to in item II of Article 5 and paragraph 1 of Article 6 of Resolution 2.882 of August 30, 2001, must be accompanied by:

I - bylaws or articles of association and their amendments;

II - proof of compliance with the minimum net worth limit;

III - acts of incorporation and registration or annotation of the special patrimony, whenever applicable;

IV - "CAPEF - Capital Composition" document, model CADOC No. 38029-8, from the clearing house or clearing and settlement service provider and from the legal entities participating in its share capital;

V - "CAPEF - Registration Form - Personal Data" model CADOC No. 38027-0 and "CAPEF - Information on Act of Election or Appointment" model CADOC No. 38006-7, regarding members of the statutory bodies of the clearing house or clearing and settlement service provider;

VI - system regulation;

VII - detailed description:

a) of all operational processes related to the system to be operated by the clearing house or clearing and settlement service provider, including those performed by third parties, comprising, among others, according to the nature of the system, the registration, confirmation, acceptance, clearing, and settlement of obligations related to operations, and the custody and transfer of securities, securities, and other financial assets;

b) of the equipment and communication means that will support the system;

c) of the basic procedures and mechanisms related to the technical access of participants to the system;

VIII - general flowchart and flowchart of each process referred to in item "a" of the previous item; and

IX - documentation evidencing the capacity of the clearing house or clearing and settlement service provider to fulfill its corporate purpose, considering technical-operational, organizational, administrative, and financial aspects, with a detailed description of risk management and containment mechanisms.

Sole Paragraph. The documentation referred to in this article must be delivered to the Department of Banking Operations and Payment Systems (Deban).

Art. 3. Clearing houses and clearing and settlement service providers operating on the date of entry into force of this Circular must deliver to Deban, by October 1, 2001, the documentation mentioned in the previous article, for the purpose of analyzing their compliance with the values, principles, and rules applicable to the payments system.

Art. 4. This Circular enters into force on the date of its publication.

Brasília, August 31, 2001

Luiz Fernando Figueiredo Sérgio Darcy da Silva Alves Director Director

Regulation Attached to Circular No. 3057 of August 31, 2001, governing the operation of systems operated by clearing houses and clearing and settlement service providers that are part of the payments system.

CHAPTER I
SCOPE OF APPLICATION

Art. 1. The provisions of this Regulation apply to the clearing houses and clearing and settlement service providers referred to in Article 2 of Resolution 2.882 of August 30, 2001, whose systems are authorized to operate by the Central Bank of Brazil.

CHAPTER II
DEFINITIONS

Art. 2. For the purposes of this Regulation, the following expressions and terms are defined as follows:

I - acceptance: process of verifying whether an operation meets the pre-established requirements in the settlement system regulation for settlement, especially regarding risk management and containment;

II - settlement finality: guarantee that the operation, once accepted, will be effectively settled, in the terms and extent established in the regulation of the system operated by the clearing house or clearing and settlement service provider;

III - clearing: process involving the determination of the net position (credits minus debits) of each participant;

IV - bilateral clearing: clearing involving participants in pairs;

V - multilateral clearing: procedure intended for the determination of the sum of the bilateral debtor and creditor results of each participant in relation to the others. The result of multilateral clearing also corresponds to the result of each participant in relation to the clearing house or clearing and settlement service provider that assumes the position of contracting party for the purposes of settlement of obligations, carried out through its intermediary;

VI - deposit of securities, securities, or other financial assets: process involving the custody and registration of securities, securities, or other financial assets;

VII - definitive event: any event, such as the settlement and transfer of funds or securities and securities, that occurs on an irrevocable and unconditional basis;

VIII - availability index: index that expresses percentage-wise the degree of availability of the system for participants, calculated as follows:

id = (hf / hp) x 100 , where:

id = availability index;

hf = number of hours of actual operation of a given system, over the last twelve months, disregarding any extensions of normal operating hours;

hp = number of hours in which the system should be open for use by participants, over the last twelve months, according to its normal operating hours;

