BM&FBOVESPA launches foreign exchange non-deliverable forward contract

BM&FBOVESPA launches foreign exchange non-deliverable forward contract

19/01/10

The Brazilian Securities, Commodities and Futures Exchange – BM&FBOVESPA has authorized, as of January 18, the registration of dollar, euro, yen, and cross-rate non-deliverable forward contracts in its OTC market.

Initially, only foreign exchange transactions established by the Brazilian Central Bank can be registered. As of March 1, BM&FBOVESPA will also authorize the registration of transactions with exchange rates calculated by the following information sources: U.S. Dollar/Euro parity exchange rate calculated and published by the European Central Bank; U.S Dollar/Euro exchange rate fixed by WMR/Reuters; Japanese Yen/U.S. Dollar parity exchange rate calculated and published by the Central Bank of Japan; and Japanese Yen/U.S. Dollar exchange rate fixed by WMR/Reuters.

The contract’s expiration date, quotation, as well as size are to be freely agreed upon by the parties, subject to the limits established by BM&FBOVESPA. The contract will be traded in foreign currency, when the underlying exchange rate selected by the parties is the exchange rate of Brazilian reals per foreign currency. It will be traded in U.S. dollars, when the underlying exchange rate selected by the parties is the exchange rate of foreign currency per U.S. dollar, or the exchange rate of U.S. dollars per foreign currency.

The contracts can be registered with or without the guarantee fee. In the first case, collateral shall be required from all customers holding open positions and its amount will be updated daily, in accordance with the margin calculation criteria for the Forward Exchange Rate Contracts. For contracts registered without the guarantee feature, BM&FBOVESPA’s responsibility shall be limited to contract registration, position monitoring, and cash settlement reporting.

Click here for further details regarding the contract.