OPERATING RULES OF THE CLEARING FACILITY AND CENTRAL SECURITIES DEPOSITORY FOR BOVESPA MARKETS ( CBLC )

Transcription

1 This is a free translation offered only as a convenience for English language readers. Any questions arising from the text should be clarified by consulting the original in Portuguese. OPERATING RULES OF THE CLEARING FACILITY AND CENTRAL SECURITIES DEPOSITORY FOR BOVESPA MARKETS ( CBLC ) TITLE I PURPOSE TITLE II DEFINITIONS TITLE III PARTICIPANT ACCESS CHAPTER I CBLC PARTICIPANTS CHAPTER II CLEARING AGENTS SECTION I CLASSIFICATION SECTION II ELIGIBILITY SECTION III ACCESS AUTHORIZATION SECTION IV CAPITAL REQUIREMENTS SECTION V TECHNOLOGY AND OPERATIONAL REQUIREMENTS SECTION VI CONTRIBUTIONS TO THE SETTLEMENT FUND SECTION VII CONTRACTUAL UNDERTAKINGS SECTION VIII PERMIT WAIVER OR WITHDRAWAL CHAPTER III CUSTODIAN AGENTS SECTION I CLASSIFICATION SECTION II ELIGIBILITY SECTION III ACCESS AUTHORIZATION SECTION IV CAPITAL REQUIREMENTS AND CUSTODY LIMITS SECTION V TECHNOLOGY AND OPERATIONAL REQUIREMENTS SECTION VI CONTRACTUAL UNDERTAKINGS SECTION VII PERMIT WAIVER OR WITHDRAWAL CHAPTER IV GROSS SETTLEMENT AGENTS SECTION I ELIGIBILITY SECTION II ACCESS AUTHORIZATION SECTION IV TECHNOLOGY AND OPERATIONAL REQUIREMENTS SECTION V CONTRACTUAL UNDERTAKINGS SECTION VI PERMIT WAIVER OR WITHDRAWAL CHAPTER V QUALIFIED INVESTORS SECTION I ELIGIBILITY SECTION II ACCREDITATION WAIVER OR WITHDRAWAL TITLE IV CBLC: NATURE OF ACTIVITIES AND OPERATING DISCIPLINE 1

2 CHAPTER I LEGAL NATURE CHAPTER II TRANSACTION REGISTRATION AND ACCEPTANCE CHAPTER III CLEARING AND SETTLEMENT SECTION I MULTILATERAL CLEARING SECTION II SETTLEMENT CHAPTER IV RISK MANAGEMENT SECTION I NATURE; SCOPE SECTION II CREDIT RISK ON SETTLEMENT SECTION III LIQUIDITY RISK ON SETTLEMENT SECTION IV SETTLEMENT FUND SECTION V SEGREGATED ASSETS CHAPTER V GROSS SETTLEMENT SERVICES CHAPTER VI CENTRAL SECURITIES DEPOSITORY SECTION I CUSTODY ACCOUNT STRUCTURE SECTION II DEPOSIT, WITHDRAWAL, TRANSFERS OF SECURITIES SECTION III CUSTODY LIMITS; LIMIT MONITORING SECTION IV TREATMENT OF CORPORATE ACTIONS CHAPTER VII FEES CHAPTER VIII INTERNAL CONTROLS TITLE V RIGHTS AND RESPONSIBILITIES OF CBLC AND CBLC PARTICIPANTS CHAPTER I RIGHTS AND RESPONSIBILITIES OF CBLC SECTION I CBLC RIGHTS SECTION II CBLC RESPONSIBILITIES CHAPTER II RIGHTS AND RESPONSIBILITIES OF CLEARING AGENTS SECTION I RESPONSIBILITIES OF CLEARING AGENTS SECTION II RIGHTS OF CLEARING AGENTS CHAPTER III RIGHTS AND RESPONSIBILITIES OF CUSTODIAN AGENTS SECTION I RESPONSIBILITIES OF CUSTODIAN AGENTS SECTION II RIGHTS OF CUSTODIAN AGENTS CHAPTER IV RIGHTS AND RESPONSIBILITIES OF GROSS SETTLEMENT AGENTS SECTION I RESPONSIBILITIES OF GROSS SETTLEMENT AGENTS SECTION II RIGHTS OF GROSS SETTLEMENT AGENTS CHAPTER V RIGHTS AND RESPONSIBILITIES OF QUALIFIED INVESTORS SECTION I RESPONSIBILITIES OF QUALIFIED INVESTORS SECTION II RIGHTS OF QUALIFIED INVESTORS CHAPTER VI RIGHTS AND RESPONSIBILITIES OF TRADING PARTICIPANTS SECTION I RESPONSIBILITIES OF TRADING PARTICIPANTS SECTION II RIGHTS OF TRADING PARTICIPANTS CHAPTER VII RIGHTS AND RESPONSIBILITIES OF INVESTORS 2

3 SECTION I RESPONSIBILITIES OF INVESTORS SECTION II RIGHTS OF INVESTORS CHAPTER VIII RIGHTS AND RESPONSIBILITIES OF SETTLEMENT BANKS SECTION I RESPONSIBILITIES OF SETTLEMENT BANKS SECTION II RIGHTS OF SETTLEMENT BANKS TITLE VI CHAIN OF RESPONSIBILITIES CHAPTER I RESPONSIBILITIES RELATED TO CLEARING AND SETTLEMENT ACTIVITIES CHAPTER II RESPONSIBILITIES RELATED TO THE CENTRAL SECURITIES DEPOSITORY CHAPTER III BM&FBOVESPA: EXEMPTIONS AND LIMITATION OF LIABILITY TITLE VII STATE OF ARREARS AND DEFAULT CHAPTER I TYPIFICATION CHAPTER II EFFECTS OF DEFAULT CHAPTER III DEFAULT REPORTING PROCESS CHAPTER IV COLLATERAL TREATMENT AND EXECUTION TITLE VIII SETTLEMENT FUND CHAPTER I LEGAL SYSTEM, ADMINISTRATIVE STRUCTURE; ASSET SEGREGATION CHAPTER II PURPOSE CHAPTER III FUND MAGNITUDE AND COMPOSITION CHAPTER IV WITHDRAWAL FROM THE FUND CHAPTER V CONTRIBUTIONS REVIEW; REPLENISHMENT MECHANISM TITLE IX SANCTIONS TITLE X TECHNOLOGY INFRASTRUCUTRE AND RECOVERY BACK UP PROCESSES TITLE XI EMERGENCY ACTIONS TITLE XII ARBITRATION TITLE XIII FINAL PROVISIONS CHAPTER I OPERATING AGREEMENTS CHAPTER II SPECIAL PROVISIONS CHAPTER III SUPPLEMENTARY RULES 3

4 T I T L E I - P U R P O S E 1 In accordance with applicable legislation and regulations, the purpose of these Operating Rules is to establish the discipline, standards and rules that will govern BM&FBOVESPA activities performed in the capacity of clearing facility and provider of net deferred settlement systems, in addition to central securities depository and related services. The discipline, standards and rules set forth herein also apply to, and are binding on persons with whom BM&FBOVESPA may establish legal relationship either under contract or by virtue of the nature of said persons operations. 2 The details and practices regarding the activities governed by these Rules are set forth in a set of standards and rules of an operational nature issued under the name of CBLC Operating Rules and Operating Procedures, known as Operating Procedures, which are incorporated herein by reference, in addition to official letters and circular letters issued from time to time by BM&FBOVESPA. T I T L E I I - D E F I N I T I O N S 3 As used herein, in either plural or singular form, the following terms shall have the meanings set forth hereinbelow, whereas giving regard to the context provided by the headings hereof. 3.1 Acceptance means the process by which CBLC undertakes to act as Counterparty for the Settlement of registered Transactions. 3.2 Clearing Agent means an institution that, acting as Counterparty to its clients and CBLC, undertakes responsibility for clearing and settling Transactions and providing margin for proprietary and/or customer Transactions, and which as a participant in clearing and settlement activities may qualify as Full Clearing Agent or Proprietary Clearing Agent or Special Clearing Agent. 3.3 Custodian Agent means an institution that, acting for itself or their customers, undertakes to manage proprietary or customer Custody Accounts held at the Central Securities Depository operated by CBLC, and which as a participant may qualify as Full Custodian Agent or Proprietary Custodian Agent or Special Custodian Agent. 3.4 Gross Settlement Agent means an institution that, acting for itself or their customers before CBLC, undertakes responsibility for the Gross Settlement of proprietary or customer Transactions. 3.5 Trading Environment means each of the stock market, the organized over-the-counter market and the non-organized over-the-counter market on which Transactions in Securities are carried out. 3.6 Securities stocks and other securities, including securities representing rights and other equity-based securities, financial contracts and other financial instruments, in addition to private or government bonds and debt securities. 4

5 3.7 Settlement Bank means an institution holding a banking reserve account with the Central Bank for the passing through of money in the name and for the account of Clearing Agents, Custodian Agents and Gross Settlement Agents. 3.8 Block for Sale means the action by which a market participant that qualifies as Trading Participant indicates the securities underlying any given selling Transaction executed for a customer Investor have been committed to ensure a particular trade is consummated and performed through Delivery of the Securities in the Clearing and Settlement process. 3.9 BM&FBOVESPA means BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros, the Brazilian Securities, Commodities and Futures Exchange, operator and manager of organized securities markets, whose primary purpose is to provide trading, auction and related systems suitable for execution or registration of Transactions in Securities and certain special Transactions, in addition to operating and managing clearing and settlement systems, a central securities depository and safe custody of securities BSM means BM&FBOVESPA Supervisão de Mercados, a mutualized not-for-profit entity whose purpose is to perform market oversight ensuring trading is orderly, and to monitor the activities of the market operator (BM&FBOVESPA), the Clearing Agents, the Gross Settlement Agents and Custodian Agents CBLC means the clearing facility and central securities depository operated by BM&FBOVESPA, whose primary functions include providing clearing, settlement and risk management services within the scope of Bovespa Markets, and providing central depository and safe custody services for Securities traded in markets comprising the Bovespa Segment of BM&FBOVESPA (as defined below). CBLC is an acronym commonly used in local capital markets in reference to the equities clearinghouse and central securities depository of BM&FBOVESPA. References herein to CBLC are to BM&FBOVESPA and vice-versa, interchangeably Settlement Cycle means the time periods established by CBLC in terms of number of days and business hours, during which assets are delivered, payments settled and the obligations arising for buyers and sellers to Transactions carried out on Bovespa Markets are discharged Clearinghouse means the department and facilities of BM&FBOVESPA whose primary function is to operate and manage clearing, settlement and risk management systems and services Clearing means the process of calculating the mutual obligations of counterparty market participants, on a net basis, for the exchange of Securities and money by way of Settlement of mutual net settlement obligations Custody Account means any individual or collective account for Securities deposited at the Central Securities Depository of CBLC or with other depositories Omnibus Account means a collective Custody Account to record ownership and of 5

6 Securities held by customers that are natural and/or legal persons, including funds and other collective investment schemes, any of which qualifies as non-resident of Brazil Margin Account means an account sets up to register the movement of pledged Collateral Passenger Account means an individual Custody Account, which is set up to record ownership of Securities held by natural and/or legal persons, including funds and other collective investment schemes qualifying as non-residents of Brazil Settlement Account means an account that CBLC, as a provider of settlement services, holds with the Central Bank s STR (as defined below) for the passing through of funds for Settlement, and a securities settlement account that CBLC, as a provider of clearing and safe custody services, holds at its Central Securities Depository and at other depositories for the movement of Securities during Clearing and Settlement processes; 3.20 Counterparty, as used herein in connection with clearing and settlement processes, means the institutions that appear opposite each other for a Transaction to go through; 3.21 Central Counterparty, or CCP, means CBLC acting as central counterparty to Clearing Agents that represent transacting parties, thereby interposing itself between buyers and sellers to facilitate trading by ensuring execution of Clearing and Settlement processes after Acceptance of each particular Transaction; 3.22 Global Custodian means a foreign institution licensed in its home jurisdiction to manage Custody Accounts, whether proprietary or customer accounts; 3.23 Central Securities Depository, or CSD, means the department and facilities of BM&FBOVESPA responsible for providing custodial services and central securities and depository for assets; 3.24 Deposit means placing Securities with the Central Securities Depository of CBLC, with an entry record made in the relevant Investor Custody Account; 3.25 Issuer means a company undertaking the obligations of the issue; 3.26 Delivery, as used herein, means the movement of Securities through a Settlement Account CBLC holds at the Central Securities Depository and other depositories for conveyance of ownership rights as part of Clearing and Settlement processes; 3.27 Transaction Specifications means the process by which a market participant that qualifies as Trading Participant supplies data to CBLC identifying the customer Investor that is a party to a Transaction entering the Clearing and Settlement process; 3.28 Corporate Actionsmeans events correlated redemption or amortization (including as to the principal and interest) by an Issuer in connection with Securities held under custody at CBLC; 6

7 3.29 Settlement Fund means a dedicated fund established as safeguard against losses that exceeds the pledged collateral in cases of default by Clearing Agents; ] 3.30 Collateral means cash, bonds, securities, rights underlying securities, financial contracts and other financial instruments pledged to CBLC as margin or security for obligations underlying Transactions; 3.31 Risk Management means the set of better recommended and established activities, techniques, models and systems for identification, assessment, monitoring, and control risk exposures, aimed to mitigate risk inherent in Clearing and Settlement processes and in activities performed by the Central Securities Depository; 3.32 Default means a failure to pay or perform an obligation at the agreed time and place and in the agreed manner; 3.33 Investor means a natural or legal person or entity, including collective investment schemes, which uses the services of market participants that qualify as Trading Participants to transact in any Trading Environment or uses the services of a Custodian Agent for the custody of their Securities; 3.34 Non-Resident Investor means a natural or legal person or entity, including collective investment schemes, which for residing or being based in a cross-border jurisdiction qualifies as non-resident of Brazil; 3.35 Qualified Investor means an accredited Investor so designated, which is licensed to settle Transactions directly, through one or more Full Clearing Agents, irrespective of the market participant (Trading Participant) through which his orders may have been executed; 3.36 Settlement Window means the interval of time that starts with the closing of the window for receipt of financial resources by CBLC and ends at the time CBLC transfers funds in the Central Bank s STR (as defined below) for Settlement of its obligations as Central Counterparty Clearinghouse; 3.37 Operating Limit means an operating cap CBLC assigns to a Clearing Agent, and the latter to its customers, as part of the process to control risk exposure associated with its activities as Central Counterparty to Clearing and Settlement processes; 3.38 Custody Limit means the operating limit CBLC assigns to a Custodian Agent, which is set as the aggregate value of securities held in Custody Accounts; 3.39 Settlement means the completion of Transactions through the exchange of Securities and money for satisfaction and release of the counterparties mutual rights and obligations; 3.40 Gross Settlement means a transfer system in which transfer orders (of money for Settlement or Securities for Delivery) are processed so Transactions are settled on one to one basis; 7

