Circular No. 3772 — Regulates the Recognition of Foreign Central Counterparties as Qualified by the Central Bank of Brazil

The Collegiate Board of the Central Bank of Brazil, in a session held on December 1, 2015, considering the provisions of Article 10 of Law No. 10,214, of March 27, 2001, and Articles 6, § 1, and 11 of Resolution No. 2,882, of August 30, 2001,

R E S O L V E:

Art. 1 This Circular regulates the process for the recognition, as qualified, of foreign central counterparties by the Central Bank of Brazil (BCB).

Art. 2 For the purposes of this Circular, the following are considered:

I - foreign central counterparty (CCP): a legal entity incorporated and domiciled abroad contracted to assume the position of contracting party, for the purpose of settling obligations, in relation to the original counterparties of an operation;

II - competent authorities: entities responsible for the regulation, authorization, and supervision of the activities of the foreign CCP in its jurisdiction of origin;

III - jurisdiction of origin: the country in which the foreign CCP is incorporated or the territorial area in which it is authorized to exercise its activities by the competent authorities.

Art. 3 The BCB may recognize a foreign CCP as qualified, provided it proves the cumulative fulfillment of the following requirements:

I - the foreign CCP must be authorized to exercise its activities in its jurisdiction of origin and subject to authorization and supervision processes that ensure compliance with the principles of efficiency, safety, integrity, and reliability that guide the SPB, as well as general compliance with the recommendations and principles formulated by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) applicable to its activities;

II - the legal framework in force in the jurisdiction of origin of the foreign CCP must provide for systems for the prevention of money laundering or concealment of assets, rights, and values, analogous to those established by Law No. 9,613, of March 3, 1998, and subsequent amendments;

III - the legal framework in force in the jurisdiction of origin of the foreign CCP must provide for a system for the recognition of CCPs incorporated and domiciled abroad that may be applicable to clearinghouses and clearing and liquidity service providers incorporated and domiciled in Brazilian territory; and

IV - the existence of a cooperation agreement between the BCB and the competent authorities, which regulates, at a minimum, the following aspects:

a) the mechanism for immediate notification, between the BCB and the competent authorities, regarding any relevant regulatory changes concerning the requirements addressed in items I to III;

b) the mechanism for the exchange of information between the BCB and the competent authorities, regarding the foreign CCP;

c) the mechanism for immediate notification to the BCB, by the competent authorities, of infractions committed by the foreign CCP that violate the conditions under which its authorization was granted or the norms to which it is subject; and

d) the procedures regarding the coordination of supervision activities of the foreign CCP, including on-site inspections.

§ 1 The compliance with the provisions of items I to IV shall be reevaluated by the BCB whenever there is a relevant regulatory change.

§ 2 The recognition of the foreign CCP does not constitute authorization for the operation, or for changes to the regulations, of the SPB settlement systems for which it intends to provide its services, in accordance with Circular No. 3,057, of August 31, 2001.

Art. 4 The application for recognition of a foreign CCP must be accompanied by documents proving compliance with the requirements set forth in Article 3, items I to IV.

Sole Paragraph. Original documents must be presented with their respective translations into the vernacular, performed by a sworn public translator.

Art. 5 The foreign CCP, if recognized as qualified by the BCB, may provide services, exclusively in relation to operations traded on organized over-the-counter markets, for:

I - the clearinghouses and clearing and liquidity service providers that are part of the SPB; and

II - the clearing members of the clearinghouses referred to in item I.

Art. 6 The recognition of a foreign CCP may be canceled by the BCB, at any time, if any of the following situations are verified:

I - the cooperation agreement between the BCB and the competent authority ceases to produce effects;

II - the competent authority cancels, revokes, or renders ineffective the authorization granted for the foreign CCP to operate in its jurisdiction of origin; or

III - a relevant regulatory change occurs in the jurisdiction of origin of the foreign CCP, which, at the BCB's discretion, implies non-compliance with the provisions of any of the items of Article 3.

Art. 7 The system for which the foreign CCP provides services must express itself within five business days, after notification by the BCB informing about the cancellation of the recognition of the foreign CCP, regarding the continuity of its operation.

§ 1 If the system referred to in the main text expresses itself in favor of the continuity of its operation, it must submit an application for authorization, in accordance with Circular No. 3,057, of 2001, within ninety days after notification by the BCB, which must include a transition plan.

§ 2 If the system expresses itself in favor of the discontinuation of its operation, it must present, along with its statement, a plan for orderly wind-down, providing for the treatment of positions in open operations.

Art. 8 This Circular enters into force on the date of its publication.

               Aldo Luiz Mendes  
                       Director of Monetary Policy