BM&FBOVESPA chooses Cinnober for new clearing system

9 November 2011

Major landmark order for TRADExpress RealTime Clearing

BM&FBOVESPA has selected Cinnober for a monumental clearing project, aiming to integrate the post-trade environments across the full range of the Brazilian giant's markets.

This joint project will completely re-engineer the Brazilian post-trade landscape by integrating the exchange's four clearinghouses and improving operating efficiency for market participants. A multi-asset clearing system based on TRADExpress RealTime Clearing will be delivered for equities, derivatives, government bonds and spot FX.

This implies the full replacement of existing systems and a true multi-asset class approach with real-time risk calculation capabilities. The new unified risk management processes at BM&FBOVESPA will contain a multi-asset and multi-market risk management framework, utilizing multiple simultaneous risk methods in real time.

"TRADExpress RealTime Clearing will be an important instrument for the integration and modernization of our post-trade environments. We're looking forward to building a business and service center with state-of-the art technology for the Brazilian and international markets," said Edemir Pinto, CEO of BM&BOVESPA.

The new Brazilian clearing system will also produce world-leading collateral management, by introducing efficient collateral pools, as well as netting of positions and settlement instructions based on asset class. The accounts will be kept at final beneficial owner level - thus climbing from 600,000 accounts to over 10 million, making it one of the largest - if not the largest - clearing solutions in the world.

"This is the most comprehensive clearing project in the world to date, and I've been in this industry since the 80s. We're of course extremely proud to have been chosen by BM&FBOVESPA for this task," said Nils-Robert Persson, Executive Chairman of Cinnober. "Brazil is a forerunner in our industry in many ways. While looking for improvements, the European Union is looking deeply into Brazilian regulation, so to be appointed as BM&FBOVESPA's technical partner for this clearing project is one of the most important steps we've taken as a company."

During the Lehman crisis and after analyzing major challenges facing the post-trade industry, Cinnober launched TRADExpress RealTime Clearing in 2009, in the firm belief that this would be the next paradigm shift for the exchange and clearing industry. Since then the market has started to pick up this pioneering message and focused harder on real-time risk management and improved clearing technology.

The renowned flexibility of the Cinnober system stems from an innovative member and account structure as well as a state-of-the-art plug-in architecture, making it possible to expand the system with new products, risk models and algorithms with short time to market. The system can run several risk algorithms in parallel, and it is possible to add algorithms as needed. This enables optimal risk control with thorough stress testing, and the use of different algorithms for different instrument classes.

"I've said it before and will say it again: legacy clearing systems are clearly not able to match the flexibility and functionality required in a modern marketplace," adds Persson, "so other actors are sure to follow this Brazilian initiative."

The project for the integration and modernization of BM&FBOVESPA's post-trade environments will continue to be developed in 2012, with integrated market testing and the start of implementation expected in 2013.

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