8 3.41 Market means a center or exchange for buying and selling Securities of similar characteristics, such as the stock market, fixed income market, and so forth State of Arrears means protracted failure to pay debt which was expected to be paid at a previously agreed or arranged time and place, as previously agreed or arranged; however, under circumstances that signal possibility of late payment through enforcement of Collateral or usage of other liquidity mechanism; 3.43 Transaction means a trade in securities and their derivatives, including trades carried out pursuant to securities lending arrangements, which CBLC may accept for clearing and settlement in the capacity of Central Counterparty Clearinghouse; 3.44 Payment, as used herein, means the passing of funds through a Settlement Account CBLC holds at the Central Bank s STR for the Settlement of net obligations underlying Transactions, and obligations related to Collateral, or to Corporate actions or fees payable to CBLC; 3.45 Participant means a market participant, whether a natural or legal person, that establishes a direct or indirect relationship with CBLC while acting (whether or not cumulatively) in the capacity of Clearing Agent, Gross Settlement Agent, Custodian Agent, Trading Participant, Settlement Bank, Investor or QualifiedInvestor; 3.46 Trading Participant means a brokerage firm or other institution licensed to engage in proprietary trading or to provide execution services by transacting for the account and order of a customer on any Trading Market, or to enter into transactions within the scope of the Securities Lending Service operated by CBLC; 3.47 Withdrawal means removing Securities from the Central Securities Depository, with an exit record being made in the relevant Investor Custody Account; 3.48 Bovespa Segment or Bovespa Markets means the business segment comprising the stock exchange and organized markets for options, forwards and futures, which are operated and managed by BM&FBOVESPA for the trading of equities and equity-based securities and derivatives; 3.49 SELIC means the Special Settlement and Custody System administered by the Central Bank of Brazil; 3.50 Central Depository Service means central depository and safe custody services for fungible and non-fungible Securities, which is operated by CBLC; 3.51 Securities Lending Service serviced offered by CBLC which allows the lending and borrowing of securities, which is operated and managed by CBLC; 3.52 Trading System means the technological and operational facilities which allows the trading of Securities on TradingEnvironment; 3.53 STR means the Reserves Transfer System managed by the Central Bank of Brazil; 8

9 3.54 Transfer means free of payment movement of Securities among Custody Accounts within the scope of the activities of the Central Security Depository. T I T L E III P A R T I C I P A N T A C C E S S CHAPTER I CBLC PARTICIPANTS 4 CBLC performs activities as a Clearinghouse for the Clearing and Settlement of Securities, and as Central Securities Depository, in addition to managing a Gross Settlement System. 5 Acting in the capacity of Clearinghouse, CBLC licenses Participants in any of the following three (3) categories: Full Clearing Agent, Proprietary Clearing Agent and Special Clearing Agent. 6 Acting in the capacity as Central Securities Depository, CBLC licenses Participants in any of the following three (3) categories: Full Custodian Agent, Proprietary Custodian Agent and Special Custodian Agent. 7 Acting in the capacity of manager of a Gross Settlement System, CBLC licenses just one category of Participants, i.e., Gross Settlement Agents. 8 Institutions that wish to act as Clearing Agent, Custodian Agent or Gross Settlement Agent are required to file permit application and attach the documentation set forth in Appendix I of the Operating Procedures, following which CBLC will conduct the granting process foreseen in the Rules for Access to BM&FBOVESPA Markets and Systems. 9 CBLC will analyze the documents attached to the application and advise the board of directors of BM&FBOVESPA, which will consider the application and decide on whether to grant the Access authorization under the relevant Participant category, communicating this decision to CBLC. 9.1 In the event of a decision to reject the application, a candidate participant may appeal to the shareholders meeting of BM&FBOVESPA. On receiving the appeal, the board of directors will first review the arguments and may elect to reconsider its former decision. 9.2 The deadlines and procedures assigned for the decision and the appeal are set forth in the Rules for Access to BM&FBOVESPA Markets and Systems. CHAPTER II CLEARING AGENTS Section I Classification 9

10 10 Clearing Agents are classified pursuant to the following categories: 10.1 Full Clearing Agents these are institutions licensed to settle Transactions they execute as principal in the course of proprietary trading and their customers, Trading Participant or QualifiedInvestors Proprietary Clearing Agents these are institutions licensed to settle Transactions: which they execute as principal in the course of proprietary trading, or for its customers; which are executed through intermediation of a company belonging to the same economic group; where the principal is a company belonging to the same economicgroup, but which are executed through a third-party broker; and where the principal is a collective investment scheme managed by them or by a company belonging to the same economic conglomerate, irrespective of who acts as broker Special Clearing Agents these are institutions licensed only to settle Transactions in fixed-income Securities from non-financial private issuers whose securities are listed to trade on a Trading Market, and in addition are Transactions: which they execute in the course of proprietary trading or acting for its customers; which are executed through intermediation of a company belonging to the same economic group ; where the principal is a company belonging to the same economic group, but which are executed through a third-party broker; and where the principal is a collective investment scheme managed by them or by a company belonging to the same economic conglomerate, irrespective of who acts as broker. Section II Eligibility 11 Brokerage houses, broker-dealers, multi-service banks, commercial banks, investment banks, and other institutions, in the discretion of CBLC, are eligible to qualify as Clearing Agents. Section III Access Authorization 12 The granting of Access authorizations by CBLC is contingent on a candidate meeting certain requirements, including the essential requirements set forth below in connection with the role of a Clearing Agent: 10

11 12.1 formal adherence to CBLC Operating Rules and Operating Procedures and other applicable regulatory and operating rules adopted by CBLC, by entering into a Clearing Service Agreement with CBLC; 12.2 contributing to the Settlement Fund by making the minimum fixed contribution and the variable contribution established by BM&FBOVESPA; 12.3 having recognized knowledge and experience in credit and finance risk analysis, and risk management activities; 12.4 having recognized organizational and operating capabilities, in particular as correlated with clearing and settlement processes; 12.5 presenting financial position consistent with the nature of the activities of a Clearing Agent, in particular capital structure that allows for adequate capitalization, liquidity and indebtedness positions, such as foreseen in the Operating Procedures; 12.6 presenting adequate profitability, consistent with the levels of business and capitalization; 12.7 having been licensed by CBLC to perform activities as a Custodian Agent; 12.8 having as directors and officers persons of good repute, including good ethical, professional and credit repute; 12.9 meeting the requirements set out in the basic audit guide of the operational qualification program (PQO) established by BM&FBOVESPA; and formal adherence to the rules and regulations established by BSM and the Market Arbitration Chamber by entering into a Clearing Service Agreement with CBLC. Section IV Capital Requirements 13. From a financial standpoint, a Clearing Agent must also meet the minimum capital, riskweighted assets and liquidity requirements, in addition to other requirements of a financial nature established by CBLC. 14. Minimum capital adequacy requirements differ by category of Access authorization for which a candidate may apply and are set forth in Appendix 1 of the Operating Procedures. 15. The minimum capital requirements may change at any time in the discretion of CBLC. 16. On evaluating an application for access authorization, and from time to time thereafter, CBLC will verify compliance with minimum capital requirements in order to ensure Clearing Agents meet them on a continuing basis. 11

12 Section V Technology and Operating Requirements 17. From a technology and operating standpoint, Clearing Agents must meet the requirements set forth below irrespective of the category of access authorization: 17.1 having been granted access to CBLC systems and the functionalities required by the activities of a Clearing Agent; 17.2 having hired a Settlement Bank licensed by the Central Bank and duly registered at CBLC on the basis of the documentation listed in Appendix 1 of the Operating Procedures; 17.3 having a designated officer responsible for risk management activities; 17.4 providing documents describing the main features of the technology structure and operating systems employed in the provision of clearing and settlement services, including summary allocation of the systems intrinsic and extrinsic operating routines and related procedures and internal controls; 17.5 providing an organizational chart that indicates the department or division responsible for clearing and settlement processes, and explains the Chinese wall or segregation of duties arrangements to separate risk management activities from other asset management activities (for Trading Participants and QualifiedInvestors). 18. A Clearing Agent must further meet minimum adequacy standards related to technology infrastructure and contingency/disaster recovery plans, as set forth under Title X ( Technology Infrastructure and Recovery Processes ) of these Rules and in special additional rules issued by CBLC. Section VI Contributions to the Settlement Fund 19. Contributing to the Settlement Fund of CBLC constitutes an essential requirement for performance of activities as a Clearing Agent. 20. The Settlement Fund is a pool of funds composed of minimum fixed contributions established by category of Clearing Agent, and a variable contribution required from each Clearing Agent in correlation to its share of CBLC overall risk exposure, as measured through stress testing Each of the minimum fixed contributions and the variable contributions may be made in the form of money or Brazilian government bonds and debt securities Variable contributions to the fund may be required in the form of daily payments. 12

13 Section VII Contractual Undertakings 21. Clearing Agents are required to enter into proper instruments giving effect to the contractual undertakings set forth below Formal adherence to these Rules, in addition to representations and commitments as follows: representation that the Clearing Agent has knowledge of the rules and standards governing the activities of Clearing Agents; Clearing Agents are to assume liability towards BM&FBOVESPA for transferring funds for Settlement if the hired Settlement Bank were to default on pass-through obligations related to the Settlement of Transactions; Clearing Agents are to exempt BM&FBOVESPA from liability if the hired Settlement Bank were to default on pass-through obligations related to funds received from BM&FBOVESPA in the course of Settlement processes Clearing Agents are to enter into clearing and settlement service agreements with customers, which at a minimum should contain provisions addressing the following: customers are to take full responsibility for the decision to hire the Clearing Agent and for the actions of the Clearing Agent in the course of rendering services; customers are to exempt BM&FBOVESPA from liability in case the Clearing Agent were to default on its obligations towards the customer, regardless of the circumstances leading to default; customers are to acknowledge awareness of, and expressly adhere to the terms and conditions of these Rules, without reservation or qualification; Clearing Agents are to commit to give the customer prior notice of intent to discontinue clearing and settlement activities or to terminate the service provision, such as the Operating Procedures require; customers are to acknowledge that sanctions and penalties that BM&FBOVESPA imposes on the Clearing Agent due to illegal or irregular actions of the customer may also extend to, and be imposed on such customer; where a Qualified Investor is the customer, the institution vouching for the record information related to the Qualified Investoris to assume liability for the accuracy and truthfulness of said information; and a provision should state the commencement date of the services. 13

14 21.3 Clearing Agents are to enter into a service agreement with the hired Settlement Bank stating the terms and conditions of settlement services, in particular as related to the Settlement Bank s obligation of passing funds through in the name and for the account of the Clearing Agent. 22. For due legal purposes, the contractual undertakings set forth in paragraph 21.2 will be deemed to have been made and assumed, even in the absence of a proper instrument, starting from any first direct or intermediated Delivery of Securities or transfer of money for Settlement or Collateral posting with the Clearing Agent. Section VIII Permit Waiver or Withdrawal 23. Clearing Agents may at any time elect to waive the Access authorization and terminate the provision of clearing and settlement services, provided they are required to give the Management of BM&FBOVESPA three (3) days prior written notice of the decision, in addition to giving prior notice to customers in accordance with the provisions of the Operating Procedures. 24 In the event of a permit waiver, Clearing Agents shall be required to carry through any pending Settlements and other obligations previously assumed towards a customer or related to proprietary portfolios. 25. Pursuant to the provisions under Title IX ( Sanctions ) and Title XI ( Emergency Actions ) of these Rules, CBLC shall have the prerogative of withdrawing access authorization granted to Clearing Agents. CHAPTER III CUSTODIAN AGENTS Section I Classification 26. Custodian Agents are classified pursuant to the following categories: 26.1 Full Custodian Agents these are institutions licensed to manage proprietary Custody Accounts and those of companies belonging to the same economic conglomerate, in addition to the Custody Accounts of non-institutional investors, investment clubs, institutional investors and Non-Resident Investors Proprietary Custodian Agents these are institutions licensed to manage proprietary Custody Accounts and those of companies belonging to the same economic conglomerate, in addition to the Custody Accounts of institutional and non-institutional investors, and investment clubs, whereas giving regard to limits established by CBLC Special Custodian Agents - these are institutions licensed only to manage their proprietary Custody Accounts. 14

15 Section II Eligibility 27. Brokerage houses, broker-dealers, multi-service banks, commercial banks, investment banks, and other institutions, in the discretion of CBLC, are eligible to qualify as Custodian Agents. 28. Closed-end pension funds licensed by the Brazilian Office for Supplementary Pension (Secretaria da Previdência Complementar), or SPC, as well as insurance companies and open-end pension funds licensed by the Brazilian Private Insurance Superintendency (Superintendência de Seguros Privados), or SUSEP, and other institutions, in the discretion of CBLC, are eligible to apply for permits to operate as Special Custodian Agents. Section III Access Authorization 29. The granting of Access authorizations by CBLC is contingent on a candidate meeting certain requirements, including the essential requirements set forth below in connection with the role of a Custodian Agent: 29.1 formal adherence to CBLC Operating Rules and Operating Procedures and other applicable regulatory and operating rules adopted by CBLC by entering into a Custody Service Agreement with CBLC having recognized organizational and operating capabilities, in particular as correlated with custody of Securities presenting financial position, in addition to technology and operational infrastructures consistent with the nature of the activities of a Custodian Agent having as directors and officers persons of good repute, including good ethical, professional and credit repute meeting the requirements set out in the basic audit guide of the Operational Qualification Program (PQO) established by BM&FBOVESPA formal adherence to the rules and regulations established by BSM and the Market Arbitration Panel by entering into a Custody Service Agreement with CBLC. Section IV Capital Requirements and Custody Limits 30. a Custody Agent will also meet the minimum capital adequacy and other requirements of a financial nature, established by CBLC. 31. Minimum capital requirements and Custody Limits differ by category of custodian access authorization. 15

16 32. The minimum capital requirements and Custody Limits may change at any time in the discretion of CBLC. 33. On evaluating an application for access authorization, and from time to time thereafter, CBLC will verify compliance with minimum capital adequacy requirements and adherence to Custody Limits in order to ensure Custodian Agents meet them on a continuing basis. Section V Technology and Operational Requirements 34. Custodian Agents must meet the requirements set forth below irrespective of the category of Access authorization; 34.1 having been granted access to CBLC systems and the functionalities required by the activities of a Custodian Agent; 34.2 carrying out daily reconciliation of Custody Account balances regarding Securities deposited with CBLC for which the relevant Custodian Agent is responsible; 34.3 allocating to perform custodial activities a minimum of two (2) employees that successfully completed the CBLC qualification and certification program; 34.4 hiring a Settlement Bank licensed by the Central Bank and duly registered at CBLC on the basis of the documentation listed in Appendix 1 of the Operating Procedures, which Settlement Bank will be responsible for passing funds through on behalf of the Custodian Agent as relating to thecorporate Actions; 34.5 providing customers with statements of their Custody Accounts; 34.6 establishing a proprietary or outsourced custody control system; 34.7 having a designated officer responsible for custodial activities; and 34.8 keeping documents describing the main features of the technology structure and operating systems employed in the provision of custody services, including summary allocation of the systems intrinsic and extrinsic operating routines and related procedures and internal controls. 35. Further to the provisions of paragraph 34 above, Full Custodian Agents will be required to meet the additional requirements set forth below: 35.1 providing an organizational chart that indicates the department or division responsible for the custodial services, and explains the Chinese wall or segregation of duties arrangements to separate custodial activities performed for customers from asset management activities; and 16

17 35.2 providing detailed audit reports concerning the custodial operations, issued by an independent auditing firm hired to assess the accuracy of information provided in the course of custodial activities, and the effectiveness, quality and security of the Custodian Agent s system operating routines. 36. A Custodian Agent (including Special Custodian Agents) are further required to meet minimum adequacy standards related to technology infrastructure and contingency/disaster recovery plans, as set forth under Title X ( Technology Infrastructure and Recovery Processes ) of these Rules and in special additional rules issued by CBLC. Section VI Contractual Undertakings 37. Custodian Agents are required to enter into proper instruments giving effect to the contractual undertakings set forth below Custodian Agents are to execute with CBLC the required Custody Service Agreement Custody Agents will further enter into securities custody service agreements with customers, which at a minimum should contain provisions addressing the following: customers are to take full responsibility for the decision to hire the Custodian Agent; customers are to exempt BM&FBOVESPA from liability in case the Custodian Agent were to default on its obligations towards the customer regardless of the circumstances leading to default customers are to acknowledge awareness of: the terms and conditions of these Operating Rules, and adhere to the same without reservation or qualification; and the terms and conditions of the Custody Service Agreement executed with BM&FBOVESPA Custodian Agents are to commit to giving customers prior notice of intent to discontinue custodial activities or to terminate the service provision, such as the Operating Procedures require customers are to acknowledge that sanctions and penalties BM&FBOVESPA imposes on the Custodian Agent due to illegal or irregular actions of the customer may also extend to, and be imposed on such customer A provision should state the commencement date of the custodial services Customers are to consent to the Custodian Agent implementing a Block for Sale, if so required. 17

