BM&FBOVESPA EQUITIES CLEARINGHOUSE (BOVESPA SEGMENT) AND CENTRAL SECURITIES DEPOSITORY (EQUITIES CLEARINGHOUSE) RULEBOOK

Transcription

1 This is a free translation offered only as a convenience for English language readers and is not legally binding. Any questions arising from the text should be clarified by consulting the original in Portuguese. BM&FBOVESPA EQUITIES CLEARINGHOUSE (BOVESPA SEGMENT) AND CENTRAL SECURITIES DEPOSITORY (EQUITIES CLEARINGHOUSE) RULEBOOK December 2015

2 TABLE OF CONTENTS TITLE I - PURPOSE... 8 TITLE II - DEFINITIONS... 9 TITLE III PARTICIPANT ACCESS CHAPTER I CLEARINGHOUSE PARTICIPANTS CHAPTER II CLEARING AGENTS Section I Classification Section II Eligibility Section III Admission Section IV Capital Requirements Section V Technical and Operational Requirements Section VI Contributions to the Settlement Fund Section VII Contractual Relationships Section VIII Withdrawal of Accreditation CHAPTER III CUSTODIAN AGENTS Section I Classification Section II Eligibility Section III Admission Section IV Capital Requirements and Custody Limits Section V Technical and Operational Requirements Section VI Contractual Relationships

3 Section VII Withdrawal of Accreditation CHAPTER IV GROSS SETTLEMENT AGENTS Section I Eligibility Section II Admission Section III Capital Requirements Section IV Technical and Operational Requirements Section V Contractual Relationships Section VI CHAPTER V QUALIFIED INVESTORS Section I Eligibility Section II Withdrawal of Accreditation CHAPTER VI REGISTRATION PARTICIPANTS Section I Eligibility Section II Admission Section III Capital Requirements Section IV Technical and Operational Requirements Section V Contractual Relationships Section VI TITLE IV NATURE OF ACTIVITIES AND OPERATING DISCIPLINE.. 34 CHAPTER I LEGAL NATURE CHAPTER II TRANSACTION REGISTRATION AND ACCEPTANCE CHAPTER III

4 CLEARING AND SETTLEMENT Section I Multilateral Netting 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 CHAPTER V GROSS SETTLEMENT AND BILATERAL SETTLEMENT SERVICES Subsection I Structure of Settlement Accounts Subsection II Bilateral Netting Subsection III Failure to pay a bilateral net balance CHAPTER VI SECURITIES DEPOSITORY SERVICE Section I Structure of Custody Accounts Section II Deposit, Withdrawal and Transfer of Securities Section III Custody Limits and Limit Monitoring Section IV Treatment of Corporate Actions CHAPTER VII FEES CHAPTER VIII INTERNAL CONTROLS TITLE V - RIGHTS AND RESPONSIBILITIES OF THE CLEARINGHOUSE AND CLEARINGHOUSE PARTICIPANTS

5 CHAPTER I RIGHTS AND RESPONSIBILITIES OF THE CLEARINGHOUSE Section I Responsibilities of the Clearinghouse Section II Rights of the Clearinghouse 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 REGISTRATION PARTICIPANTS Section I Responsibilities of Registration Participants Section II Rights of Registration Participants CHAPTER VI RIGHTS AND RESPONSIBILITIES OF QUALIFIED INVESTORS Section I Responsibilities of Qualified Investors Section II Rights of Qualified Investors CHAPTER VII RIGHTS AND RESPONSIBILITIES OF FULL TRADING PARTICIPANTS Section I Responsibilities of Full Trading Participants

