Equities

Information

  • The service

    For the securities lending program, BM&FBOVESPA acts as service manager and the central counterparty of all operation, taking in instance a set of risk control criteria’s and rules for the well-functioning of the market.

    The securities lending are ruled by the registration of a loan agreement set through a voluntary loan between a borrower and a lender which regulates the mutual promises made by each party or a compulsory loan triggered under exceptional circumstances by BM&FBOVESPA for a borrowers that still have to count on the willingness of an available lender.

  • Eligible assets

    The securities eligible for securities lending transactions include shares issued by public companies admitted for trading on BM&FBOVESPA’s and other securities at the clearinghouse’s discretion. The securities involved in lending transactions must have been previously deposited in the clearinghouse’s depository service. The securities must be free and clear of any liens or encumbrances that may restrict their circulation and their holders must have contractually consented to transactions of this kind.

    Currently, eligible securities are:

    • Stocks (admitted for trading on the stock market);
    • Units (assets composed by more than one type or class of securities);
    • Exchange-traded Index Funds (ETFs); and
    • Sponsored BDRs (Brazilian Depositary Receipts)
  • Technical description

    Prior to entering into a loan agreement, an offering shall take place by one of the parties (lender or borrower) and this will require the acceptance of the counterparty before consideration of all requirements and validation of the contract. Following outlined below the possible arrangements permitted by the BM&FBOVESPA which will draw up under what conditions the loan is ruled:

    Identification and attributes Description Parameters
    Investors’ identification number Mandatory identification number of the investor (final beneficial owner) under an intermediary Identification number
    Security identification Defines the security through its ticker symbol or ISIN code Ticker symbol or ISIN codes under listing
    Quantity (lot size) Minimum amount of “1” security maximum amount determined by the BM&FBOVESPA’s risk management through the positions limits for the securities lending service Integer numbers
    Fee Determines the annualized percentage that will define lender earns and part of the borrowers liability (compounded  interest based on 252 business day in a year) The integer part (whole numbers) limited to “3” digits with “5” significant digits after the decimal point (000.00000)
    Brokerage commission It’s predefined upon loan registration and accrued as the above “fee” The integer part (whole numbers) limited to “3” digits with “5” significant digits after the decimal point (000.00000)
    Recallable Sets an attribute upon registration that allows the lender to recall securities on loan YES or NO
    Margin credit Able  the securities on loan to be used as collaterals by the lender  in the BOVESPA segment margin account YES or NO
    Unlock date A lock-up period can be set through the unlock date, which allows the early termination or renewal by the borrower until end of the loan term period (in other words, it defines a fixed term) DD/MM/YYYY ≤ expiration date (if it matches with a holiday,  the next business day will be considered)
    Expiration date Maximum date to an offer or loan DD/MM/YYYY > register date (if it matches with a weekend or a holiday,  the next business day will be considered)
  • Benefits

    The investors in general either natural or legal person, including financial institutions have different types of motivation, however the most often are:

    Lender of the securities

    • Earns an incremental return, previously determined at the loan’s registration for the borrower’s temporary ownership of the securities;
    • Is identified as the final beneficial owner, in order to guarantee the segregation of the investors assets from the intermediary firm’s assets who registers the loan at BM&FBOVESPA;
    • Who lends their securities does not abdicate from eventual dividend distribution of the company to its shareholders.

    Borrower of the securities

    The borrower fulfills its temporary settlement obligation of owning the securities in order to implement its investments strategies. The most common types are outlined below:

    • Hedge an equity-linked derivative position through the short selling of its underlie;
    • Arbitrage the dislocation of assets prices between the cash and derivatives markets; and
    • Covering a short-sold position in order to capture profit from the fallen asset prices.
  • How it works
  • Participant ranking (number of contracts) - 04/2017
    • 8,296,978
      J. P. MORGAN CCVM S.A.
    • 7,422,700
      BRADESCO S/A CTVM
    • 7,376,205
      MORGAN STANLEY CTVM S/A
    • 6,517,478
      CREDIT SUISSE BRASIL S.A. CTVM
    • 6,255,776
      XP INVESTIMENTOS CCTVM S/A
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