Non-resident investor | B3

Margin requirements and collateral deposits

As a central counterparty for the derivatives market, B3 Clearinghouse requires collateral to be pledge by its participants as a mean to protect itself from the risk associated with their transactions. Should a participant default, the Clearinghouse will be responsible for the settlement of its trades, however, it can use the participant´s pledged collateral to compensate for any such losses that may occur.

Collateral margin is defined by the risk for the closeout of a portfolio faced by the clearinghouse.

In order to calculate the risk for the closeout of a portfolio consisting of positions and collateral from several markets and asset classes, B3 developed an innovative risk measure: Close-Out Risk Evaluation (CORE).

Key CORE benefits:

  • It calculates the worst accumulated cash flow during the portfolio closeout process
  • It calculates the joint risk for positions and collateral
  • It models three types of risk: market, liquidity for positions and collateral, and cash flow
  • Accurate closeout strategy: position closeout transactions and collateral execution
  • Severe loss (stress test): confidence level of 99.96% or 10Y crisis
  • It considers 10,000 scenarios: historical (since 2002), quantitative and prospective
  • Multi-horizon: daily closeout operations (1 to 10 days)
  • It apllies full valuation

As Brazil is a final beneficiary owner model, B3 collateral management system accounts are segregated by each beneficiary owner in specific Custody Accounts. The system updates investor positions on a real-time basis.