6 Section II Rights of Full Trading Participants CHAPTER VIII RIGHTS AND RESPONSIBILITIES OF INVESTORS Section I Responsibilities of Investors Section II Rights of Investors CHAPTER IX SETTLEMENT AGENTS CHAPTER X GOLD DEPOSITARIES Section I Responsibilities of Gold Depositaries Section II Rights of Gold Depositaries CHAPTER XI GOLD REFINERS Section I Responsibilities of Gold Refiners Section II Rights of Gold Refiners TITLE VI - CHAIN OF RESPONSIBILITIES CHAPTER I RESPONSIBILITIES RELATED TO SETTLEMENT CHAPTER II RESPONSIBILITIES RELATED TO THE DEPOSITORY SERVICE CHAPTER III BM&FBOVESPA EXEMPTIONS AND LIMITATIONS OF LIABILITY TITLE VII STATE OF ARREARS AND DEFAULT CHAPTER I TYPIFICATION CHAPTER II EFFECTS OF DEFAULT CHAPTER III DEFAULT REPORTING PROCEDURES CHAPTER IV COLLATERAL TREATMENT AND EXECUTION TITLE VIII SETTLEMENT FUND

7 CHAPTER I LEGAL SYSTEM; MANAGEMENT; OWNERSHIP CHAPTER II PURPOSE CHAPTER III FUND SIZE AND COMPOSITION CHAPTER IV FUND UTILIZATION CHAPTER V REVIEW OF CONTRIBUTIONS; REPLENISHMENT MECHANISM TITLE IX SANCTIONS TITLE X - TECHNOLOGY INFRASTRUCTURE AND CONTINGENCY PROCEDURES TITLE XI EMERGENCY ACTIONS TITLE XII - ARBITRATION TITLE XIII FINAL PROVISIONS CHAPTER I OPERATING AGREEMENTS CHAPTER II SPECIAL PROVISIONS CHAPTER III SUPPLEMENTARY RULES

8 T I T L E I - P U R P O S E 1 The purpose of this Rulebook is to govern the activities performed by BM&FBOVESPA in the capacity of deferred net settlement system, central securities depository and related services provider, setting forth the general standards and rules, under applicable regulations, binding on the entities and persons with whom it maintains any kind of legal relationship, either of a contractual nature or of an operational one. 2 Details regarding the activities governed by this Rulebook are defined in a set of rules called Operating Procedures, which integrate and complement this Rulebook, in addition to the official letters and circular letters issued from time to time by BM&FBOVESPA. 8

9 T I T L E II - D E F I N I T I O N S 3 As used herein, in either plural or singular form, the following terms will have the meanings set forth herein below, whereas giving regard to the context provided by the headings thereto: 3.1 Acceptance [aceitação] means the procedure by which the Clearinghouse undertakes to act as Counterparty for the Settlement of registered Transactions; 3.2 Clearing Agent [agente de compensação] means an institution that, acting as Counterparty to its clients and the Clearinghouse, undertakes responsibility for settling Transactions and providing collateral for proprietary and/or customer Transactions, and which may qualify as Full Clearing Agent or Proprietary Clearing Agent or Special Clearing Agent; 3.3 Custodian Agent [agente de custódia] means an institution that, towards its customers and the Clearinghouse, undertakes responsibility for managing proprietary and customer Custody Accounts within the Depository Services, and which may qualify as Full Custodian Agent or Proprietary Custodian Agent or Special Custodian Agent; 3.4 Gross Settlement Agent [agente de liquidação bruta] means an institution that, towards its customers and the Clearinghouse, undertakes responsibility for the Gross Settlement of proprietary and customer Transactions; 3.5 Trading Environment [ambiente de negociação] means the organized exchange-traded and over-the-counter markets and the unorganized over-the-counter markets on which Transactions are carried out; 3.6 Securities [ativos] mean the securities, rights, contracts and other financial instruments issued by a government or a corporate Issuer; 3.7 Block for Sale [bloqueio de venda] means the mechanism by which a Full Trading Participant indicates that the Securities underlying a given sale Transaction executed for an Investor have been committed to ensure the Securities delivery obligation in the Settlement process; 3.8 BM&FBOVESPA [BM&FBOVESPA S.A. - BOLSA DE VALORES, MERCADORIAS E FUTUROS (BM&FBOVESPA)] means the BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros or BM&FBOVESPA SA - Securities, Commodities and Futures Exchange, which manages organized securities markets and whose primary function is to maintain systems suitable for the execution of purchase and sale transactions, auctions and special transactions involving Securities, in addition to managing clearing, settlement and custody systems; 3.9 BSM [BM&FBOVESPA Supervisão de Mercados (BSM)] means BM&FBOVESPA Supervisão de Mercados, or BM&FBOVESPA Market Supervision, a mutualized notfor-profit entity responsible for the review, monitoring and oversight of the activities of 9