18 37.3 Pursuant to applicable legislation, where a Custodian Agent is to make use of simplified record information for a Non-Resident Investor, said Custodian Agent and the related Global Custodian (or Omnibus Account holder) will be required to enter into a written custody agreement with provisions at a minimum addressing the following: a provision to the effect that the agreement and the Global Custodian (or Omnibus Account holder) will be subject to the governing law and jurisdiction of the Federative Republic of Brazil, including the regulations issued by local oversight, regulatory and self-regulatory agencies and entities; a provision to the effect that the Global Custodian (or Omnibus Account holder) undertakes to give notice upfront making customers aware of the requirements of Brazilian capital markets legislation by furnishing copy of the same or designating the place at which such information can be accessed; a provision to the effect that the local operations of the Global Custodian (or Omnibus Account holder) are subject to the Brazilian capital markets legislation; a provision to the effect that the Custodian Agent undertakes to provide the Global Custodian (or Omnibus Account holder) with copies of Brazilian laws, statutes, codes, regulations, rules and requirements applicable in the domestic capital markets, as enacted and issued by the Brazilian government and oversight, regulatory and self-regulatory agencies and entities; a provision to the effect that the Global Custodian (or Omnibus Account holder) undertakes to settle disputes related to the custody service agreement before the Brazilian courts or the Market Arbitration Chamber; a provision to the effect that the Global Custodian (or Omnibus Account holder) grants powers to a delegate in Brazil for him to act in the name and on behalf of the grantor for the purpose of receiving service of process and judicial or extrajudicial notifications issued by any Brazilian court, administrative authority or local oversight or regulatory or self-regulatory agencies or entities in connection with the operations contemplated in the relevant custody service agreement; a provision to the effect that the Global Custodian (or Omnibus Account holder) undertakes liability for keeping current information and documentation for proper identification of Non-Resident Investors, doing so for as long as required by Brazilian law, and to make said information available promptly upon request of the Custodian Agent, as may be necessary for operating or regulatory purposes, in the latter case giving due regard to deadlines assigned by the relevant authority, agency or entity, each acting within its sphere of authority; a provision to the effect that the Global Custodian (or Omnibus Account holder) undertakes liability for properly identifying customers, and for diligently fulfilling know your customer (KYC) requirements and applying better recommended anti-money laundering standards and processes; 18

19 a provision requiring the agreement to be terminated in the event of noncompliance with contractual obligations and, in particular violation of the rules governing the operations and investments of Non-Resident Investors in the Brazilian financial and capital markets; a provision to the effect that the Global Custodian (or Omnibus Account holder) undertakes to designate an employee or department responsible for keeping current record information on Non-Resident Investors and for promptly communicating any changes thereto. 38 Pursuant to applicable legislation, in the event of noncompliance with any provision under paragraph 37.3 above, the Custodian Agent will be required to make prompt use of the complete record information for the relevant Non-Resident Investors Upon receiving notice from regulatory agencies or entities that any particular Global Custodian (or Omnibus Account holder) has failed to provide information required to be provided, BM&FBOVESPA will promptly give notice thereof to every Custodian Agent having contractual dealings with such Global Custodian (or Omnibus Account holder) Upon receiving the notice foreseen in the preceding paragraph, Custodian Agents will promptly adopt the complete record information form for the relevant Non-Resident Investors in any transactions carried out on Brazilian financial and capital markets. 39 In certain events specifically contemplated in the Operating Procedures, the Custodian Agents may hire a Full Clearing Agent and agree a joint liability arrangement for Deposits of certain Securities with the Central Securities Depository. Section VII Permit Waiver or Withdrawal 40. Custodian Agents may at any time elect to waive the Access authorization and terminate the provision of custody services, provided they are required to give the Management of BM&FBOVESPA fifteen (15) day prior written notice of the decision, in addition to giving prior notice to customers in accordance with the provisions of the Operating Procedures. 41 Pursuant to the provisions under Title IX ( Sanctions ) and Title XI ( Emergency Actions ) of these Rules, CBLC shall have the prerogative of withdrawing access authorization granted to Custodian Agents CHAPTER IV GROSS SETTLEMENT AGENTS Section I Eligibility 19

20 42 Brokerage houses, broker-dealers, multi-service banks, commercial banks, investment banks, and other institutions, in the discretion of CBLC, are eligible to qualify as Gross Settlement Agents. Section II Access authorizations 43 Set forth below are the essential requirements applicable to Gross Settlement Agents Formal adherence to CBLC Operating Rules and Operating Procedures and other applicable regulatory and operating rules adopted by CBLC by entering into a Gross Settlement Service Agreement with CBLC Having recognized organizational and operating capabilities, in particular as correlated with Settlement of Transactions Presenting financial position consistent with the nature of the activities of a Gross Settlement Agent, in particular capital structure that allows for adequate capitalization, liquidity and indebtedness positions Presenting adequate profitability, consistent with the levels of business and capitalization Having been licensed by CBLC to perform activities as a Custodian Agent Having as directors and officers persons of good repute, including good ethical, professional and credit repute Meeting the requirements set out in the basic audit guide of the Operational Qualification Program (PQO) established by BM&FBOVESPA Formal adherence to the rules and regulations established by BSM and the Market Arbitration Chamber by entering into a Gross Settlement Service Agreement with CBLC. Section III Capital Requirements 44 From a financial standpoint, a Gross Settlement Agent will also meet the minimum capital risk-weighted assets and liquidity requirements, in addition to other requirements of a financial nature established by CBLC taking into account the industry in which it operates. Section IV Technical and Operating Requirements 45 Gross Settlement Agents must meet the requirements set forth below Access to the systems and functionalities required by the activities of a Gross Settlement Agent. 20

21 45.2 Hire a Settlement Bank licensed by the Central Bank and duly registered at CBLC, presenting the documentation listed in Appendix 1 of the Operating Procedures Allocate at least two (2) employees to settlement activities that have successfully completed the CBLC qualification and certification program Indicate the officer responsible for Settlement activities; 45.5 Keep documents describing the main features of the technology structure and operating systems employed in the provision of settlement services, including allocation of the systems intrinsic and extrinsic operating routines and related procedures and internal controls. 46 Gross Settlement Agents must further meet minimum adequacy standards related to technology infrastructure and contingency/disaster recovery plans, as set forth under Title X ( Technology Infrastructure and Recovery Processes ) of these Rules and in special additional rules issued by CBLC. Section V Contractual Undertakings 47 Gross Settlement Agents are required to enter into proper instruments giving effect to the contractual undertakings set forth below Formal adherence to these Operating Rules of BM&FBOVESPA, in addition to representations and commitments as follows: acknowledgement of awareness of the rules governing its activities; acknowledgement that CBLC will neither act as Central Counterparty for Markets in which the Gross Settlement Agent will operate, nor for the Transactions it will settle, such that CBLC s role in these cases will be one of facilitating delivery versus payment; Gross Settlement Agents will exempt BM&FBOVESPA from liability if the hired Settlement Bank defaults on pass-through obligations related to the settlement of Transactions received by BM&FBOVESPA 47.2 Before the hired Settlement Banks, Gross Settlement Agents: are to enter into an agreement regulating the terms and conditions of settlement services, in particular as related to the Settlement Bank s obligation of passing funds through in the name and for the account of the Gross Settlement Agent are to enter into service agreements with customers, which at a minimum should contain provisions that address the following: 21

22 Customers are to take full responsibility for the decision to hire the Gross Settlement Agent and for the actions of the Gross Settlement Agent in the course of rendering services; Customers are to exempt BM&FBOVESPA from liability in case the Gross Settlement Agent were to default on its obligations towards the customer regardless of the circumstances leading to default; Customers are to acknowledge awareness of, and expressly adhere to the terms and conditions of these Operating Rules without reservation or qualification; Gross Settlement Agents are to commit to give the customers prior notice of intent to discontinue gross settlement activities or to terminate the service provision; customers are to acknowledge that sanctions and penalties BM&FBOVESPA imposes on the Gross Settlement Agent due to illegal or irregular actions of the customer may also extend to, and be imposed on such customer; a provision should state the commencement date of the services. Section VI Permit Waiver or Withdrawal 48 Gross Settlement Agents may at any time elect to terminate the provision of gross settlement services, as long as the management of BM&FBOVESPA is informed at least three (3) days prior written notice of the decision, in addition to giving prior notice to customers in accordance with the provisions of the Operating Procedures In the event of a permit waiver, Gross Settlement Agents will be required to carry through any pending Settlements and other obligations previously assumed towards a customer or related to their proprietary portfolios. 49 Pursuant to the provisions under Title IX ( Sanctions ) and Title XI ( Emergency Actions ) of these Rules, CBLC shall have the prerogative of withdrawing access authorizations granted to Gross Settlement Agents. CHAPTER V QUALIFIED INVESTORS Section I Eligibility 50 Any of the following parties is eligible for accreditation under the designation of Qualified Investor: 50.1 Commercial banks, multi-service banks, investment banks; 22

23 50.2 Closed-end pension funds licensed by the Brazilian Office for Supplementary Pension (Secretaria da Previdência Complementar), or SPC; 50.3 Insurance companies and open-end pension funds licensed by the Brazilian Private Insurance Superintendency (Superintendência de Seguros Privados), or SUSEP; 50.4 Mutual funds licensed to operate by the Brazilian Securities Commission (Comissão de Valores Mobiliários), or CVM, or by the Central Bank of Brazil; 50.5 Legal persons not subject to legal or regulatory restrictions; 50.6 Non-Resident Investors registered pursuant to applicable regulatory requirements; and 50.7 Other natural or legal persons, in the discretion of CBLC. 51 In the discretion of CBLC, a legal representative may authorize its Investors to be designated as Qualified Investors. Section II Accreditation Waiver or Withdrawal 52 A Qualified Investor may at any time submit formal waiver of the accreditation as Qualified Investor by forwarding written application to the Clearing Agent or CBLC. 53 Under certain circumstances foreseen in the Operating Procedures, CBLC acting on its own initiative or on application of a Clearing Agent may decide to withdraw the accreditation as Qualified Investor. T I T L E I V C B L C : N A T U R E O F A C T I V I T I E S A N D O P E R A T I N G D I S C I P L I N E CHAPTER I LEGAL NATURE 54 As clearing facility and provider of net deferred settlement systems for Securities, CBLC in accordance with applicable legislation and regulations acts as Central Counterparty to facilitate trading and ensure execution of Clearing and Settlement processes following Acceptance of Transactions for Settlement. 55 Acting in the capacity of clearing facility and provider of gross settlement systems for Securities, CBLC in accordance with applicable regulatory rules abstains from acting as central counterparty to Gross Settlement Agents. 56 Acting in the capacity of manager of net deferred settlement and gross settlement systems, CBLC coordinates Settlement on a delivery versus payment basis. 57 As Central Counterparty, CBLC also undertakes responsibility for ensuring final Settlement of securities lending agreements registered in the Securities Lending Service. 23

24 58 BM&FBOVESPA may enter into clearing arrangements with Trading Environments or their managers and operators for the purpose of ensuring prompt relay of Transaction confirmations for purposes of Acceptance and execution of Risk Management, Clearing and Settlement processes. 59 Acting in the capacity of Central Securities Depository, CBLC manages the Central Depository Service in accordance with applicable regulatory rules. 60 With the purpose of ensuring proper execution of Risk Management, Clearing and Settlement processes, and to perform activities as Central Securities Depository, BM&FBOVESPA executes agreements with each of the Participants. 61 BM&FBOVESPA may also elect to enter into agreements with Issuers in order to ensure execution of certain activities and services within the scope of the Central Securities Depository. CHAPTER II TRANSACTION REGISTRATION AND ACCEPTANCE 62 Based on execution allocation received through the trading systems, CBLC promptly registers Transactions carried out on Trading Environments. 63 Registered Transactions are accepted for Settlement provided CBLC ascertains the requirements set forth in the Operating Procedures regarding specifications on price, number and type of Securities, Operating Limits, settlement time and date, and other requirements foreseen in these Rules have been met. 64 Acceptance will be deemed to have occurred promptly upon CBLC relaying the execution specifications to Clearing Agents, as established in the Operating Procedures Information on Transactions not accepted for Settlement will promptly be relayed to Market participants and the relevant Trading Market, as established in the Operating Procedures. CHAPTER III CLEARING AND SETTLEMENT 65 Clearing and Settlement processes entail a chain of obligations and responsibilities arising from a number of contractual relationship established amongst Participants and CBLC, whereby mutual obligations arise for the counterparties, which are typically discharged and satisfied through the exchange of Securities for money The chain of responsibilities established in the course of Clearing and Settlement processes stems from the interactions amongst CBLC and Clearing Agents, and amongst the latter and Qualified Investors or Market participants, and amongst the latter and Investors. 24

25 66 On acting in the capacity of Central Counterparty to ensure Clearing and Settlement of accepted Transactions, CBLC will give regard to operating rules that, among other things, are conducive to the following results: 66.1 multilateral netting of the obligations of Clearing Agents, and thus successively through to the end of the chain of responsibilities; 66.2 final settling of multilateral net settlement positions vis-à-vis Clearing Agents at the time funds are transferred through the Central Bank s STR for concomitant transfer of money in exchange for transfers of Securities moved through at the Central Securities Depository and other depositories, on an irrevocable and unconditional basis; 66.3 integrated communication amongst CBLC and Participants through the messaging system established by the Central Bank of Brazil within the scope of the CBLC operations as a provider of deferred net clearing settlements; 66.4 adherence to business hours and operating rules established by the Central Bank for funds transferred through the STR for consummation of the Settlement, as prescribed by the Operating Procedures; 66.5 in the event of Default by a Clearing Agent, adoption of the actions prescribed under Title VII ( State of Arrears and Default ) of these Rules; 66.6 Transaction suspension or cancellation, regardless of prior Acceptance by CBLC but giving regard to a Settlement s irrevocability and unconditional status, if and when so determined by the Central Bank, the Brazilian Securities Commission, BSM, a Managing Entity of Organized Market of Securities or BM&FBOVESPA (acting in the capacity of self-regulatory and oversight entity), each acting within its sphere of authority. Section I Multilateral Clearing 67 Acting as Central Counterparty and deferred net clearing facility, in order to complete the Settlement of Transactions, CBLC will first implement the multilateral netting of the obligations of Clearing Agents under accepted Transactions. 68 CBLC will net-net the positions of Clearing Agents vis-à-vis their claims and obligations in Securities and money, and proceed to 68.1 clear identical Securities; and 68.2 settle multilateral net settlement positions, as a single consolidated multilateral net balance covering all Markets for which CBLC provides services as Central Counterparty. 69 CBLC next notifies Clearing Agents of their net settlement positions for purposes of Settlement within the deadlines and business hours established in the Operating Procedures. 25