IX - settlement: process of extinguishing obligations;

X - real-time gross settlement: settlement of obligations, one by one, in real time;

XI - deferred settlement: settlement carried out at a time subsequent to the acceptance of the operations giving rise to the corresponding obligations;

XII - operation: unless otherwise specified in the text, any transaction commanded in a system that may result in the transfer of funds, securities, securities, or other financial assets;

XIII - accepted operation: operation accepted by the clearing house or clearing and settlement service provider for the purposes of settlement;

XIV - credit order: order to transfer funds from the account of the originating participant to the account of the beneficiary participant;

XV - financial position: financial balance of a participant, at any given moment, in a settlement system;

XVI - processing: set of procedures preceding settlement and, where applicable, clearing;

XVII - issuer risk: risk of not honoring a commitment related to the issuance or redemption of the principal and accessories of the security or security;

XVIII - credit risk: risk of a contracting party not settling an obligation at the expected time and not doing so in the future;

XIX - liquidity risk: risk of a contracting party settling an obligation at a time subsequent to the initially agreed time;

XX - operational risk: risk of human error or failure of equipment, computer programs, or telecommunications systems essential for the operation of a given system;

XXI - settlement system: complex of facilities, equipment, and computer and communication systems made available by a clearing house or clearing and settlement service provider, for the settlement of operations according to formally established rules and procedures;

XXII - hybrid settlement system: system that combines characteristics of deferred settlement systems and real-time gross settlement systems;

XXIII - systemically important system: settlement system in which the volume or nature of the business, at the discretion of the Central Bank of Brazil, is capable of posing a risk to the solidity and normal functioning of the National Financial System.

CHAPTER III
SETTLEMENT SYSTEMS

Section I
Object of Settlement

Art. 3. The following may be the object of settlement in a settlement system, individually or jointly, obligations arising from:

I - checks and other documents;

II - electronic debit and credit orders;

III - transfers of funds and other financial assets;

IV - operations with securities and securities;

V - operations carried out in commodity and futures exchanges;

VI - other operations, including those involving financial derivatives.

Sole Paragraph. The Central Bank of Brazil, at its exclusive discretion and on a case-by-case basis, may restrict the set of operations whose obligations are eligible for settlement in the same system.

Section II
Deferred Settlement Systems

Art. 4. In deferred settlement systems:

I - financial settlement must be preceded by clearing; and

II - interbank financial settlement is final at the moment when the resulting movements in the Bank Reserves accounts held at the Central Bank of Brazil are effected.

Section III
Real-Time Gross Settlement Systems

Art. 5. In real-time gross settlement systems, interbank financial settlement:

I - must be made directly in a Bank Reserves account;

II - is final at the moment when the movements in the Bank Reserves accounts held at the Central Bank of Brazil are effected.

Art. 6. In real-time gross settlement systems for fund transfers, the information originating therein regarding the transfer of funds must only be provided to the beneficiary at the moment the transfer becomes final.

Section IV
Hybrid Settlement Systems

Art. 7. Hybrid settlement systems will be examined by the Central Bank of Brazil, on a case-by-case basis, observing, where applicable, the requirements established in this Regulation for deferred settlement systems and for real-time gross settlement systems.

Section V
Systemically Important Systems

Art. 8. All settlement systems are considered systemically important, except for fund transfer systems that do not meet at least one of the criteria expressed in the formulas below:

     30  
     Σ VM(n)i i=1  

I) --------- > K1, where:
30

n varies from one to the number of business days in the last six months;

S = sum;
VM(n) = value, in reais, of the largest accepted operation in the system on a given business day in the last six months; K1 = R$10,000,000.00 (ten million reais);

i = order number of each VM(n), after all VM(n) considered are ordered by decreasing value;

      30  
      Σ VA(n)i i=1  

II) --------- > K2, where:
30

n varies from one to the number of business days in the last six months;

S = sum;

VA(n) = daily aggregated value, in reais, of the operations accepted in the system on a given business day in the last six months; K2 = R$5,000,000,000.00 (five billion reais); i = order number of each VA(n), after all VA(n) considered are ordered by decreasing value;

Paragraph 1. The reference values referred to in items I and II (K1 and K2) may be altered by the Central Bank of Brazil every civil semester, producing effects from the subsequent civil semester.