10 BM&FBOVESPA, Clearing Agents, Gross Settlement Agents and Custodian Agents, among others; 3.10 Clearinghouse [câmara] means the BM&FBOVESPA facility whose primary function is to provide clearing, settlement and risk management services for the Transactions executed on the BOVESPA Segment. It is also responsible for providing custodial and central depository services for the securities traded at BM&FBOVESPA; 3.11 Settlement Cycle [ciclo de liquidação] means the time periods established by the Clearinghouse for the performance of obligations resulting from the Settlement of Transactions; 3.12 Clearing [compensação] means the procedure for calculating the net balances in Securities and financial resources between the Counterparties for the Settlement of mutual debts and credits; 3.13 Custody Account [conta de custódia] means any individual or collective account for Securities and gold as a financial asset deposited at the Clearinghouse Depository or with other depositories; 3.14 Omnibus Account [conta coletiva] means a collective custody account of Securities held by natural and/or legal persons, including funds and other collective investment schemes, resident, domiciled or headquartered abroad; 3.15 Collateral Account [conta de garantia] means an account set up to register the movement of pledged Collateral; 3.16 Passenger Account [conta passageiro] means an individual Securities custody account held by natural and/or legal persons, including funds and other collective investment schemes, resident, domiciled or headquartered abroad; 3.17 Settlement Account [conta de liquidação] means an account held in STR, as regulated by the Central Bank of Brazil, which is utilized by the relevant holder to make or receive Payments associated with proprietary obligations to the Clearinghouse, whenever acting in the capacity of Clearing Agent or Gross Settlement Agent or Registration Participant or Custody Agent, as the case may be; 3.18 Clearinghouse Settlement Account [conta de liquidação da câmara] means an account held in STR, as regulated by the Central Bank of Brazil, which is utilized by the Clearinghouse to make or receive Payments associated with the Settlement process; 3.19 Securities Settlement Account [conta de liquidação de ativos] means the Securities account held by the Clearinghouse in its Depository Service, or even in other central depositories, in order to perform the steps in the Settlement process; 10

11 3.20 Gold Settlement Account [conta de liquidação de ouro] means the account held by the Clearinghouse in its Depository Service, in order to perform the steps in the Settlement process of transactions involving gold as a financial asset; 3.21 Bank Reserves Account [conta reservas bancárias] means an account held in STR, as regulated by the Central Bank of Brazil, which is utilized by the relevant holder to make or receive Payments associated, as the case may be, with (i) proprietary obligations to the Clearinghouse, whenever acting in the capacity of Clearing Agent or Gross Settlement Agent or Registration Participant or Custody Agent; and (ii) third-party obligations to the Clearinghouse; 3.22 Counterparty [contraparte] means the institutions that appear opposite each other in the Settlement of Transactions; 3.23 Central Counterparty [contraparte central], or CCP, means the position assumed by the Clearinghouse exclusively to Clearing Agents in the Settlement of Transactions after the Acceptance thereof; 3.24 Custody Service Agreement [contrato de prestação de serviços de agente de custódia de ativos] means the agreement executed by the Clearinghouse and the Custody Agents entitling the latter to provide depository services for Assets and gold as a financial asset, in accordance with applicable legislation and the Clearinghouse Rulebook and Operating Procedures; 3.25 Global Custodian [custodiante global] means a foreign institution licensed in its home jurisdiction to manage Custody Accounts, whether proprietary or customer accounts; 3.26 Depository [depositária] means the BM&FBOVESPA department responsible for providing custodial and central depository services for Securities; 3.27 Gold Depositary [depositário de ouro] means the entity registered by BM&FBOVESPA to be responsible for receiving, holding in custody and preserving the gold bars held under custody at the Depository Service; 3.28 Deposit [depósito] means placing Securities and gold as a financial asset with the Clearinghouse, with an entry record made in the relevant Investor Custody Account; 3.29 Issuer [emissor] means a company undertaking the obligations inherent in the Securities it issues; 3.30 Delivery [entrega] means the Transfer of Securities to or from a Securities Settlement Account with the Clearinghouse or other depositories, in order to settle obligations arising from Transactions; 3.31 Transaction Allocation [especificação de operações] means the process by which a Full Trading Participant identifies to the Clearinghouse the Investors associated with the Transactions to be settled; 11