26 Section II Settlement Subsection I Structure of Settlement Accounts 70 In order to execute Clearing and Settlement, CBLC established a settlement account with Central Bank s STR, a securities settlement account at the Central Securities Depository, and may hold securities settlement accounts at other depositories CBLC holds the Settlement Account at the Central Bank s STR for purposes of passing through the funds required to ensure final Settlement, in bank reserves, of Transactions carried out on Trading Environments CBLC holds Settlement Accounts at the Central Securities Depository and other depositories for purposes of moving Securities through for completion of Clearing and Settlement processes related to Transactions carried out on Trading Environments. 71 The Settlement Accounts held by CBLC serve the purpose of facilitating coordination activities to ensure Delivery versus Payment is executed and accomplished on a simultaneous, final, irrevocable and unconditional basis. Subsection II Delivery versus payment 72 The process whereby Clearing Agents required to do so are to deliver Securities to CBLC will give regard to the following: 72.1 for Securities deposited with the Central Securities Depository, Clearing Agents owing Securities will move the relevant Securities through the Settlement Account managed by the Central Depository Service, doing so in accordance with the rules provided in the Operating Procedures; 72.2 for Securities deposited with other depositories, Clearing Agents owing Securities will move the Securities through the Settlement Account CBLC holds at the relevant depository, in accordance with the rules established by the relevant depository and the rules provided in the Operating Procedures; and 72.3 Delivery of the relevant Securities will only be deemed effective upon CBLC receiving confirmation from the relevant depositories. 73 After Delivery by the Clearing Agents is confirmed, CBLC notifies their hired Settlement Banks of the transfers of money required to be made and completed by no later than the opening of CBLC Settlement Window at the Central Bank s STR. 74 Clearing Agents are required to settle their net debt positions through the Settlement Banks, which will transfer the required funds by debiting their own reserve accounts and crediting the Settlement Account CBLC holds at the STR for the same amount. 26

27 74.1 In order to settle a Clearing Agent s net debt position, Settlement Banks will debit their banking reserve accounts for money being paid and credit the Settlement Account held by CBLC for the same amount; provided however Settlement Banks are required to do so on or before CBLC Settlement window opens CBLC will not clear net settlement positions of Clearing Agents that hire the same Settlement Bank Payment by a Clearing Agent will only be deemed to have been effectively made upon CBLC receiving confirmation from the Central Bank of Brazil that the relevant amount of money has been credited to the Settlement Account. 75 Processes whereby CBLC is required to deliver Securities or make Payments to Clearing Agents, as the case may be, will give regard to the following: 75.1 at the closing of CBLC Settlement window, CBLC will coordinate Delivery versus Payment on a simultaneous, final, irrevocable and unconditional basis through synchronized movement of securities and money, as follows: CBLC will charge the Settlement Account for money payable to each Clearing Agent on a net basis, whereas crediting the respective Settlement Banks reserve account for the same amount of money; and CBLC will likewise implement the Delivery of Securities to Clearing Agents by entering a debit for the net number of identical Securities in its Settlement Account at the Central Securities Depository or at other depositories, as applicable, whereas entering a credit to the relevant Clearing Agent, and 75.2 upon completion of these simultaneous transfers of deposited Securities in exchange for moneys transferred in the Central Bank s STR, Delivery versus Payment will be effective, final and irrevocable. 76 In the event of failed delivery or failed payment to CBLC, the special treatment mechanisms contemplated in the Operating Procedures will be implemented. CHAPTER IV RISK MANAGEMENT Section I Nature and Comprehensiveness 77 Acting through BM&FBOVESPA, CBLC performs Risk Management activities based on guidelines and standards established by Management and in accordance with the provisions of these Rules. 78 Pursuant to the Bylaws, BM&FBOVESPA established a Market Risk Committee responsible for advising Management on risk management standards and affairs. 27

28 79 Risk Management activities include identification, assessment, measurement, monitoring, control and mitigation of risk exposures, in particular credit risks, liquidity risks, operational risks, legal risks and market risks. Section II Credit Risk on Settlement 80 CBLC maintains risk management systems to monitor and control exposure to credit risks related to Transactions carried out on markets in which it operates or may operate as Central Counterparty As established pursuant to levels of assurance or confidence provided in risk management guidelines, credit risk on settlement correlates with the maximum possible loss from fluctuations in the market prices of deliverable Securities under unsettled Transactions Based on the chain of responsibilities referred to under Title VI of these Rules: CBLC undertakes responsibility for managing and controlling its own exposure to credit risks vis-à-vis Clearing Agents; Clearing Agents undertake responsibility for managing and controlling their own exposure to credit risks vis-à-vis Market participants and Qualified Investors, and likewise, conversely; Market participants undertake responsibility for managing and controlling their own exposure to credit risks vis-à-vis Investors, and vice versa. 81 Risk management mechanisms employed in credit risk are intended to the following: 81.1 identify and measure risk exposure moment-to-moment vis-à-vis each Clearing Agent; 81.2 determine whether to cover or transfer identified risk by calling margin or using another safeguard; 81.3 avoid outstanding trades insufficiently covered by margin or other form of protection. 82 On identifying, measuring and covering or transferring credit risk vis-à-vis Clearing Agents, CBLC will use the portfolio method whereas giving regard to the following: 82.1 For risk related to net obligations that terminate on completion of the Settlement Cycle: the portfolio for each Clearing Agent encompasses all outstanding Transactions it is responsible for settling in the relevant Settlement Cycle, and Clearing will be implemented irrespective of the identities of market participants, buyers and sellers, whether Market participants, Qualified Investors or other Investors; 28

29 exposure to credit risk determined pursuant to the above paragraph will be covered directly by the relevant Clearing Agent For net obligations outstanding at the end of the Settlement Cycle, such as net obligations correlated with positions in derivatives, securities lending or trades left unsettled at the end of the Settlement Cycle due to failed delivery: The portfolio of each Clearing Agent encompasses all outstanding transactions it is responsible for settling on maturity or termination, and Clearing will be implemented by lot of Transactions segregated by Investor, as intermediated by Market participant or, as the case may be, lot of Transactions segregated by Qualified Investor; exposure to credit risk determined pursuant to the above paragraph will be covered by the relevant Investor, through intermediation of the respective Market participant and Clearing Agent or, as the case may be, covered by the relevant Qualified Investor, through intermediation of his Clearing Agent; A Market participant and his Clearing Agent are co-obligors of the Investor, successively liable for covering risk exposure determined pursuant to paragraph Similarly a Clearing Agent is the co-obligor of the Qualified Investors for which it provides clearing services Risk measurement is performed every business day on a moment-to-moment basis, such that coverage may be required from Participants at any time over the course of a business day. 83 On controlling credit risk vis-à-vis Clearing Agents, CBLC uses risk management mechanisms which at a minimum include the following: 83.1 continuing monitoring of minimum capital adequacy requirements applicable to Clearing Agents, as provided in Chapter I of Title III; 83.2 market supervision for closer monitoring of atypical fluctuations in market prices and volumes traded, and of the concentration of trades by Market participants and of concentration of responsibilities by their elected Clearing Agents; 83.3 designated Operating Limits, adherence to which is monitored by CBLC; 83.4 collection and management of Collateral; 83.5 outstanding Transactions and deposited Collateral are marked-to-market; 83.6 the Settlement Fund is managed with the aim of covering losses in excess of the value of deposited Collateral in the event of Default by a Clearing Agent; and 83.7 segregation of Special Funds. 29

30 84 CBLC sets margin requirements, defines the calculation methods and elects acceptable collateral, all of which are revised from time to time and may change as necessary or convenient, in the discretion of CBLC. Any such change may be implemented retroactively, including for purposes of implementing additional margin calls or for suspension of the access authorization of any Clearing Agent due to Collateral insufficiency. 85 CBLC may establish clearing or other funds for specific purposes, carry insurance and adopt other safeguards to cover or transfer credit risk on settlement, with the aim of improving performance. Subsection I Collateral 86 In order to cover credit risk on settlement, CBLC, acting through BM&FBOVESPA, collects Collateral from Participants, for this purpose using Margin Accounts established with SELIC, the Central Securities Depository and other local and cross-border depositories, wherein Collateral pledged in the form of Securities are deposited Collateral entering the Margin Account are segregated by Participant and used only to cover losses arising from default, such as contemplated herein. 87 The marginable assets are designated in the Operating Procedures and consist primarily of liquid Securities, which CBLC is responsible for managing and, as the case may be, enforcing. 88 Securities accepted as Collateral are segregated into individual or collective Margin Accounts based on intent, in accordance with the Operating Procedures. 89 Securities are accepted as Collateral at an appropriate discount (haircut) vis-à-vis their market prices, based on inherent risks and taking into account the relevant liquidation costs. Subsection II Operating limits 90 The rules set forth below are established for assignment of Operating Limits to Clearing Agents and allocation to their customers CBLC assigns Operating Limits based on the value of Collateral previously deposited by each particular Clearing Agent CBLC assigns to each particular Clearing Agent a single Operating Limit, which correlates with exposure to credit risk associated with outstanding Transactions due for Settlement in the relevant Settlement Cycle A raise in Operating Limit requires additional Collateral being deposited. 30

31 90.4 CBLC may revise the Operating Limits at any time on the basis of then-current market conditions or the particular circumstances of a Clearing Agent CBLC will communicate each Clearing Agent of its assigned Operating Limit and any changes thereto implemented from time to time Within their assigned Operating Limits, Clearing Agents are in turn required to allocate Operating Limits to customers, on either an individual or collective basis, in addition to setting Operating Limits by trading system Clearing Agents are to allocate Operating Limits to customers on the basis of their own evaluations and the contractually agreed conditions for provision of clearing and settlement services As long as the Operating Limit of any particular customer is not exceeded, a Clearing Agents is permitted to take said Operating Limit as an aggregate interchangeable among Trading Systems A Clearing Agent is entitled to raise the limits allocated to their customers, as long as its own Operating Limit is not exceeded Clearing Agents have the prerogative of cutting at any time the Operating Limit allocated to a customer, provided no such cut may be implemented to the detriment of the Settlement of Transactions for which execution allocation has already been issued Clearing Agents are required to give CBLC notice of the Operating Limits allocated to customers and any revisions thereto CBLC will not accept for settlement Transactions carried out in excess of the relevant Operating Limits. 91 CBLC is responsible for continually monitoring adherence to Operating Limits assigned to Clearing Agents, which in turn are responsible for monitoring customer adherence to their allocated Operating Limits, pursuant to the following rules: 91.1 where exposure to credit risk under outstanding Transactions due for settlement by any particular Clearing Agent exceeds its Operating Limit, CBLC may call additional margin from said Clearing Agent CBLC will provide Clearing Agents with the means to access information permitting them to monitor how their own and their customers trades affect the relevant Operating Limits CBLC will provide Market participants with the means to access information permitting them to monitor their own Operating Limit. 31

32 91.4 CBLC may also provide data and calculation information for Clearing Agents to manage customer risk and allocate Operating Limits, provided CBLC undertakes no responsibility for how Clearing Agents use such data and information Credit risk correlated with Transactions executed by any particular Market participant is attributable to the Operating Limit assigned to said Market participant and that of its designated Clearing Agent Specified trades attributed to Qualified Investors, which need not be corrected ( respecified ), cease to affect the Operating Limits of the relevant Market participant and Clearing Agent, and start to affect the Operating Limit of the specified Qualified Investor and his designated Clearing Agent. 92 The calculation formulas and standards designed to measure, assign and monitor Operating Limits, and to determine limit raises and cuts, are addressed in further detail in the Operating Procedures. Section III Liquidity Risk on Settlement 93 BM&FBOVESPA maintains risk management systems to monitor and control exposure to liquidity risks related to Transactions carried out on markets in which it operates or may operate as Central Counterparty Liquidity risk correlates with the settlement value of a Payment or the financial value for the number of deliverable Securities which CBLC, substituting for a Clearing Agent in Default or State of Arrears, is to pay or deliver as and when required by the clearing and settlement process. 94 Risk management mechanisms used in tackling liquidity risk are intended to the following: 94.1 identify and measure risk exposure for CBLC; 94.2 determine appropriate corrective actions to curb lack of liquidity or marketability, providing such liquidity via financial sources or securities; 94.3 mitigate exposure to liquidity risk. 95 CBLC establishes voluntary and compulsory mechanisms to treat delivery or settlement failures due to State of Default, which among other things, and as further provided in the Operating Procedures, include the following: 95.1 securities lending arrangements and financial loans; 95.2 replacement of the Participants declared in State of Default; 95.3 delivering substitute Securities; and 32

33 95.4 repurchasing Securities. 96 CBLC sets limits to cap exposure under open derivative positions and open stock loan positions and, as provided in the Operating Procedures, performs daily monitoring of adherence to these limits to curb exposure to liquidity risk from concentration of positions. Section IV Settlement Fund 97 BM&FBOVESPA maintains a Settlement Fund designed to cover losses from failed delivery or failed settlement due to default by Clearing Agents, inasmuch as such losses exceed the value of Collateral deposited in CBLC The rules that regulate the Settlement Fund are set forth under Title VIII ( Settlement Fund ) of these Rules. Section V Segregated Securities 98 As permitted under applicable Brazilian legislation, BM&FBOVESPA will segregate Special Funds exclusively to meet its obligations as a Central Counterparty The yields generated from the Special Funds will be incorporated to such assets. CHAPTER V GROSS SETTLEMENT SERVICES 99 CBLC offers services for Gross Settlement of Transactions carried out on Trading Environments, which are provided pursuant to service agreements entered into between a Trading Market and CBLC. 100 The types of Transactions for which CBLC offers gross settlement services and the phases of a Gross Settlement process are set forth in the Operating Procedures In performing the role of provider of Gross Settlement services, CBLC operates to facilitate and coordinate Gross Settlement, by offering appropriate infrastructure for efficient registration, preparation and Settlement of Transactions, however without interposing itself as CCP to Transactions. 101 The Gross Settlement service operated by CBLC entails coordinating transfers of Securities in exchange for transfers of money by moving Securities at the Central Securities Depository and the Central Bank s STR. 102 In a gross settlement process, in the event of failed delivery or failed payment, CBLC deems the Transaction not carried through to fruition, notifies the Counterparties 33

34 accordingly, and returns Securities or money, as the case may be, to the performing Counterparty. Section I Gross Settlement Subsection I Structure of Settlement Accounts 103 In order to facilitate and coordinate Gross Settlement processes, CBLC established a settlement account at the Central Bank s STR, and securities settlement accounts at the Central Securities Depository and other depositories The Settlement Account CBLC holds at the Central Bank s STR is operated for the passing through and transfer of money by way of final Settlement, in bank reserves, of Transactions carried out on a Trading Market The Securities Settlement Accounts CBLC holds at the Central Securities Depository and other depositories are operated for the movement and transfer of Securities by way of Delivery on a final basis against Settlement of Transactions carried out on a Trading Market. 104 The Settlement Account established at the Central Bank s STR, and the Settlement Accounts established at the Central Securities Depository and other depositories serve the purpose of facilitating coordination activities to ensure gross settlement is executed, and Delivery versus Payment accomplished on a simultaneous, final, irrevocable and unconditional basis. Subsection II Delivery versus Payment 105 The process whereby Gross Settlement Agents required to do so are to deliver Securities to CBLC is implemented having regard for the following: for Securities deposited with the Central Securities Depository, Gross Settlement Agents delivering Securities move the Securities through the Settlement Account CBLC holds at the CSD; for Securities deposited with other depositories, Gross Settlement Agents delivering Securities move the Securities to a CBLC settlement account, according to their rules and the Operating Procedures; and Delivery will be deemed effective upon confirmation from the depositories that the Securities have been transferred. 106 After Delivery by the Gross Settlement Agents is confirmed, CBLC notifies their Settlement Banks of the transfers of money required to be made and completed by no later than a designated time. 34

