Gilson Finkelsztain, CEO, B3 shares his viewpoints for 2018.
Looking ahead to 2018, what are the most important regional and global trends shaping your exchange or CCP?
The Brazilian market has already implemented many practices that regulation is making mandatory around the world, especially the migration of OTC trading to a centralised environment and in many cases with the involvement of a CCP. In this context our recently delivered integrated clearinghouse (Equities and Fixed Income Derivatives) strengthens our position further and boosts market development.
At the same time, the outlook for Brazil presents several challenges. The economy is starting to recover, albeit timidly, from the worst recession in 70 years. Consumer confidence has improved in recent months in line with lower unemployment and loan delinquencies are also gradually falling. The central bank’s significant interest-rate cuts and 2018/2019 inflation forecasts at target should benefit the equities market. Presidential elections are due in October and we hope the incoming administration in Brasília to push an agenda of important fiscal and social security reforms. These factors taken together tend to make us optimistic about the local outlook for this year.
Are there any significant regulatory changes on the horizon that may impact the way you do business?
We do not foresee material regulatory changes in the short to medium term. This does not mean the Brazilian market is not evolving, however.
With regard to corporate governance, for example, enhanced new rules for Novo Mercado, B3’s listing segment with the highest corporate governance standards in Brazil, entered into force on 2 January 2018. The changes are designed to make Novo Mercado even more transparent and rigorous, and capable of adding more value to listed companies.
Among other things, the rules require listed companies to have an internal auditing area and a board of directors with at least two independent members (or 20%).
In 2018 and the years ahead our focus will be on completing the post-merger integration process.
Listed companies must also publish policies governing compensation, nomination of directors, advisory committees and executive officers, and transactions with related parties.
What are your key strategic priorities for the coming year?
2017 was a challenging year for B3. We achieved several major milestones on the integration front from the merger between BM&FBOVESPA and CETIP that already translated into synergies, integration of clearinghouses (as mentioned before), migration of datacentres to new sites, and a new internal organisational with distinction between product management and sales responsibilities.
In 2018 and the years ahead our focus will be on completing the post-merger integration process, especially in first-half of 2018, and, based on our customers’ needs, increasing the number of projects that result in enhancement or new products and services. To this end we have refined our customer relationship model to improve customers’ experience of our solutions while extending our capacity to understand and respond to their needs.
How do you feel the social role of financial market infrastructures is changing?
FMIs play a key role in the development of nations by helping companies to fund relevant projects, offering savers options for investment diversification, and enabling companies, investors and financial institutions to protect themselves against certain risks.
Every year the links between the social and financial become more important and visible. With this in mind, we are following trends in our industry by working to help develop the financial markets in this direction. In 2017 we took two steps of a groundbreaking nature in the global exchange industry.
One was ‘Report or Explain for the SDGs’, an initiative of B3 in partnership with GRI designed to foster a better understanding of the Sustainable Development Goals (SDGs) and ensure that they are steadily incorporated into companies’ business strategies. Progress will be surveyed annually, in line with B3’s mission to develop and enhance the capital markets in Brazil by incentivising best practice in transparency and management among listed companies.
The other groundbreaking measure was publication of the 'Guide to Sustainability for the Intermediation Sector', with the aim of disseminating guidelines on the Central Bank of Brazil’s Resolution 4327/2014, which requires the implementation of social and environmental responsibility policies by financial institutions under BCB’s supervision, creating an environment and forum for the sharing of experiences, presenting business opportunities, and assisting with the implementation of such policies.
In addition, in November we announced the 16th Portfolio of the Corporate Sustainability Index (ISE). The ISE is a good market indicator of social action, having displayed a return of 185.01% since its creation in 2005, compared with 113.72% for the Bovespa Index (base date Nov/2017) with lower volatility – in other words, companies with social responsibility are seen as more reliable by the market.