12 3.32 Corporate Actions [evento de custódia] mean an Issuer s obligations related to the redemption of principal and interest in connection with the Securities issued by the Issuer and held under the Clearinghouse custody; 3.33 Gold Refiner [fundidor de ouro] means the financial institution registered by BM&FBOVESPA to be responsible for producing, receiving, holding in custody and preserving gold bars under custody in the Depository Service; 3.34 Settlement Fund [fundo de liquidação] means a dedicated fund established in order to cover losses in excess of pledged Collateral, in cases of default by Clearing Agents; 3.35 Collateral [garantias] means Securities, financial resources, rights, contracts and other instruments pledged to fulfill Participant obligations; 3.36 Risk Management [gerenciamento de riscos] means the set of activities aimed to minimize the possibility of discontinuity in the Transaction Settlement process and in the provision of the Depository Service, including through the adoption of generally accepted techniques, models and systems; 3.37 Default [inadimplência] means a failure to perform an obligation in the agreed time, place and manner; 3.38 Investor [investidor] means a natural or legal person, including collective investment schemes, which uses the services of Full Trading Participants to carry out Transactions in Trading Environments or those of Custodian Agents for the custody of Securities and gold as a financial asset; 3.39 Non-Resident Investor [investidor não residente] means a natural or legal person, including funds or collective investment schemes, resident, domiciled or headquartered abroad; 3.40 Qualified Investor [investidor qualificado] means an Investor authorized to settle Transactions directly, through one or more Full Clearing Agents, irrespective of the Full Trading Participant through which said Transactions may have been executed; 3.41 Settlement Window [janela de liquidação] means the interval of time that starts with the closing of the window for receipt of financial resources by the Clearinghouse and ends at the time the Clearinghouse transfers funds in STR for Settlement of its obligations as Central Counterparty; 3.42 Operating Limit [limite operacional] means an operating cap the Clearinghouse assigns to a Clearing Agent, and the latter to its customers, in order to limit the risk associated with the Settlement of Transactions under its responsibility; 3.43 Custody Limit [limite de custódia] means the limit the Clearinghouse assigns to a Custodian Agent for the total value of Securities held in Custody Accounts; 12

13 3.44 Settlement [liquidação] means a process by which rights and obligations, in Securities, gold as a financial asset and financial resources, are terminated; 3.45 Bilateral Settlement [liquidação bilateral] means a process by which the amount resulting from bilateral netting of rights and obligations in financial resources, owed by one counterparty to the other and vice versa, is settled; 3.46 Gross Settlement [liquidação bruta] means a process by which the orders for the Settlement of funds and the transfer of Securities occur on an individual basis, that is, the Transactions are settled one by one; 3.47 Settlement Agent [liquidante] means the institutions registered in the Clearinghouse that utilize their Bank Reserves Accounts or Settlement Accounts, held with the Central Bank of Brazil, to make or receive the Payments associated with the Settlement process; 3.48 Market [mercado] means a set of activities associated with Transactions in Securities of similar characteristics, such as the equities market, the corporate debt market and others; 3.49 State of Arrears [mora] means the failure to perform obligations in the agreed time, place and manner under circumstances, however, that signal the possibility of such obligations being fulfilled through the use of Collateral or other liquidity mechanisms; 3.50 Transactions [operações] mean trades in Securities and Securities-based derivatives, including lending arrangements, which are liable to be accepted by the Clearinghouse in the capacity of Central Counterparty; 3.51 Payment [pagamento] means the transfer of funds through the Clearinghouse Settlement Account in STR, in order to settle obligations associated with the Settlement of Transactions, with required Collateral, with Corporate Actions, with the fees payable to the Clearinghouse, and with the Transactions and the Securities registered in Registration Systems; 3.52 Participant [participante] means a natural or legal person that establishes a direct or indirect relationship with the Clearinghouse while acting (whether on a cumulative basis or not) in the capacity of Clearing Agent, Gross Settlement Agent, Registration Participant, Custodian Agent, Full Trading Participant, Settlement Agent, Investor, or Qualified Investor; 3.53 Full Trading Participant [participante de negociação pleno] means an institution licensed to execute Transactions for a proprietary portfolio or for the account and order of customers in any Trading Environment and in the Securities Lending Service; 3.54 Registration Participant [participante de registro] means an institution that is licensed to register Securities and Transactions for a proprietary portfolio or for the account and order of customers in Registration Systems, and which undertakes responsibility, 13