Paragraph 2. For settlement systems in the initial phase of operation, only the provision of item II must be considered, taking the expected movement for the first two complete civil semesters of operation.

Paragraph 3. The Central Bank of Brazil will grant a period of up to six months, counted from the month following the end of the observation period, for the clearing house or clearing and settlement service provider to make the necessary adaptations resulting from the classification of the system it operates as systemically important.

Paragraph 4. For the purposes of applying the criteria defined in items I and II, the payment order formalized by check or any other means is considered an operation.

Art. 9. Regardless of the provisions of the previous article, the Central Bank of Brazil may, at its exclusive discretion, on a case-by-case basis and focusing on the risk aspect, consider a given fund transfer settlement system to be systemically important, granting a period of up to six months for the clearing house or clearing and settlement service provider to make the necessary adaptations.

Art. 10. In systemically important systems, the availability index must be equal to or greater than 99.8% (ninety-nine point eight percent).

Art. 11. In deferred settlement systems considered systemically important:

I - the financial settlement of the cleared results of accepted operations must occur directly at the Central Bank of Brazil;

II - settlement may be deferred, relative to the time of acceptance of the operation:

a) until the end of the day, in the case of fund transfers;

b) for up to one business day, in the case of spot operations with securities and securities, except shares;

c) for up to three business days, in the case of spot operations with shares carried out on a stock exchange;

d) for the period to be defined by the Central Bank of Brazil, in other situations;

III - preferably, more than one settlement session should occur throughout each day;

IV - the clearing house or clearing and settlement service provider must:

a) assume the position of contracting party for the purposes of settlement of obligations, carried out through its intermediary, excluding issuer risk; and

b) ensure the settlement of obligations related to accepted operations, constituting special patrimony and adopting adequate mechanisms and safeguards, such as:

1. definition of operational limits;

2. establishment of mechanisms for loss sharing among participants;

3. constitution of guarantees by participants;

4. constitution of a settlement guarantee fund;

5. contracting of settlement guarantee insurance; and

6. contracting of bank credit lines.

Art. 12. The adequacy of the mechanisms and safeguards referred to in item "b" of item IV of the previous article will be evaluated by the Central Bank of Brazil, on a case-by-case basis, according to the nature and specifics of the settlement system to which they relate, requiring diversification in the choice of third parties offering credit lines.

Art. 13. Clearing houses and clearing and settlement service providers that operate deferred settlement systems considered systemically important must request the Central Bank of Brazil to open an account intended exclusively:

I - for the final settlement of the results determined by them; and

II - for carrying out financial movements directly related to the mechanisms and safeguards adopted in the settlement systems they operate, or linked to custody events related to the settlement of issuer obligations.

Paragraph 1. The following movements are accepted in the account titled by the entities referred to in the caput, exclusively:

I - to credit, in counterpart to a debit commanded by the holder of a Bank Reserves account;

II - to debit, commanded by the holder, in counterpart to a credit in a Bank Reserves account.

Paragraph 2. The account titled by the referred entities must have a balance equal to zero at the end of each day.

Art. 14. Systemically important fund transfer settlement systems may only be operated by clearing houses and clearing houses whose corporate purpose is exclusively the activities directly related to the processing, clearing, and settlement of payments.