35 107 Gross Settlement Agents are required to settle their debt positions through their Settlement Banks, which will transfer the required funds by debiting their own reserve accounts and crediting the Settlement Account CBLC holds at the STR for the same amount In order to settle a Gross Settlement Agent s debt position, by the designated time Settlement Banks will debit their banking reserve accounts for money being paid and credit the Settlement Account held by CBLC for the same amount Payment will be deemed to have been made upon confirmation from the Central Bank of Brazil that the money has been credited. 108 Delivery to Gross Settlement Agents receiving Securities and Payment to Gross Settlement Agents sending money will be coordinated by CBLC for Delivery versus Payment to be implemented on a simultaneous, final, irrevocable and unconditional basis through synchronized movement of Securities and money, as follows: for Payment, CBLC will debit its Settlement Account at the STR for funds passing through as Payment and credit the same amount of money to the reserve account of the Settlement Bank acting for the relevant Gross Settlement Agent delivering Securities; and for Delivery, CBLC will move Securities by entering a debit to the Settlement Account existing at the Central Securities Depository or another depository, and a credit for the same number of Securities to the Settlement Account of the relevant Gross Settlement Agent making Payment. 109 On completion of these simultaneous transfers of deposited Securities in exchange for money transferred at the Central Bank s STR, Delivery versus Payment will be effective, final and irrevocable. CHAPTER VI CENTRAL SECURITIES DEPOSITORY 110 Acting in the capacity of Central Securities Depository, CBLC adopts operating standards conducive to the following processes, among other things: analytical control of ownership of Securities under custody; treatment of Corporate Actions; Deposits, Withdrawal and Transfers of Securities, based on transfer orders received from Custodian Agents; recordation of CBLC fiduciary ownership of Securities under custody in the Issuer registry; 35

36 110.5 reconciliation of balances under Custody Accounts with synthetic positions registered by Issuers; segregation of Securities deposited as Collateral; ensuring the integrity of Securities held under custody; ensuring the confidentiality of data on characteristics and volumes of Securities under custody establishing rules on, and assigning Custody Limits, in addition to monitoring adherence thereto. 111 CBLC undertakes no responsibility for Issuer compliance with issue-related obligations, such as redemption or amortization (including as to the principal and interest), in connection with Securities held under custody at the Central Securities Depository 112 BM&FBOVESPA or a special purpose vehicle or an outsourced entity may establish special purpose funds, carry insurance or adopt other safeguard mechanisms to compensate Investors for losses arising from error, failure or fraud on the part of directors, officers, employees or representatives of Custodian Agents, pursuant to terms, conditions and deadlines established by BM&FBOVESPA. Section I Custody Account Structure 113 For the provision of depositary and safe custody services, the Central Securities Depository adopts a structure based on individually identified Custody Accounts. CBLC, in its discretion, may also establish a service structure based on collective custody accounts. 114 For clearing and settlement processes related to Securities held under custody, CBLC established a Settlement Account at the Central Securities Depository. 115 Having regard for the provisions of the Operating Procedures, CBLC may further set up special-purpose accounts with specific features. 116 For the passing through of funds related to Corporate actions, CBLC will use primarily the Settlement Account established at the Central Bank s STR. Section II Deposit, Withdrawal, Transfer of Securities 117 Deposits, Withdrawal and Transfers of Securities at the Central Securities Depository will only be carried through pursuant to instructions received from the relevant Custodian Agents, whether acting for themselves or their customers. 36

37 118 Except for certain cases established in the Operating Procedures, Deposits with the Central Securities Depository are contingent on transfer of fiduciary ownership to CBLC. 119 Withdrawal of Securities from Custody Accounts held at the Central Securities Depository are contingent on a record of transfer of ownership being made by the Issuer. Section III Custody Limits; Limit Monitoring 120 The guidelines set forth below are established for CBLC to assign Custody Limits to Custodian Agents The Custody Limits CBLC assigns to Custodian Agents may be calculated on the basis of shareholders equity multiplied by a rate established by CBLC Shareholders equity for purposes of the preceding paragraph is the consolidated shareholders equity, as determined based on the financial statements prepared by the conglomerate of which the Custodian Agent is a constituent member CBLC may from time to time revise the rate referred to in paragraph above, and apply the revised rate upon giving Custodian Agents 90-day prior notice of the date of effectiveness CBLC will communicate each Custodian Agent of its assigned Custody Limit, and any revisions thereof. 121 The value of Securities held under Custody Accounts managed by a single Custodian Agent may not exceed the Custody Limit assigned to such Custodian Agent; The value of the following Securities may be disregarded for purposes of comparing the overall value of Securities under custody and the Custody Limit: the proprietary Securities of the Custodian Agent or of customers (whether natural or legal persons) belonging to the same conglomerate as the Custodian Agent; Securities sold in a primary offering, which for the initial settlement are held in custody under the Custody Account of a customer which waives any and all claim against the investor compensation mechanisms established by CBLC or any Trading Market for which CBLC provides clearing and settlement services CBLC will provide to Custodian Agents periodic information on the value of Securities held under Custody Accounts they manage, for these Custodian Agents to monitor adherence to assigned Custody Limits In the event that the value of Securities held in custody surpass the Custody Limit threshold, CBLC will cease to receive Deposits or Transfer to Custody Accounts managed by the relevant Custodian Agent pending an adjustment for conformity with the Custody Limit. 37

38 121.4 The calculation method to determine a Custody Limit will be released by CBLC. Section IV Treatment of Corporate actions 122 On treating Corporate actions, CBLC will receive from the Issuer and pass or move through to the Custodian Agent, funds or Securities correlated with redemption of principal and related benefits receive from the Custodian Agent and pass or move through to the Issuer, funds or Securities correlated with redemption of principal and related benefits. 123 For Corporate actions consisting of transfers of funds, receipt and transfer will preferably be transferred through the Settlement Account established at the STR Any transfer of cash will be contingent on CBLC first receiving funds on an irrevocable and final basis. 124 For Corporate actions consisting in transfers of Securities, the Issuer is expected to make a record of fiduciary ownership by CBLC A credit will be made to the Custody Accounts of relevant Investors, contingent however on the Issuer or regulatory entity, as applicable, communicating or confirming the Custody Event. CHAPTER VII FEES 125 CBLC charges fees for its services which are established by the Chief Executive Officer of BM&FBOVESPA pursuant to proper instruments, which are communicated to Participants through customary communication channels. CHAPTER VIII INTERNAL CONTROLS 126 The quality and security of documentation, filing and recordation systems will be assessed by the independent auditors and their findings included in a separate section of the auditors report. In addition, internal controls are established to ensure these systems conform to applicable regulations, these Operating Rules and other compliance rules and standards related to the activities of CBLC and contemplated by these Rules. 127 CBLC adopts an internal controls structure based on control activities established for all operations contemplated herein, and implemented pursuant to predefined goals and related procedures, which include continuing monitoring and compliance processes. 38

39 128 The internal control activities will be continually monitored and evaluated periodically. Semi-annual reports of the findings and recommendations resulting from this evaluation work will be forwarded to BM&FBOVESPA Management. T I T L E V - R I G H T S A N D R E S P O N S I B I L I T I E S O F C B L C A N D C B L C P A R T I C I P A N T S CHAPTER I RIGHTS AND RESPONSIBILITIES OF CBLC Section I CBLC Responsibilities 129 Set forth below are the responsibilities of CBLC: Before the Brazilian Securities Commission and the Central Bank of Brazil: Undertaking the responsibilities established under legal and regulatory rules in connection with activities performed within the scope of these Operating Rules; Before Trading Environments: registering Transactions carried out on Trading Environments; establishing conditions for Acceptance by type of Transaction; processing the Settlement of accepted Transactions, except in the event of cancellation pursuant to Chapter III of Title VI; providing access to current information related the Operating Limits assigned to Market participants; reporting to competent authorities any development potentially affecting trading in Brazilian capital markets, in particular suspension of Clearing Agents; and providing access to information on Investors identified by Market participants Before Clearing Agents: acting as Central Counterparty for multilateral net settlement of accepted Transactions; assigning Operating Limits to Clearing Agents and providing tools permitting them to allocate and manage limit thresholds for customers; providing Clearing Agents with access to information giving them the ability to monitor the Operating Limits allocated to customers; 39

40 ensuring customer Transactions forwarded for Settlement will not result in allocated Operating Limit thresholds being crossed; ensuring the integrity of information related to clearing and settlement processes; coordinating Delivery versus Payment; managing Collateral deposited by Clearing Agents in connection with clearing and settlement processes; Before Gross Settlement Agents: providing services to facilitate and coordinate gross settlement of Transactions carried out on Trading Environments, as well as providing an efficient infrastructure for registration, preparation, clearing and gross settlement of Transactions; suspending or cancelling gross settlement processes, if and when so determined by the Central Bank of Brazil, the Brazilian Securities Commission, BSM or the operator of the Trading Market where CBLC provides gross settlement services, each of the above acting within its own sphere of authority; holding a Settlement Account at the Central Bank s STR, and Settlement Accounts at the Central Securities Depository and other depositories for the passing through of funds and the moving through of Securities for Gross Settlement of Transactions carried out on Trading Environments; and coordinating Delivery versus Payment Before Custodian Agents: ensuring the integrity of Securities held under custody and keeping the confidentiality of information regarding characteristics and volumes, unless required by regulators, issuers and other Institutions considered in the legislation; ensuring Securities held under custody stay deposited in Custody Accounts designated by Custodian Agents; implementing Deposits, Withdrawal and Transfers of Securities between Custody Accounts on the basis only of formal movement orders provided by the Custodian Agents; moving Securities through and transferring funds, as resulting from treatment of Corporate actions by CBLC; on receiving written request, exercising rights related to Corporate actions attributable to Securities held under custody at the Central Securities Depository, and as the case may be, passing money through to accomplish this goal; and 40

41 on receiving written notice from Custodian Agents, returning deposited Securities to Investors (as adjusted to include entitlements) irrespective of the order number of any depositary receipts, subject however to adherence to legal, regulatory and Issuer requirements Before Investors, acting as lenders of Securities within the scope of the securities lending facility operated by CBLC: returning Securities deposited at the Central Securities Depository, as adjusted to include related entitlements. 130 CBLC will keep the confidentiality of any information of which it becomes aware in the course of providing services, with disclosures being permitted only in certain instances and under conditions contemplated by applicable legislation, or authorized by regulators. 131 CBLC will provide access to its systems and the functionalities, as necessary for Participants to perform their activities, as provided in these Rules and the Operating Procedures. 132 CBLC will review its records to investigate errors, imperfections and mistakes claimed by Clearing Agents, Gross Settlement Agents and Custodian Agents in connection with movements of Securities or settlement-related documentation, upon receiving complaint filed in the form and within deadlines assigned for this purpose in the Operating Procedures. CollateralCollateralCollateralCollateralCollateralCollateralCollateralWithdrawalWithdrawalWithdr awalcollateralwithdrawal Section II CBLC Rights and Prerogatives 133 Set forth below are the rights and prerogatives of CBLC Regarding self-regulatory activities contemplated herein: monitoring the activities of Clearing Agents, Gross Settlement Agents and Custodian Agents, their directors, officers and representatives, mediating claims and disputes, issuing properly grounded decisions and, as the case may be, imposing penalties, as contemplated in these Rules; granting Access authorizations to Clearing Agents, Custodian Agents and Gross Settlement Agents, pursuant to terms and conditions set forth herein and in the Operating Procedures; withdrawing accreditation granted to Participants in cases foreseen in these Rules and where advisable for the normal course of business; requiring compliance with adequate integrity and ethical standards, investigating, judging and punishing dishonest or unethical behavior by Clearing Agents, Custodian Agents and Gross Settlement Agents, their directors, officers and representatives; 41

42 demanding adherence to minimum capital requirements and tecnical and operational requirements prescribed for Clearing Agents, Custodian Agents and Gross Settlement Agents; be notified on the contractual relation between Clearing Agents, Custodian Agents or Gross Settlement Agents and their customers, formalized under service agreements containing the minimum contractual provisions required by these Rules; being notified of the following by letter delivered in person (with delivery protocol): (a) at least five (5) business days prior to the date of effectiveness, notice of execution of any agreement between the Custodian Agent and the Global Custodian(or Omnibus Account Holder), as required under paragraph 37.3 and subparagraphs ; and (b) at least five (5) business days prior to the termination date, notice of termination of any agreement between the Custodian Agent and the Global Custodian (or Omnibus Account Holder), except in the event of automatic termination due to breach of contract, in which case the report to CBLC is to be made as of the termination date; requiring information or clarification required from Clearing Agents, Custodian Agents and Gross Settlement Agents to be provided within assigned deadlines, in particular as to record information required to be kept current, accurate and complete regarding themselves, their employees and outsourced providers registered with CBLC and their customers; requiring from Custodian Agents (within assigned deadlines) timely information or clarification related to agreements entered into with Global Custodians (or Omnibus Account Holders), as provided in paragraph 37.3 and subparagraphs; conducting periodic and occasional audits of the systems and processes adopted by Clearing Agents, Custodian Agents and Gross Settlement Agents in performing activities within the scope of business conducted by CBLC; at periodic audits foreseen in paragraph above, establishing whether ongoing agreements with Global Custodians (or Omnibus Account Holders) conform to applicable Brazilian legislation and regulation; in its discretion, rejecting Clearing Agent requests for accreditation of Qualified Investors, or granting Clearing Agent applications for withdrawal of accreditation of a customer Qualified Investor, on indications of irregularities or other claims adversely affecting or potentially affecting clearing and settlement activities or due to violation of the provisions of these Rules; be notified by Clearing Agents, Custodian Agents and Gross Settlement Agents, by communication addressed to the Director of BM&FBOVESPA, regarding any indications of irregularities or other development that affect or threaten to affect their business or CBLC business; 42

43 establish, raise or lower values referring to fines, collecting fines or setting them aside, on the terms and within the deadlines foreseen in these Rules; suspending any CBLC Participant if market security so requires, giving notice of the event to the Central Bank of Brazil, the Brazilian Securities Commission, BSM and, as the case may be, to the Trading Environment; declaring A Clearing Agent in Default of its obligations, such as provided in These Rules; terminating a suspension, authorizing the punished Participant to resume activities upon collecting amounts payable, as accruing interest at market rates, plus fines and other applicable legal or contractual charges; adopting special Settlement processes in the event of default by a Clearing Agents, as provided in the Operating Procedures; demanding additional margin or changing margin requirements; demanding Custodian Agents to adhere to assigned Custody Limits; revising the Operating Limit assigned to any particular Clearing Agent based on criteria that include level of liquidity, credit availability, obligations under Transactions and concentration, the Operating Limit guidelines and the metrics to determine operating levels; changing margin requirements and margin call calculation methods; establishing fee schedules and contributions and require their payment Regarding the activities contemplated in these Rules: requiring Clearing Agents to: comply with obligations related to clearing and settlement processes, as well as margin calls, whereas giving regard to the provisions of the Operating Procedures, in particular as to deadlines and business hours, in addition to imposing penalties, as applicable; perform clearing and settlement activities pursuant to adequate standards of security so as to avoid vulnerabilities with potential to compromise their ability to operate the clearing and settlement business; provide sufficiently complete information for CBLC to monitor adherence to minimum capital adequacy requirements, as provided in paragraph 13 of these Rules; selecting customers, allocating them Operating Limits and monitoring and managing customer adherence to the Operating Limit threshold; and 43

44 Full Clearing Agents are expected to provide information on the Operating Limits allocated to customers where permitted and necessary, changing Settlement Cycle deadlines and business hours, giving notice to Participants; halting, preventing or refusing any particular settlement process where there are indications of a breach legal or regulatory rules or of unfair practices or any type of fraud, in which case one or more Participants may be required to give evidence of authority to act for a particular customer within the scope of activities performed at CBLC or the with Managing Entities of Organized Markets of Securities; rejecting Securities and documents which, for being formally or legally defective, are unusable in clearing and settlement processes; collecting compensation for losses incurred in settling Transactions for and instead of a Clearing Agent, including by seizing and liquidating Collateral pledged by such Clearing Agent; borrowing Securities in the name of an Investor and under responsibility of his Clearing Agent in order to settle Transactions left unsettled due to failed Delivery of Securities; acting in the capacity of Central Counterparty, denying registration of Transactions which, in its discretion, threaten to jeopardize the business of CBLC, of Participants and the market as a whole; consenting to, or disallowing a replacement of Collateral; for enforcement of assigned Operating Limits, requiring a Clearing Agent, Trading Participant or Investor to meet a close-out requirement, as foreseen in the Operating Procedures; authorizing the registration of Transactions for Gross Settlement on a trade-by-trade basis, provided that: such Transactions will not be computed in the consolidated multilateral net balance set for settlement in the CBLC Settlement Window on the STR; and CBLC will coordinate Delivery versus Payment for Transactions contemplated in paragraph but will not act as Central Counterparty; establishing minimum margin requirements pursuant to these Rules; assigning Custody Limits to Custodian Agents; assigning Operating Limits to markets in which it performs settlement activities; 44