14 towards the Clearinghouse and its customers, for the Gross Settlement and the Bilateral Settlement of rights and obligations, in financial resources, due after a registration is made, as well as the delivery of securities, where this is foreseen; 3.55 Withdrawal [retirada] means removing Securities and gold as a financial asset from the Clearinghouse Depository, with an exit record being made in the relevant Investor Custody Account; 3.56 BOVESPA Segment [segmento bovespa] means the organized market managed by BM&FBOVESPA for the trading of equities and equity-based derivatives (options, forwards and futures); 3.57 SELIC [SELIC] means the Special System for Settlement and Custody managed by the Central Bank of Brazil; 3.58 Depository Service [serviço de depositária] means the centralized depository and fungible and non-fungible custody services for Securities and gold as a financial asset managed by the Clearinghouse; 3.59 Securities Lending Service [serviço de empréstimo de ativos] means the service managed by the Clearinghouse which allows Investors to lend and borrow Securities; 3.60 Trading System [sistema de negociação] means the technological and operational facilities which allow Transactions to be carried out on Trading Environments; 3.61 Registration System [sistema de registro] means the technological and operational facilities which allow Securities and Transactions to be registered in the registration environments managed by BM&FBOVESPA, pursuant to the specific rules and procedures it issues; 3.62 STR [STR] means the Reserves Transfer System managed by the Central Bank of Brazil; 3.63 Transfer [transferência] means the free of payment movement of Securities and gold as a financial asset between Custody Accounts in the Depository Service; 14

15 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 CLEARINGHOUSE PARTICIPANTS 4 The Clearinghouse performs activities as a Securities Clearing and Settlement facility and as a Central Securities Depository, in addition to managing a Gross Settlement and Bilateral Settlement System. 5 Acting in the capacity of Central Counterparty, it has the following three (3) categories of Participants: Full Clearing Agent, Proprietary Clearing Agent and Special Clearing Agent. 6 Acting in the capacity of Central Securities Depository, the Clearinghouse has the following three (3) categories of Participants: Full Custodian Agent, Proprietary Custodian Agent and Special Custodian Agent. 7 Acting in the capacity of manager of Gross Settlement and Bilateral Settlement systems, the Clearinghouse has the following two (2) categories of Participants: Gross Settlement Agent and Registration Participant. Gross Settlement Agents operate only in the Gross Settlement process, whereas Registration Participants operate in both Gross Settlement and Bilateral Settlement processes, pursuant to this Rulebook. 8 Institutions that wish to act as Clearing Agents, Custodian Agents, Gross Settlement Agents and Registration Participants are required to submit an application to the Clearinghouse accompanied by the documentation set forth in Appendix I of the Operating Procedures, and be admitted to the Clearinghouse pursuant to the provisions contemplated in the Rules for Access to the BM&FBOVESPA Systems and Markets. Registration Participants are also subject to the specific rules and procedures set forth for Registration System. 9 The BM&FBOVESPA Board of Directors will analyze the documentation attached to the application and assess the adequacy of the candidate to the relevant Participant category, formally communicating its approval or not of the applicant s admission to the Clearinghouse. 9.1 In the event of a decision to reject an application, the relevant candidate may appeal to the Shareholders Meeting of BM&FBOVESPA. The appeal will firstly be reviewed by the Board of Directors that will analyze it 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 Systems and Markets. Registration Participants are also subject to the specific rules and procedures set forth for Registration System. 15