Section VI
System Regulation

Art. 15. The regulation of each settlement system must clearly and objectively contain all relevant aspects related to its operation, such as:

I - criteria for access, suspension, and exclusion of participants;

II - operating hours and rules, including settlement hours, direct or indirect, at the Central Bank of Brazil;

III - obligations of the clearing house or clearing and settlement service provider and of the participants, including regarding the management and containment of credit, liquidity, and operational risks;

IV - requirements for the acceptance of an operation;

V - time from which the clearing house or clearing and settlement service provider accepts the operation;

VI - mechanisms and safeguards adopted by the system for the management of credit, liquidity, and operational risks;

VII - events characterizing participant default;

VIII - procedures to be adopted in the event of participant default;

IX - contingency and recovery plans, with a detailed description of the procedures to be adopted in the event of operational failures; and

X - third parties contracted to carry out stages related to the core activities of the clearing house or clearing and settlement service provider, considered important by the Central Bank of Brazil.

Art. 16. Clearing houses and clearing and settlement service providers must promptly disclose to all participants any changes related to the operation of the settlement systems they operate.

Art. 17. Clearing houses and clearing and settlement service providers must require, as a guarantee of commitments assumed by participants within the settlement system they operate, preferably the delivery of liquid assets.

Sole Paragraph. The assets must be taken as collateral with an adequate discount relative to the market price and in an amount sufficient to cover the obligations to which they relate.

CHAPTER IV
CLEARING HOUSES AND CLEARING AND SETTLEMENT SERVICE PROVIDERS

Section I
Share Capital and Patrimony

Art. 18. The clearing house or clearing and settlement service provider must maintain net worth compatible with the risks inherent to the settlement systems it operates, observing the following minimum limits:

I - R$5,000,000.00 (five million reais), in the case of being responsible for a settlement system considered not systemically important;

II - R$30,000,000.00 (thirty million reais), in the case of being responsible for a settlement system considered systemically important.

Paragraph 1. If the clearing house or clearing and settlement service provider operates more than one settlement system, the minimum net worth limits referred to in the caput must correspond to the sum of the respective minimum limits required to operate each system.

Paragraph 2. If the settlement system is operated by a clearing and settlement service provider, the minimum net worth amount must be increased by other amounts required for the exercise of other activities.

Paragraph 3. The values referred to in this article may be modified by the Central Bank of Brazil, observing a periodicity of no less than two years.

Art. 19. To comply with the provisions of Article 5 of Law 10.214 of March 27, 2001, clearing houses and clearing and settlement service providers must separate a minimum special patrimony of R$10,000,000.00 (ten million reais), constituted exclusively by federal public bonds, for each of the systemically important systems they operate.

Paragraph 1. The federal public bonds separated as special patrimony in the form of the caput must be transferred, in the Special Settlement and Custody System (Selic), to a specific linked account of each system, becoming blocked for trading.

Paragraph 2. The income from the federal public bonds must be incorporated into the special patrimony.

Paragraph 3. The clearing house or clearing and settlement service provider must provide for the immediate reinforcement of the special patrimony whenever, evaluated based on the unit prices used by the Central Bank of Brazil in its repo operations, it presents a value lower than the minimum stipulated in the caput.

Section II
Organization and Administration

Art. 20. The clearing house or clearing and settlement service provider must have personnel technically and administratively qualified, enabling it to fully achieve its corporate purpose.

Art. 21. Those responsible for the administration of the clearing house or clearing and settlement service provider must be professionals of recognized technical competence in the subject matter, with management autonomy, in accordance with their contract or articles of association.

Section III
Authorization for Changes in Regulations

---

Art. 22. Amendments to regulations related to the aspects indicated below depend on prior authorization from the Central Bank of Brazil:

I - the settlement system operated by the entity, especially regarding:

a) its security and integrity;

b) contingency and recovery plans;

c) its interconnection, where applicable, with other systems;

II - the operational routines of:

a) registration, confirmation, and acceptance of operations;

b) fund transfers;

c) deposit of securities, financial instruments, or other financial assets;

d) clearing;

e) settlement;

III - the mechanisms and procedures for administering and containing credit and liquidity risks, including those intended to ensure settlement certainty, where applicable, and those related to the constitution, administration, and execution of guarantees.

Sole Paragraph. Other amendments made to the regulation of each settlement system operated by the clearinghouse or clearing and settlement service provider must be communicated to the Central Bank of Brazil within thirty days.