45 rejecting any Transaction suspected of being illegal under applicable Brazilian legislation, whereas reporting the event to responsible administrative authorities; rejecting deposit of Securities deemed illegal or invalid, regardless of eligibility; having Custodian Agents undertake responsibility for the formal and substantive legality, validity and good standing of Securities delivered for deposit at the Central Securities Depository, and for the veracity of endorsements and for the truthfulness of every other document and information submitted in connection with security movements and, as the case may be, transfers of funds for exercise of rights related to Corporate actions; in its discretion, withdrawing Securities registered in Custody Accounts and authorizing their transfer back to the relevant Investor, in book-entry form, in the event of termination of the service agreement between BM&FBOVESPA and the Issuer, or in the event the Settlement of Transactions is suspended in any Trading Environment; and where CBLC is acting as fiduciary owner of Securities, and the Issuer for any reason declines to transfer to BM&FBOVESPA any number of securities, requiring Custodian Agents to replace such securities to BM&FBOVESPA. CHAPTER II RIGHTS AND RESPONSIBILITIES OF CLEARING AGENTS Section I Responsibilities of Clearing Agents 134 Set forth below are the responsibilities of Full Clearing Agents: Vis-à-vis CBLC: undertaking responsibility for providing to customers services comprising Risk Management, Clearing and Settlement of Transactions, including services for posting Collateral to meet margin requirements; undertaking responsibility for their decision to provide clearing and settlement services to customers, whereas exempting BM&FBOVESPA from any liability in the event a customer were to default on its contractual obligations, regardless of the reasons leading to default; hiring the services of Settlement Banks for the passing of funds through to and from CBLC related to the settlement of its operations; undertaking responsibility for their choice of Settlement Banks, informing CBLC of the relationship established, for provision of settlement-related services are formalized under service agreements that contain the minimum contractual provisions required by these Rules, in addition to exempting BM&FBOVESPA from any liability in the event a Settlement Bank were to default on its contractual obligations, regardless of the reasons leading to default; 45

46 perform clearing and settlement activities pursuant to adequate standards of security so as to avoid vulnerabilities with potential to compromise their ability to operate the clearing and settlement business, for this purpose carefully screening customers, allocating them Operating Limits and monitoring customer adherence to the Operating Limit threshold; providing sufficiently complete information for CBLC to monitor adherence to minimum capital adequacy requirements, as provided in paragraph 13 of these Rules; keeping the confidentiality of any information of which they become aware in the course of providing services as Clearing Agents, with disclosures being contingent on customer consent, except for disclosures to regulatory agencies and entities, as required under applicable legislation or regulation or under court order; adhering to their assigned Operating Limits, in addition to allocating Operating Limits to customers and monitoring customer adherence to the same; communicating to CBLC the Operating Limits allocated to customers; adhering to liquidity requirements established by CBLC, including requirements to tackle failed Deliveries and failed Payments, in the latter event observing the assigned adjustment periods and deadlines; providing to BM&FBOVESPA audit teams full access to internal systems and processes used within the scope of clearing and settlement activities; giving notice to customers in case the Operating Limit threshold is about to be crossed; settling the net obligations of customers, for this purpose moving Securities and passing money through in a timely fashion; depositing Collateral to meet margin calls, as and when established in the Operating Procedures; making contributions to the Settlement Fund, as and when required by CBLC; refunding BM&FBOVESPA for expenses and losses it may incur in settling Transactions due for them and in their stead, on account of their own default; ensuring the truthfulness and accuracy of information provided to CBLC, in particular ensuring record information required to be kept on themselves, their employees and outsourced providers registered with CBLC, and their customers, is kept accurate, current and complete at all times; accepting liability for the actions of employees and outsourced providers registered with CBLC in the course of discharging their functions, whereas ensuring they adhere to integrity and ethical standards required by CBLC; 46

47 notifying the Chief Executive Officer of BM&FBOVESPA of any irregularity or development which adversely affects or threatens to affect their activities and those of CBLC, including those that entail or could entail customer Default; accepting and abiding by the oversight authority of BM&FBOVESPA and BSM, including their handling of, and decisions on irregularities, error, claims and similar other issues; providing within assigned deadlines information or clarification requested by CBLC, BSM and regulatory agencies and entities; submitting to fee schedules and contribution requirements established by BM&FBOVESPA and be responsible for the payment; keeping records of, and documentation for Transactions settled in the course of business, whereas making them available to CBLC and BSM promptly upon request; and giving CBLC prior notice of service discontinuance, whether due to contract termination or shutdown of operations or otherwise, as provided in the Operating Procedures Vis-à-vis customers: ensuring the arrangements with customers for provision of clearing and settlement services are formalized under service agreements that contain the minimum contractual provisions required by these Rules; using the services of CBLC to settle the net obligations of customers, giving regard to Operating Limits allocated to these customers; allocate Operating Limits to customers and monitor adherence to the same; giving notice to customers in case they are about to cross the Operating Limit threshold; advising customers of business related information, such as business hours, deadlines, costs and penalties, as set forth herein; keeping registration and control systems to track Transactions in futures markets for follow-up purposes, on a trade-by-trade/contract-by-contract basis, by Investor, through to completion of these Transactions; allocate Operating Limits to customers and monitor adherence to the same; giving notice to customers in case they are about to cross the Operating Limit threshold; keeping registration and control systems to track Transactions in futures markets for follow-up purposes, on a trade-by-trade/contract-by-contract basis, by Investor, through to completion of these Transactions; 47

48 keeping current and complete record information on customers Vis-à-vis Settlement Banks: receiving sufficiently complete information to give them ability to provide services effectively. 135 Proprietary Clearing Agents and Special Clearing Agents have the same responsibilities assigned to Full Clearing Agents, as applicable. Section II Rights of Clearing Agents 136 Set forth below are the rights and prerogatives of Clearing Agents Vis-à-vis CBLC: using the services of CBLC to settle the net obligations of customers, giving regard to Operating Limits allocated to these customers; declaring a customer in Default of its obligations; applying to CBLC for customer Investors to be accredited as Qualified Investors, giving regard to eligibility requirements set by CBLC; in their discretion, rejecting requests for Qualified Investor; in their discretion, applying for CBLC to withdraw the accreditation of a customer Qualified Investor; accessing information required for risk assessment activities; accessing information to monitor the Operating Limits allocated to customers; and having CBLC review its records to investigate claims of error, imperfections or mistakes related to movements of Securities or settlement-related documentation, upon filing complaint in the form and within deadlines assigned for this purpose in the Operating Procedures Vis-à-vis customers: receiving the Securities or funds required for the Settlement of Transactions; demanding deposits of Collateral to secure net obligations underlying customer Transactions, whether at the levels required by CBLC or otherwise, in their discretion; collecting compensation for losses incurred in settling customer Transactions for them and in their stead, including by seizing deposited Collateral; 48

49 charging fees for services rendered, and collecting refund for expenses with fines and other operating costs. CHAPTER III RIGHTS AND RESPONSIBILITIES OF CUSTODIAN AGENTS Section I Responsibilities of Custodian Agents 137 Set forth below are the responsibilities of Custodian Agents vis-à-vis CBLC: controlling Securities deposited for custody under their responsibility, and keeping records of movement or transfer orders and consents; keeping control records under the names of customers placing Securities under custody; authorizing or not authorizing movements of Securities held under custody for Clearing and Settlement of Transactions, as provided in the Operating Procedures; withdrawing Securities deposited at the Central Securities Depository (as adjusted to include related entitlements), subject however to adherence to legal, regulatory and Issuer requirements; hiring a Settlement Bank to pass funds through to and from CBLC, as related to settlement of Corporate Actions; comply with, and causing compliance with legal provisions governing restrictions on ownership of Securities, including as the case may be by taking action for the sale of such Securities; undertaking responsibility for the formal and substantive legality, validity and good standing of Securities delivered at the Central Securities Depository, and for the veracity of endorsements and for the truthfulness of every other document and information submitted in connection with Transactions in deposited Securities; where CBLC is acting as fiduciary owner of Securities, and the Issuer for any reason declines to transfer to CBLC any number of securities being deposited with the Central Securities Depository, Custodian Agents are responsible for replacing such securities; presenting written requests for CBLC, as the case may be, to exercise rights underlying Corporate actions attributable to Securities held under custody at the Central Securities Depository; in any event, such formal request is contingent on an order from the customer; as applicable in the case of paragraph above, passing funds through to CBLC for exercise rights underlying Corporate actions related to Securities held in custody; 49

50 keeping in their own systems and those of CBLC, current and complete record information regarding themselves and their customers; providing CBLC with documentary evidence of their own and their customers record information; notifying CBLC of any irregularity which adversely affects or threatens to affect their custodial activities; giving notice to CBLC by letter delivered in person (with proof of delivery), as follows: (a) at least five (5) business days prior to the date of effectiveness, notice of execution of any agreement with a Global Custodian (or Omnibus Account Holder), as required under paragraph 37.3 and subparagraphs ; and (b) at least five (5) business days prior to the termination date, notice of termination of any agreement with a Global Custodian (or Omnibus Account Holder); keeping properly filed and available to CBLC (upon request) the agreements executed with Global Custodians (or Omnibus Account Holders); using and providing complete record information of Non-Resident Investors concerning whom CBLC advises that a regulatory agency or entity is requiring such information to be used and provided; on receiving notice from CBLC to the effect that a regulatory agency or entity is requiring complete record information be used and provided regarding any Non-Resident Investor, Custodian Agents are responsible for advising customer Global Custodians (or Omnibus Account Holders) that Brazilian legislation and regulations require Non-Resident Investors having business in the domestic financial and capital markets to use and provide complete record information ensuring the arrangements with customers for provision of custody services are formalized under service agreements that contain the minimum contractual provisions required by these Rules; and obtaining formal consent from customer Investors for free of payment movement of Securities between Custody Accounts adhering to assigned Custody Limits, and where the threshold is crossed, adhering to restrictions established by CBLC concerning Deposits and Transfers; providing sufficiently complete information for CBLC to monitor adherence to minimum capital adequacy requirements; accepting and abiding by the oversight authority of BM&FBOVESPA and BSM, including their handling of, and decisions on irregularities, error, claims and similar other issues; 50

51 providing (within the assigned deadlines) information or clarification requested by CBLC, BSM and regulatory agencies and entities; submitting to fee schedules and contribution requirements established by BM&FBOVESPA and be responsible for its payments; 138 Set forth below are the responsibilities of Custodian Agents vis-à-vis their customers: ensuring the integrity of Securities held under custody and keeping the confidentiality of information regarding Securities characteristics and volumes; keeping individual custody accounts for Securities held under custody, identified by customer, in addition to assuming full responsibility for movements of Securities entered in Custody Accounts; implementing Deposits, Withdrawal and Transfers of Securities based exclusively on orders provided by the customer; withdrawing Securities deposited at the Central Securities Depository (as adjusted to include related entitlements) irrespective of the order number of depositary receipts, subject however to adherence to legal, regulatory and Issuer requirements; moving Securities through and transferring funds, as resulting from treatment of Corporate actions by CBLC and, as the case may be, arranging for payment of related taxes; and presenting written request for CBLC to provide information, as may be necessary for the representation of customers vis-à-vis the Issuers of Securities held in custody. Section II Rights of Custodian Agents 139 Set forth below are the rights and prerogatives of Custodian Agents: keeping Securities deposited under individual Custody Accounts, including as the case may be individual accounts by customer, due regard given to assigned Custody Limits; implementing Deposits, Withdrawal and Transfers of Securities held in Custody Accounts under their management; requiring updated records for the Securities upon occurrence of Corporate actions; presenting written requests for CBLC, as the case may be, to exercise rights underlying Corporate actions attributable to Securities held under their custody at the Central Securities Depository; in any event, such formal request is contingent on an order from the customer; 51

52 139.5 accessing information on Custody Account balances, by type of Securities, by owner; and in performing the functions contemplated herein, receiving sufficiently complete information to give them ability to provide services effectively. CHAPTER IV RIGHTS AND RESPONSIBILITIES OF GROSS SETTLEMENT AGENTS Section I Responsibilities of Gross Settlement Agents 140 Set forth below are the responsibilities of Gross Settlement Agents Vis-à-vis CBLC: implementing the Settlement of Transactions for its customers by transferring or moving through Securities and money, as required under each proprietary or customer Transaction; undertaking liability for the decision to provide gross settlement services to customers, whereas exempting BM&FBOVESPA from any liability in the event a customer were to default on its contractual obligations, regardless of the reasons leading to default; hiring a Settlement Bank to pass funds through to and from CBLC, as related to the Settlement of proprietary or customer Transactions; undertaking full responsibility for its choice of Settlement Bank, whereas giving notice of the hiring to CBLC, provided the related service agreement must contain the minimum contractual provisions required by these Rules and, in addition, a provision to the effect of exempting BM&FBOVESPA from any liability for the effects of default by the Settlement Bank, regardless of the reasons leading to default; keeping the confidentiality of any information of which they become aware in the course of providing services as Gross Settlement Agent, with disclosures being contingent on customer consent, except for disclosures to regulatory agencies and entities, as required under applicable legislation or regulation or under court order or injunctive order; accepting and abiding by the oversight authority of BM&FBOVESPA and BSM, including their handling of, and decisions on irregularities, error, claims and similar other issues; providing (within the assigned deadlines) information or clarification requested by CBLC, BSM and regulatory agencies and entities; submitting to fee schedules and contribution requirements established by BM&FBOVESPA and paying fees and contributions as due; 52

53 ensuring the truthfulness and accuracy of information provided to CBLC, in particular ensuring record information required to be kept on themselves, their employees and outsourced providers registered with CBLC, and their customers, is kept accurate, current and complete at all times; accepting liability for the actions of employees and outsourced providers registered with CBLC in the course of discharging their functions, whereas ensuring they adhere to integrity and ethical standards required by CBLC; keeping records of, and documentation for Transactions settled in the course of business, whereas making them available to CBLC and BSM promptly upon request; and providing to CBLC audit teams full access to internal systems and processes used within the scope of gross settlement activities Vis-à-vis customers: ensuring the arrangements with customers for provision of gross settlement services are formalized under service agreements that contain the minimum contractual provisions required by these Rules; using the services of CBLC to settle Transactions for customers; advising customers of business related information, such as business hours, deadlines, costs and penalties, as set forth; keeping updated, current and complete record information at all times Vis-à-vis Settlement Banks: providing sufficiently complete information permitting them to provide services effectively. Section II Rights of Gross Settlement Agents 141 Set forth below are the rights and prerogatives of Gross Settlement Agent Vis-à-vis CBLC: using the services of CBLC to settle Transactions for customers; having CBLC review its records to investigate claims of error, imperfections or mistakes related to movements of Securities or settlement-related documentation, upon filing complaint in the form and within deadlines assigned for this purpose in the Operating Procedures Vis-à-vis customers: 53