16 CHAPTER II CLEARING AGENTS Section I Classification 10 Clearing Agents are classified pursuant to the following categories: 10.1 Full Clearing Agents: institutions licensed to settle Transactions they execute for proprietary portfolios and also for customers, Full Trading Participants or Qualified Investors portfolios; 10.2 Proprietary Clearing Agents: institutions licensed to settle Transactions: which they execute for proprietary portfolios or for customer portfolios; which are intermediated by companies belonging to the same economic group as the Proprietary Clearing Agents; which are intermediated by another institution for companies belonging to the same economic group as the Proprietary Clearing Agents; and which are executed for collective investment schemes managed by them or by companies belonging to the same economic group as the Proprietary Clearing Agents, even if such Transactions are intermediated by another institution Special Clearing Agents: institutions licensed only to settle Transactions in corporate debt securities issued by non-financial companies whose Securities are listed on Trading Environments: which they execute for proprietary portfolios or for customer portfolios; which are intermediated by companies belonging to the same economic group as the Special Clearing Agents; which are intermediated by another institution for companies belonging to the same economic group as the Special Clearing Agents; and which are executed for collective investment schemes managed by them or by companies belonging to the same economic group as the Special Clearing Agents, even if such Transactions are intermediated by another institution. 16

17 Section II Eligibility 11 Brokerage houses, broker-dealers, multi-service banks, commercial banks, investment banks, and other institutions, in the discretion of the Clearinghouse, are eligible to qualify as Clearing Agents. Section III Admission 12 The approval of a Clearing Agent s admission to the Clearinghouse and the performance of its activities is contingent on the essential requirements set forth below: 12.1 adhering formally to this Rulebook and the Clearinghouse Operating Procedures and other applicable regulatory and operating rules adopted by the Clearinghouse, by entering into a Clearing Service Agreement; 12.2 contributing to the Clearinghouse Settlement Fund, by making the minimum fixed contribution and the variable contribution established by the BM&FBOVESPA Management; 12.3 having a recognized expertise in credit assessment and lending, and in risk management activities in general; 12.4 having recognized organizational and operating capabilities, regarding in particular the Settlement of Transactions; 12.5 presenting a financial and economic standing consistent with the nature of the activities of a Clearing Agent, concerning in particular the maintenance of adequate capitalization, liquidity and indebtedness levels, pursuant to the provisions of the Operating Procedures; 12.6 presenting an adequate profitability level, consistent with its levels of business and capitalization; 12.7 having been licensed as a Clearinghouse Custodian Agent; 12.8 having as directors, officers and representatives persons of good professional, ethical and credit repute; 12.9 meeting the requirements set out in the basic audit guide of the BM&FBOVESPA operational qualification program (PQO); and adhering formally to BSM s rules and regulations and to the Market Arbitration Chamber, by entering into the Clearing Service Agreement. 17

18 Section IV Capital Requirements 13. For the performance of their activities, Clearing Agents must meet minimum capital and liquidity requirements, requirements of property and equipment, in addition to other requirements related to their financial and economic standing, as established by the Clearinghouse. 14. Minimum capital requirements differ by category of Clearing Agent and are described in Appendix 1 of the Operating Procedures. 15. The minimum capital requirements may change at any time, in the discretion of the Clearinghouse. 16. On evaluating an application for admission, and periodically thereafter, the Clearinghouse verifies compliance with capital requirements, in order to ensure that Clearing Agents meet them on a continuing basis. Section V Technical and Operational Requirements 17. Clearing Agents must meet the following operational requirements, irrespective of the category to which they belong: 17.1 having been granted access to the Clearinghouse systems and the functionalities required by the activities of a Clearing Agent; 17.2 engaging a Settlement Agent licensed by the Central Bank of Brazil and duly registered at the Clearinghouse on the basis of the documentation listed in Appendix 1 of the Operating Procedures; 17.3 designating the officer responsible for risk management activities; 17.4 providing a document describing the main features of the operating and technology systems employed in the provision of services, including a summary specification of the systems intrinsic and extrinsic operating routines and related internal procedures and controls; and 17.5 providing an organizational chart that indicates the department responsible for performing the services to be provided and explains the Chinese wall scheme to segregate risk management activities from other third-party asset management activities (for Full Trading Participants and Qualified Investors). 18. Clearing Agents must meet minimum standards related to technology infrastructure and contingency procedures appropriate for the performance of their activities, as set forth under Title X ( Technology Infrastructure and Contingency Procedures ) of this Rulebook and in specific additional rules issued by the Clearinghouse. 18