Art. 23. In reviewing the authorization request referred to in Article 5, item II, and Article 6, sole paragraph, of Resolution No. 2,882, of August 30, 2001, the Central Bank of Brazil will analyze, within the payments system, all processes executed by the clearinghouse or clearing and settlement service provider, as well as those preceding them.

Art. 24. The contracting of third parties to perform processes executed by the clearinghouse or clearing and settlement service provider depends on prior approval from the Central Bank of Brazil, which will examine compliance with regulatory requirements regarding the efficiency, security, integrity, and reliability of the settlement systems.

Section IV
Supervision

Art. 25. Clearinghouses and clearing and settlement service providers are supervised by the Central Bank of Brazil, focusing on the values, principles, and rules applicable to the payments system.

Sole Paragraph. Supervision may be extended to third parties if, at the discretion of the Central Bank of Brazil, they perform important stages related to the core activities of the entities covered by the main text, in which case the extension must be stated in the contracts between them and the third parties.

CHAPTER V
PARTICIPANTS

Art. 26. Clearinghouses and clearing and settlement service providers must accept as participants in the respective settlement systems they operate, among others, financial institutions and other institutions authorized to operate by the Central Bank of Brazil, whose activities are compatible with the operations settled through these systems.

Paragraph 1. In deferred settlement systems, it is permitted that the clearinghouse or clearing and settlement service provider establish, in the regulation of the system it operates, objective, public, and clear access criteria based, above all, on the participants' capacity to manage and contain credit and liquidity risks.

Paragraph 2. The provisions of the preceding paragraph do not exempt the participant from the need to be technically and operationally qualified to gain access to the settlement systems operated by the clearinghouse or clearing and settlement service provider.

Art. 27. Participants are responsible for the accuracy of the data reported in their operations, within each settlement system.

CHAPTER VI
GENERAL AND TRANSITIONAL PROVISIONS

Art. 28. Clearinghouses and clearing and settlement service providers, as well as third parties contracted by them, must comply with legislation and regulations regarding data confidentiality.

Art. 29. Contingency and recovery plans, necessary for service continuity in the event of equipment or computer program failures, or interruption, for any reason, of the supply of electricity, telecommunications services, or any other input, must necessarily include:

I - the installation and operation of a secondary processing center that allows the resumption of the effective functioning of the settlement system within a period not exceeding:

a) thirty minutes, in the case of real-time gross settlement systems; or

b) two hours, in the case of deferred settlement systems;

II - the provision of emergency procedures in the event of simultaneous impediment of the main and secondary processing centers.

Sole Paragraph. Clearinghouses and clearing and settlement service providers operating settlement systems not considered systemically important may, at the exclusive discretion of the Central Bank of Brazil, adopt, for the purposes mentioned in the main text, mechanisms and procedures substitutive to those provided for in item I.

Art. 30. Clearinghouses and clearing and settlement service providers must immediately communicate to the Central Bank of Brazil:

I - default, characterized in the manner of their regulation, by financial institutions and other institutions authorized to operate by the Central Bank of Brazil, verified in the settlement systems they operate;

II - the suspension or exclusion of a participant;

III - occurrences that may prevent or delay the normal functioning of the settlement system.

Art. 31. Electronic funds transfer settlement systems must operate based on credit orders.

Art. 32. Clearinghouses and clearing and settlement service providers operating electronic funds transfer settlement systems must implement measures aimed at avoiding concentration, both in terms of value and quantity, of the registration of orders at the end of the period provided for this purpose.

Art. 33. In settlement systems for transactions involving securities, financial instruments, or other financial assets, including foreign currency, the definitive transfer of the traded asset must occur simultaneously with the definitive financial settlement.

Art. 34. The analysis regarding the classification of the Check Clearing Service (SCCOP) as systemically important or not must be conducted for the first time in July 2002, with the application of the provisions of Article 8, paragraph 2, and, from January 2003, in accordance with the other provisions of the same article.