54 receiving the Securities or funds required for the Gross Settlement of Transactions; charging fees for services rendered, and collecting refund for expenses with fines and other operating costs incurred due to failures for which the customers are at fault. CHAPTER V RIGHTS AND RESPONSIBILITIES OF QUALIFIED INVESTORS Section I Responsibilities of Qualified Investors 142 Set forth below are the responsibilities of Qualified investors Vis-à-vis CBLC: ensuring the arrangements with Clearing Agents for provision of clearing and settlement services are formalized under service agreements that contain the minimum contractual provisions required by these Rules; Vis-à-vis Clearing Agents: providing funds for Settlement of their proprietary Transactions, meeting margin calls or calls for Collateral as required; adhering to assigned Operating Limits; refunding Clearing Agents for expenses with fines and other operating costs incurred due to their own failures or default; and notifying Clearing Agents of any changes to their record information. Section II Rights of Qualified Investors 143 Set forth below are the rights and prerogatives of Qualified investors Vis-à-vis CBLC: having a Full Clearing Agent settle proprietary Transactions, irrespective of the identity of the intermediary Trading Participant; Vis-à-vis Trading Participants: receiving (directly or indirectly) from Trading Participants information regarding the identity of Clearing Agents hired to provide clearing and settlement services for their proprietary Transactions; 54

55 143.3 Vis-à-vis Clearing Agents: being made aware of the full contents of these Rules; receiving from Clearing Agents prior notice of service discontinuance, whether due to contract termination or shutdown of operations or otherwise, as provided in the Operating Procedures. CHAPTER VI RIGHTS AND RESPONSIBILITIES OF TRADING PARTICIPANTS Section I Responsibilities of Trading Participants 144 Set forth below are the responsibilities of Trading Participants Vis-à-vis CBLC: hiring the services of Clearing Agents or Gross Settlement Agents, as the case may be, whereas exempting BM&FBOVESPA from any liability in the event a Clearing Agent or Gross Settlement Agent were to default on its contractual obligations, regardless of the reasons leading to default; ensuring the arrangements with Clearing Agents or Gross Settlement Agents for provision of clearing and settlement services are formalized under service agreements that contain the minimum contractual provisions required by these Rules; specifying the customer Investor under Transactions they intermediate, for this purpose giving regard to allocation standards and deadlines set forth in the Operating Procedures; keeping registration and control systems to track Transactions in derivatives and securities lending Transactions for follow-up purposes, on a trade-by-trade/contract-bycontract basis, by Investor, through to completion of these Transactions; keeping updated, current and complete record information regarding each of their Investor customers, in accordance with applicable regulatory requirements; Vis-à-vis Clearing Agents: passing funds through for Settlement of the Transactions they intermediate, meeting margin calls and calls for Collateral as required; adhering to assigned Operating Limits; repaying operating costs and losses incurred by Clearing Agents in settling the Transactions (whether or not proprietary) for customer Trading Participants and in their stead, on account of their own or the customer default. 55

56 144.3 Vis-à-vis Gross Settlement Agents: moving funds through for Settlement of the Transactions they intermediate; repaying operating costs and losses incurred by Gross Settlement Agents in settling Transactions for them or their customers; Vis-à-vis customers: providing (directly or indirectly) information regarding the identity of Clearing Agents or Gross Settlement Agents hired to provide clearing and settlement services for the customer Transactions; and moving funds through for Settlement of customer Transactions they intermediate. Section II Rights of Trading Participants 145 Set forth below are the rights and prerogatives of Trading Participants: collecting refund for expenses with fines and other operating costs incurred due to failures for which the customers are at fault or due to customer default, as provided in the Operating Procedures; receiving from Clearing Agents and Gross Settlement Agents, as the case may be, prior notice of service discontinuance, whether due to contract termination or shutdown of operations or otherwise; and receiving notice from Clearing Agents in case their Operating Limit threshold is about to be crossed. CHAPTER VII RIGHTS AND RESPONSIBILITIES OF INVESTORS Section I Responsibilities of Investors 146 Set forth below are the responsibilities of Investors: Vis-à-vis Trading Participants: providing Securities and money as necessary for the Settlement of its own Transactions within the deadlines established in the Operating Procedures; repaying operating costs and losses incurred by Trading Participants in setting Transactions, as arising from default by the relevant Investor; and updating record information at all times. 56

57 146.2 Vis-à-vis Custodian Agents: providing funds for exercise of rights underlying Corporate actions related to Securities held in custody; updating record information at all times, in addition to providing documentary evidence of the accuracy and truthfulness of said record information; and upon request from CBLC, promptly providing the same documentation required to be provided to an Issuer for purposes of the record of ownership of Securities. Section II Rights of Investors 147 Set forth below are the rights and prerogatives of Investors Vis-à-vis CBLC: receiving periodic updated information regarding Securities held in custody at the Central Securities Depository; and right to confidentiality of proprietary information on Securities held in custody at the Central Securities Depository, provided disclosures required under applicable legislation or regulatory rules and by Issuers will not be deemed to consist of breach of confidentiality Vis-à-vis Trading Participants: receiving the Securities and money resulting from the Settlement of Transactions executed for their account and order; and receiving information (directly or indirectly) regarding the identity of Clearing Agents or Gross Settlement Agents hired by a Trading Participant for Settlement of his Transactions; Vis-à-vis Custodian Agents: receiving periodic updated information regarding Securities held in custody at the Central Securities Depository; and right to confidentiality of proprietary information on Securities held in custody at the Central Securities Depository. CHAPTER VIII SETTLEMENT BANKS 57

58 Section I Responsibilities of Settlement Banks 148 Set forth below are the responsibilities of Settlement Banks: passing funds through to and from the CBLC Settlement Account holds at thestr, acting under instructions of customer Clearing Agents or Gross Settlement Agents, as the case may be, but giving regard to deadlines and business hours established herein; operating pursuant to communications and security standards required by the Central Bank of Brazil for the messaging system used for transfers of funds within the scope of Clearing and Settlement processes and related activities; timely communicating to CBLC and customer Clearing Agents or Gross Settlement Agents, as applicable, any hurdle or difficulty of a financial, operational or technological nature, or resulting from fortuity or events of force majeure, which threaten to delay or prevent the passing through of all or some of the funds required under any particular Transaction; communicating to CBLC any development related to Clearing Agents or Gross Settlement Agents which threaten to delay or prevent fulfillment of Settlement obligations. Section II Rights of Settlement Banks 149 Set forth below are the rights and prerogatives of Settlement Banks: receiving from Clearing Agents or from Gross Settlement Agents or from CBLC, as applicable, information and instructions for the rendering of services they are hired to provide within the scope of the activities regulated by these Rules; and rejecting transfer orders from customer Clearing Agents or Gross Settlement Agents, as the case may be, based on the particular standards contractually agreed with the customers. T I T L E V I - C H A I N O F R E S P O N S I B I L I T I E S CHAPTER I RESPONSIBILITIES RELATED TO SETTLEMENT ACTIVITIES 150 As Central Counterparty, the responsibility of CBLC, undertaken towards Clearing Agents only, is restricted to moving Securities through and transferring money, which in the latter case is accomplished through Settlement Banks hired by Clearing Agents for this purpose. 58

59 151 Where a Clearing Agent fails to make Payment within the Settlement Cycle, CBLC will proceed to settle Payments owed to Counterparty Clearing Agents thereby acquiring right of recourse against the Securities exchanged for Payment. 152 CBLC will adopt appropriate action as may be necessary to treat Default on settlement, and may seize and liquidate Collateral to obtain compensation for losses thus incurred, without prejudice to other applicable penalties. Expenses CBLC incurs with Default treatment will be borne by the defaulting Clearing Agent. 153 The Clearing and Settlement process for Transactions accepted by CBLC implies a unique chain of responsibilities, which is set forth below Regarding Clearing Agents: as Counterparty to customers for its services and to CBLC (acting as Clearinghouse), a Clearing Agent undertakes responsibility (towards the customers and CBLC) for delivering Securities and transferring funds for Settlement of Transactions. A Default on its obligations leads to Collateral enforcement actions taken at its own expense for refund of ensuing losses, without prejudice to other applicable penalties a Clearing Agent further undertakes responsibility for depositing margin and posting other Collateral required by CBLC; in the event of Default by customer, consisting of failure to provide funds within the Settlement Cycle, a Clearing Agent will be required to assist CBLC in making Payment of the net settlement obligations of the defaulting customer, with recourse against the Securities exchanged for said Payment; a Clearing Agent undertakes no liability towards Investors or Trading Participants for default on either of their mutual obligations; and a Clearing Agent is fully liable for its choice of customers, wherefore it exempts BM&FBOVESPA from any liability for the customer violations of these Rules and other applicable legal and regulatory provisions Regarding Gross Settlement Agents: as Counterparty to customers for its services and to CBLC (acting as manager of Gross Settlement System), a Gross Settlement Agent undertakes responsibility (towards the customers and CBLC) for delivering Securities and transferring funds for Gross Settlement of Transactions; a Gross Settlement Agent undertakes no liability towards Investors or Trading Participants for default on either of their mutual obligations; and a Gross Settlement Agent is fully liable for its choice of customers, wherefore it exempts BM&FBOVESPA from any liability for the customer violations of these Rules and other applicable legal and regulatory provisions. 59

60 153.3 Regarding Trading Participants: as Counterparty to Investors (customers for its services), and to Clearing Agents (as service providers), a Trading Participant undertakes responsibility (towards the customers and the Clearing Agents) for delivering Securities and transferring funds for Settlement of Transactions they intermediate. A Default on its obligations leads to seizure of Collateral pledged by customers and other enforcement actions taken at the expense of the customers for refund of ensuing losses, without prejudice to other applicable penalties; a Trading Participant further undertakes responsibility for depositing margin and providing other Collateral required by the Clearing Agents; in the event of Default by a customer Investor, consisting of failure to provide funds as due within the Settlement Cycle, a Trading Participant will be required to assist its Clearing Agent in making Payment of the net settlement obligations of its defaulting customer, with recourse against the Securities exchanged for said Payment; and a Trading Participant is fully liable for its choice of customers, wherefore it exempts BM&FBOVESPA from any liability for the customer violations of these Rules and other applicable legal and regulatory provisions Regarding Qualified investors: as transacting counterparty and Counterparty to Clearing Agents (acting as service providers), a Qualified Investors undertakes responsibility (towards the Clearing Agents) for delivering Securities and transferring funds for Settlement of its own Transactions, and for depositing margin and providing other Collateral required by the Clearing Agents; a Qualified Investor is fully liable for its choice of Clearing Agents, which they hire directly or through third parties, therefore undertaking full liability for his own actions and the actions ensuing from its choices Regarding Investors: as transacting counterparty and Counterparty to Trading Participants (as service providers), an Investor undertakes responsibility (towards the Trading Participants) for delivering Securities and transferring funds for Settlement of its own Transactions, and for depositing margin and providing other required Collateral, as the case may be; and an Investor is fully liable for its choice of Trading Participants. CHAPTER II RESPONSIBILITIES RELATED TO THE CENTRAL SECURITIES DEPOSITORY 154 CBLC is responsible towards Custodian Agent: 60

61 154.1 for the integrity of Securities held under custody and for adjustments ensuing from Corporate actions; for moving Securities through and transferring funds resulting from treatment of Corporate actions; for Deposits, Withdrawal and Transfers of Securities pursuant to the instructions of Custodian Agent, including instructions for Settlement of Transactions; and for managing individual Custody Account structures, if any. 155 The chain of responsibilities within the scope of the Central Securities Depository is set forth below Regarding the Custodian Agent: a Custodian Agent is fully liable for its choice of customers, for whom they are liable towards CBLC, including as to responsibility for customer record information and the accuracy and truthfulness of said information, and as to responsibility for the registration of Securities in Custody Accounts, for the formal and substantive legality, validity and good standing of delivered Securities, for the veracity of endorsements and for the truthfulness of every other document submitted in connection with Transactions in such Securities, and as to responsibility for the confidentiality of information related to Securities held under custody for customers; a Custodian Agent is fully liable for its choice of customers, and exempts BM&FBOVESPA from any liability for losses and damages caused by its customers or third parties; a Custodian Agent undertakes responsibility towards customers for moving Securities through and transferring funds resulting from treatment of Corporate actionsby CBLC and, as the case may be, arranges for related taxes to be paid; and a Custodian Agent undertakes responsibility towards customers for Deposits, Withdrawal and Transfers of Securities implemented under their instructions, including instructions for Settlement of Transactions Regarding Investors, as customers of Custodian Agent: an Investor is liable towards its Custodian Agent for the accuracy and truthfulness of customer record information it provides, and for the formal and substantive legality, validity and good standing of deposited Securities, for the veracity of endorsements and for the truthfulness of every other document submitted in connection with Transactions in Securities held in custody, and for delivering funds related to exercise of rights in Corporate actions; and 61

62 an Investor is fully liable for its choice of Custodian Agent, and exempts BM&FBOVESPA from any liability for illegal or irregular movement of, or transaction in Securities and other actions entailing violations of these Rules and other applicable rules. CHAPTER III BM&FBOVESPA EXEMPTIONS AND LIMITATIONS OF LIABILITY 156 BM&FBOVESPA, acting through CBLC, assumes no liability for, and will at all times be exempt from liability related to any of the following: a Qualified investor or MarketParticipant that, as customer, defaults on its obligations towards its Clearing Agent, regardless of the circumstances leading to default; a MarketParticipant that, as customer, defaults on its obligations towards its Gross Settlement Agent, regardless of the circumstances leading to default; a Clearing Agent or Gross Settlement Agent that, as service provider, defaults on its obligations towards its customers, regardless of the circumstances leading to default; a Market Participant that, as service provider, defaults on its obligations towards its customer Investors, regardless of the circumstances leading to default; a Settlement Bank that, as service provider, defaults on its obligations towards its customers, in particular that of passing funds through at a predefined time within the Settlement Cycle; any irregular or unauthorized movement of Securities held under custody, implemented on instructions of the Custodian Agent; and an Investor that defaults on its obligations towards its Custodian Agent, regardless of the circumstances leading to default. 157 Additionally, BM&FBOVESPA assumes no liability for, and will at all times be exempt from liability related to any of the following: information provided by the Securities Issuer; actions of third parties that do not operate, or do business, or have business within the scope of activities performed by CBLC, as contemplated herein; Default by any Participant, regardless of the circumstances leading to default, or noncompliance with applicable legal and regulatory rules, and events of violation of these Rules; indemnities claimed by any Participant for losses incurred as a result of actions of Custodian Agents entailing use, or irregular or unauthorized movement of Securities held in custody at the Central Securities Depository; 62

63 157.5 indemnities claimed by any Participant for losses incurred as a result of violations of applicable legal and regulatory rules or these Operating Rules, or on account of the actions of a Participant vis-à-vis another, and in fortuity or force majeure which delay or prevent performance of any of the activities contemplated in these Rules; an Issuer failing to perform issue-related obligations, such as redemption or amortization (including as to the principal and interest) of Securities; and a suspension or cancellation of Transaction or protracted Settlement, regardless of prior Acceptance by CBLC (which in this event may be annulled) but giving regard to a Settlement s irrevocability and unconditionality, if and when so determined by the Central Bank of Brazil, the Brazilian Securities Commission, BSM, a Trading Market or BM&FBOVESPA (acting in the capacity of self-regulatory and oversight entity), each acting within its sphere of authority T I T L E V I I S T A T E O F A R R E A R S A N D D E F A U L T CHAPTER I TYPIFICATION 158 A failure to meet obligations related to clearing and settlement processes, or to meet margin requirements, or to contribute to the Settlement Fund or any other safeguard or risk management mechanism contemplated herein, will characterize and constitute State of Arrears or Default, as may be the case depending on the nature and degree of failure. 159 CBLC will declare a Clearing Agent in State of Arrears if the circumstances surrounding its failure to pay or perform and the nature of the obligation are such that the obligation may yet be met through seizure of Collateral pledged by the Clearing Agent, or the use of appropriate liquidity safeguards, as provided in the Operating Procedures and under paragraph 83 of these Rules The noncompliance of obligations resulting from fortuity or force majeure will neither constitute State of Arrears nor Default, but the obligations of the Clearing Agent survive any such event and must be met at a later time. 160 CBLC will declare the Default of a Clearing Agent if the circumstances surrounding its failure to pay or perform and the nature of the obligation are such that the obligation cannot be met through seizure of Collateral pledged by the Clearing Agent, or the use of appropriate liquidity safeguards. CBLC will further declare a Clearing Agent to be in Default of an obligation, if said Clearing Agent, after having been declared in State of Arrears and despite having had renewed opportunity to pay or perform, failed to do so within the deadline assigned by CBLC. 161 Whether in State of Arrears or in Default, a Clearing Agent will nonetheless be fully liable for refunding CBLC for the ensuing losses, without prejudice to other applicable administrative, financial, legal and regulatory sanctions. 63