19 Section VI Contributions to the Settlement Fund 19. Contributing to the Settlement Fund of the Clearinghouse constitutes an essential requirement for the performance of activities as a Clearing Agent. 20. The Settlement Fund is composed of minimum fixed contributions established by category of Clearing Agent, of variable contributions corresponding to the share of each Clearing Agent in the Clearinghouse s total risk exposure, as measured through stress testing, and also of a BM&FBOVESPA contribution Each of the minimum fixed contributions and the variable contributions may be made in cash or in Brazilian government securities Variable contributions may be required on a daily basis. Section VII Contractual Relationships 21. Clearing Agents are required to enter into proper instruments in order to: 21.1 vis-à-vis BM&FBOVESPA, adhere formally to this Rulebook, declaring: that they have knowledge of the rules governing the activities of a Clearing Agent; that they recognize their responsibility towards BM&FBOVESPA in case the Settlement Agent they engage fails to meet the obligation to transfer funds for the Settlement of Transactions; that they exempt BM&FBOVESPA from liability in case the Settlement Agent they engage fails to meet the obligation to transfer funds received from BM&FBOVESPA and associated with the Settlement of Transactions; 21.2 Vis-à-vis its customers, Clearing Agents must implement the relevant service agreements, which at a minimum should contain provisions addressing the following: customers are to take full responsibility for the decision to engage a Clearing Agent and for the actions of the Clearing Agent they engage in the course of rendering services; customers are to exempt BM&FBOVESPA from liability in case the Clearing Agent fails to meet its obligations towards the customer, regardless of the circumstances leading to failure; customers are to acknowledge awareness of, and expressly adhere to the terms and conditions of this Rulebook; 19

20 Clearing Agents are to commit to giving customers prior notice of intent to discontinue their activities as a Clearing Agent or to terminate the service provision, pursuant to the Operating Procedures; customers are to acknowledge that sanctions and penalties that BM&FBOVESPA may impose on a Clearing Agent due to illegal or irregular actions of a customer may also extend to, and be imposed on such customer; the institution responsible for the records related to a Qualified Investor assumes liability for the accuracy and truthfulness of said information; and statement of the commencement date of the services Vis-à-vis Settlement Agents, Clearing Agents must implement the relevant service agreements, in particular as related to the transfer of financial resources in the name and for the account of Clearing Agents. 22. For due legal purposes, the contractual relationship 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 funds for Settlement, or Collateral posting with Clearing Agents. Section VIII Withdrawal of Accreditation 23. Clearing Agents may, at any time, elect to terminate the provision of Settlement services, provided they give the Management of BM&FBOVESPA at least three (3) business 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 Clearing Agents will remain responsible for any Transactions pending Settlement and any other obligations assumed by their customers or related to proprietary portfolios, until they are completely extinguished. 25. Pursuant to the provisions under Title IX ( Sanctions ) and Title XI ( Emergency Actions ) of this Rulebook, the Clearinghouse may withdraw the authorization granted to any Clearing Agents. CHAPTER III CUSTODIAN AGENTS Section I Classification 26. Custodian Agents are classified pursuant to the following categories: 20