64 CHAPTER II EFFECTS OF DEFAULT 162 A Default entails the following consequences for the defaulting Clearing Agent: loss of any rights underlying the non-performed obligation or unpaid debt; enforcement and seizure of Collateral pledged to CBLC, pursuant to Chapter IV under this Title; temporary constraint preventing any further trade registration, clearing or settlement, pending payment or performance of the defaulted obligation or full refund of the ensuing losses; and application of sanctions pursuant to Title IX ( Penalties ) of these Rules. 163 On declaring the Default of a Clearing Agent, CBLC, acting as Central Counterparty, undertakes responsibility for settling Transactions left unsettled. 164 Responsibility for the Settlement of open positions in derivatives markets and other outstanding Transactions which the defaulting Clearing Agent was due to settle, will be, in the discretion of CBLC: The open positions on the derivatives markets and other operations to be settled by the Clearing agent responsibility could, in the discretion of CBLC: to another Clearing Agent designated by the customer of the defaulting Clearing Agent or by CBLC; or be transferred to another Clearing Agent responsibility, designated by the Default Clearing Agent customer or by CBLC; to be transferred, temporarily, to BM&FBOVESPA, which will adopt the appropriate procedures; or compulsory early liquidation of positions, except for open positions in derivatives markets and open interest positions, in addition to covered short sales in cash markets carried out by performing Investors. 165 Default resulting from failed money transfer by a Settlement Bank is attributable to the relevant customer Clearing Agent. 166 The effects of Default set forth in this Chapter apply also to other Participants engaged in the Default treatment, in particular with regard to actions by Clearing Agents for seizure and enforcement of Collateral posted by Qualified Investor and MarketParticipants, and actions by MarketParticipants for seizure and enforcement of Collateral provided by Investor customers In the absence of action by Clearing Agents and Market Participants, the BM&FBOVESPA may seize Collateral pledged to them by Investors, qualified or not, to ensure settlement of the obligations of the latter two. 64

65 166.2 The unused proceeds from liquidation of Collateral pledged to Clearing Agents or Trading Participants by a defaulting Investor may be used to settle such Investor s obligations towards other Clearing Agents or Trading Participants. CHAPTER III DEFAULT REPORTING PROCESS 167. CBLC will report events of Default of Clearing Agents to the Central Bank of Brazil, the Brazilian Securities Commission and the Managing Entity of Organized Markets of Securities Default by other Participants must be reported to CBLC by their respective counterparties, to CBLC, who will report any such event to the Central Bank of Brazil, the Brazilian Securities Commission, BSM and the Managing Entity of Organized Markets of Securities, according with their own spheres of oversight authority The BM&FBOVESPA may also release information to the market regarding the Participant s Default, doing so through customary communication channels CBLC will keep records of any event of Default and related treatment actions for a period of five (5) years, during which these records will be made available for use by regulatory agencies and entities promptly upon request. CHAPTER IV COLLATERAL TREATMENT AND ENFORCEMENT 169. Default of any participant will imply prompt seizure and liquidation of Collateral pledged by the defaulting Participant Seizure of Collateral requires no prior notice or judicial notification or other consents In seizing and liquidating Collateral, BM&FBOVESPA will give regard to the following order of preference: Collateral pledged to by the defaulting Clearing Agent or by Investors, Qualified or not; Withdrawal from the Settlement Fund in the form of contributions attributable to the defaulting Clearing Agent; withdrawal from the Settlement Fund in the form of contributions attributable to the other Clearing Agents and fund members; withdrawal from the Settlement Fund in the form of institutional contributions attributable to CBLC; other Collateral, if any; and 65

66 170.6 Securities held as Segregated Assets If the proceeds from liquidation of outstanding positions and Collateral (according to the above order of preference) are insufficient to settle all claims against a defaulting Clearing Agent, BM&FBOVESPA may take the following actions: cancel Transactions for whose clearing and settlement there are insufficient Collateral, in which event CBLC will be released from any underlying obligations towards Counterparty Clearing Agents, which in turn will be released from any underlying obligations towards customer Qualified Investors and MarketParticipants, which in turn will be released from any underlying obligations towards customer Investors; and establish a process to recover outstanding losses, as approved at an extraordinary meeting of the shareholders of BM&FBOVESPA called for this purpose After completion of the liquidation and settlement process, any balance of proceeds then outstanding will be returned to the party or parties legally entitled to said balance Resources recovered by CBLC by way of full or partial refund for losses will be credited to the persons, entities and funds listed under paragraph 170 above, in reverse order of preference. T I T L E V I I I S E T T L E M E N T F U N D CHAPTER I LEGAL SYSTEM; ADMINISTRATIVE STRUCTURE; ASSET SEGREGATION 174. CBLC maintains a single dedicated Settlement Fund as a safeguard and risk management mechanism to cover exposure to credit and liquidity risks correlated with its activities as Central Counterparty The Settlement Fund established by CBLC is a not-for-profit entity, but not a legal person The Settlement Fund will be composed of securities contributed by BM&FBOVESPA and the Clearing Agents for deposit at BM&FBOVESPA Margin Accounts established with SELIC, the Central Depository Service and other depositories CBLC has authority to define securities that are acceptable as contribution to the Settlement Fund, and determine the discounts at which they will be accepted BM&FBOVESPA or the Clearing Agents, as applicable, will continue to hold title to securities contributed to the Settlement Fund The BM&FBOVESPA, will have authority to operate the Settlement Fund pursuant to powers granted on an irrevocable basis to: 66

67 177.1 manage securities contributed to the Settlement Fund by way of safeguard for exposure to risks correlated with clearing and settlement processes, which it will do in the name and on behalf of the collectivity of Clearing Agents and BM&FBOVESPA; liquidate securities in the cases contemplated in these Rules, selling them as and when CBLC may deem fit and, using the proceeds from such sales to ensure the net obligations of Clearing Agents are fully or at least partially settled; and as and if practicable, collect refund for losses incurred by the Settlement Fund on account of withdrawal, which refund will be used in replenishing the fund. CHAPTER II PURPOSE 178. The primary purpose of the Settlement Fund is to ensure liquidity for clearing and settlement processes by: covering losses from Default of Clearing Agent, whereas giving regard to the rules set forth herein for enforcement of Collateral; and providing liquidity for CBLC to tackle failed Deliveries and failed Payments, as and when required, in accordance with the provisions set forth in the Operating Procedures the provision of liquidity contemplated in paragraph is to be implemented solely through withdrawal from resources contributed by BM&FBOVESPA Losses not covered by the Settlement Fund include those that relate to: the Settlement of Transactions regarding which CBLC does not act as Central Counterparty; and fraudulent Transactions thus identified by the Central Bank of Brazil, or the Brazilian Securities Commission, or the Managing Entity of Organized Markets of Securities or BSM or BM&FBOVESPA (acting in the capacity of self-regulatory and oversight entity), each acting within its sphere of authority. CHAPTER III FUND MAGNITUDE AND COMPOSITION 180. CBLC is responsible for defining the calculation methods and guidelines used in determining the magnitude of the Settlement Fund, and the contributions each Clearing Agent is required to make The calculation methods and guidelines used in determining the magnitude of the Settlement Fund are set forth in the Operating Procedures. 67

68 181. Any additional contribution a Clearing Agent may be required to make to the Settlement Fund will be determined in correlation to risk exposure underlying the Transactions said Clearing Agent is responsible for settling. CHAPTER IV WITHDRAWAL THE FUND 182. Any withdrawal from the Settlement Fund must necessarily be made to meet the purposes for which the fund has been established. Sales of securities withdrawn from the Settlement Fund will abide by the rules for enforcement of Collateral set forth under Chapter IV ( Collateral Treatment and Enforcement ) of Title VII ( Delay and Default ) of these Rules. CHAPTER V CONTRIBUTIONS REVIEW; REPLENISHMENT MECHANISM 183. CBLC from time to time will review the magnitude of the Settlement Fund As a result of these periodic reviews the contributions required from Clearing Agent may be revised upwards or downwards In the event CBLC implements withdrawal from the Settlement Fund, it will promptly establish a review process, irrespective of timing, for replenishment purposes Where the contributions to the Settlement Fund are revised downwards, CBLC will return excess resources to the fund members in proportion to their contributions Where the contributions are revised upwards, the Clearing Agents may alternatively elect to adjust the risk exposure underlying outstanding Transactions, as follows: in the case of Investors in derivatives markets, by calling additional margin from these customers; and in the case of outstanding Transactions, by transferring all or some of this portfolio to another Clearing Agent CBLC will assign deadlines within which the Clearing Agents will be required to replenish the fund with additional contributions or, alternatively, adjust the level of risk exposure underlying outstanding Transactions A Clearing Agent s failure to contribute replenishment resources or adjust risk exposure in the form provided above constitutes Default punishable with the sanctions provided herein The replenishment resources required from Clearing Agents in the form of additional contributions to the Settlement Fund may not be used to cover losses from events of Default occurred prior to the date of the replenishment revision process. 68

69 T I T L E I X S A N C T I O N S 189. Violations of these Operating Rules and any other rules approved by BM&FBOVESPA, including repeat violations, could result in any of the following sanctions and penalties, which apply alternatively or cumulatively: warning; penalty fine; compulsory close out of positions and enforcement of Collateral posted by the relevant Participant (except Gross Settlement Agent); compulsory closing of the Custody Account (except Gross Settlement Agent); suspension or withdrawal of permit or accreditation, in addition to prompt reporting to the Central Bank of Brazil, the Brazilian Securities Commission, to BSM and the Managing Entity of Organized Markets of Securities, suspension of access or refusal of clearing and settlement services by CBLC, where there are indications of fraud and in the cases listed under Chapter III ( BM&FBOVESPA: Exemptions and Limitation of Liability ) of Title VI ( Chain of Responsibilities ) of these Rules; compulsory reallocation of positions held in Custody Accounts to another Custodian Agent; and compulsory reallocation of outstanding Transactions to another Clearing Agent The authority to decide on sanctions lies with the Chief Executive Officer of BM&FBOVESPA, whose rulings will be grounded on detailed analysis of the facts related to the violation imputed to the accused Participant In the event of a ruling affirming the violation and imposing sanction, the Participant may file motion to reconsider within fifteen (15) days after receiving notice of the decision. The motion to reconsider will be processed with staying effects If the Chief Executive Officer of BM&FBOVESPA rejects the motion to reconsider, the Participant within fifteen (15) days after receiving notice of the decision on the motion may appeal to BSM, with staying effects In any event, if the final decision exacts a penalty fine: the amount of the fine may be added to the financial compensation account established by the Participant, irrespective of notice of any kind; and 69

70 193.2 within five (5) days after receiving notice of the penalty fine, the Participant may file application (without staying effects) for CBLC to reconsider the amount of the fine, doing so in accordance with the provisions of the Operating Procedures; In the event of suspension of a Clearing Agent s Access authorization due to Default, the suspension may be lifted if the Clearing Agent pays all amounts then due and unpaid, as adjusted to include interest charged at the market rate and other legal and contractual charges. T I T L E X - T E C H N O L O G Y I N F R A S T R U C T U R E A N D C O N T I N G E N C Y P R O C E D U R ES 194. CBLC adopts technology infrastructure consistent with its operations as Clearinghouse for net deferred settlement and as Central Securities Depository, which fulfill the security requirements established by the Central Bank of Brazil The technology infrastructure is developed, adjusted and implemented with assistance from well-renowned and highly experienced consultants, specializing in high-capacity volume-critical, large-scale complex IT systems, which encompass a variety of system portfolios to operate integrated trading and trading-related systems on an interconnected basis As part of its business continuity, contingency/disaster recovery plan, CBLC also maintains an alternate contingency facility (back-up site) The alternate site duplicates the system and structure of CBLC s primary data processing center and includes no-break power and alternate power sources, in addition to interconnection for real-time data replication (including production data) to and from offsite location, for effective and continuing operation of clearing and settlement systems through the alternate site in the event of contingency or disaster CBLC and the Participants are likewise required to maintain contingency/disaster recovery resources for their critical processes. T I T L E X I E M E R G E N C Y A C T I O N S 198. With the aim of ensuring its activities are regularly and efficiently performed, CBLC may adopt emergency actions, as necessary in certain adverse circumstances Emergency actions may be required in any of the following events: state of emergency, state of siege or disaster declarations; war, insurrection, or strike; developments of any nature, including as a result of acts of God or events of force majeure, which adversely affect or threaten or jeopardize the normal course of business, including threat of discontinuance; and 70

71 199.4 interruption of communication services affecting communications with Participants, the Central Bank of Brazil and SELIC due to equipment failure, power outages or other factors adversely affecting order transmission and messaging systems, which BM&FBOVESPA disaster recovery and business continuity processes cannot overcome The Chief Executive Officer of BM&FBOVESPA has authority to: define situations that constitute emergencies requiring adoption of emergency actions; summon Management meetings to decide on appropriate emergency actions, which may include actions affecting trading, executed trades and open positions, and clearing and settlement processes, including ongoing processes; if Management is unable to meet, the Chief Executive Officer has powers to determine appropriate emergency actions Emergency actions that CBLC may take by giving prior notice or obtaining consent from regulatory agencies and entities, as applicable, include the following: transitory changes to rules, standards and procedures that regulate its activities, including as to deadlines and business hours, due regard given to the provisions of the Bylaws governing spheres of authority; halting operations by Clearing Agents, Custodian Agents and Gross Settlement Agents, registrations of Transactions in Securities, halting provision of services by CBLC, including clearing and settlement processes; halting ongoing and executed clearing and settlement processes; and declaring CBLC in recess Adoption of emergency actions will not release or exempt Participants from complying with previously assumed obligations, including obligations related to the chain of responsibilities within the scope of clearing and settlement processes and the Central Securities Depository. T I T L E XII - A R B I T R A T I O N 203. The BM&FBOVESPA, Clearing Agents, Custodian Agents and Gross Settlement Agents are required to submit to arbitration, pursuant to the Arbitration Regulation of the Market Arbitration Chamber, any and all disputes among them, which relate to, or arise from the application, validity, effectiveness, interpretation, violation and effects of violation of the provisions of Brazilian Corporate Law (Law No /76, as amended), their Bylaws, the rules issued by the Brazilian National Monetary Council, or the Central Bank of Brazil or the Brazilian Securities Commission, in addition to other rules and regulations regarding the operation of Brazilian capital markets, including the rules set forth in these Operating Rules and other rules issued by BM&FBOVESPA. 71

72 T I T L E X I I I F I N A L P R O V I S I O N S CHAPTER I OPERATING AGREEMENTS 204. BM&FBOVESPA may enter into arrangements with Managing Entities of Organized Markets of Securities, payment systems, providers of Clearing and Settlement services and depositories for the provision of special services or performance of activities related to Transaction registration, Clearing, Settlement and Risk Management or related to the Central Securities Depository. CHAPTER II SPECIAL PROVISIONS 205. For due legal purposes and effect, these Operating Rules are binding on all CBLC Participants referred to herein The provisions of these Operating Rules are to be included explicitly or by reference in service agreements entered into by CBLC Participants. CHAPTER III SUPPLEMENTARY RULES 207. The Chief Executive Officer of BM&FBOVESPA will rule on instances regarding which these Rules are silent. 72