21 26.1 Full Custodian Agents: institutions licensed to manage proprietary Custody Accounts and those of companies belonging to the same economic group as the Full Custodian Agents, in addition to Custody Accounts of non-institutional investors, investment clubs, institutional investors and Non-Resident Investors Proprietary Custodian Agents: institutions licensed to manage proprietary Custody Accounts and those of companies belonging to the same economic group as the Proprietary Custodian Agents, in addition to Custody Accounts of institutional and noninstitutional investors, and investment clubs, subject to terms and limits established by the Clearinghouse Special Custodian Agents: these are institutions licensed only to manage proprietary Custody Accounts. Section II Eligibility 27. Brokerage houses, broker-dealers, multi-service banks, commercial banks, investment banks, commodity brokerage firms (exclusively to provide custody services for gold as a financial asset) and other institutions, in the discretion of the Clearinghouse, are eligible to qualify as Custodian Agents. 28. Closed-end pension funds licensed by the Brazilian Supplementary Pension Plan Secretariat [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 the Clearinghouse, are eligible to qualify as Special Custodian Agents. Section III Admission 29. The approval of a Custodian Agent s admission to the Clearinghouse and the performance of its activities is contingent on the essential requirements set forth below: 29.1 adhering formally to this Rulebook and the Clearinghouse Operating Procedures and other applicable regulatory and operating rules adopted by the Clearinghouse, by entering into a Custody Service Agreement; 29.2 having recognized organizational and operating capabilities, in particular as related to the custody of Securities and gold as a financial asset, when applicable; 29.3 presenting financial and economic standing, in addition to technology and operational infrastructures consistent with the nature of the activities of a Custodian Agent; 29.4 having as directors, officers and representatives persons of good professional, ethical and credit repute; 21

22 29.5 meeting the requirements set out in the basic audit guide of the BM&FBOVESPA operational qualification program (PQO); and 29.6 adhering formally to BSM s rules and regulations and to the Market Arbitration Chamber, by entering into the Custody Service Agreement. Section IV Capital Requirements and Custody Limits 30. For the performance of their activities, Custodian Agents must meet minimum capital requirements and other requirements associated with their financial and economic standing, in addition to Custody Limits, as established by the Clearinghouse. 31. Minimum capital requirements and Custody Limits differ by category of Custodian Agent. 32. The minimum capital requirements and Custody Limits may change at any time, in the discretion of the Clearinghouse. 33. On evaluating an application for admission and periodically thereafter the Clearinghouse will verify compliance with minimum capital requirements, in order to ensure that the Custodian Agents meet them on a continuing basis. Section V Technical and Operational Requirements 34. Custodian Agents must meet the following operational requirements, irrespective of the category to which they belong: 34.1 having been granted access to the Clearinghouse systems and the functionalities required by the activities of a Custodian Agent; 34.2 carrying out the daily reconciliation of Custody Account balances for which they are responsible towards the Clearinghouse; 34.3 allocating to perform custodial activities a minimum of two (2) employees that successfully completed the Clearinghouse qualification and certification program; 34.4 by Custodian Agents that do not hold a Bank Reserves Account or a Settlement Account, engaging a Settlement Agent licensed by the Central Bank of Brazil and duly registered at the Clearinghouse on the basis of the documentation listed in Appendix 1 of the Operating Procedures, which will be responsible for receiving and transferring funds relating to the activities of the Custodian Agents The Custodian Agent that holds a Settlement Account can only use it to make or receive payments associated with its own activities. 22

23 34.5 Providing customers with statements of their Custody Accounts; 34.6 Establishing a proprietary or outsourced custody control system; 34.7 Designating the officer responsible for custodial activities; and 34.8 Providing a document describing the main features of the operating and technology systems employed in the provision of services, including a summary specification of the systems intrinsic and extrinsic operating routines and related internal procedures and 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 responsible for performing services to be provided and explains the Chinese wall scheme to segregate third-party custodial activities from asset management activities; and 35.2 providing detailed audit reports concerning the custodial operations, issued by an independent auditing firm engaged 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. Custodian Agents (including Special Custodian Agents) must meet minimum standards related to technology infrastructure and contingency procedures appropriate for the performance of their activities, as set forth under Title X ( Technology Infrastructure and Contingency Procedures ) of this Rulebook and in special additional rules issued by the Clearinghouse. Section VI Contractual Relationships 37. Custodian Agents are required to enter into proper instruments in order to: 37.1 vis-à-vis BM&FBOVESPA, execute the required Custody Service Agreement; 37.2 vis-à-vis customers, execute Custody Service Agreements, which at a minimum should contain provisions addressing the following: customers are to take full responsibility for the decision to engage a Custodian Agent; customers are to exempt BM&FBOVESPA from liability in case the Custodian Agent fails to meet its obligations towards the customer, regardless of the circumstances leading to failure; customers are to acknowledge awareness of: 23

24 this Rulebook, and fully adhere to the same; and the Custody Service Agreement executed by BM&FBOVESPA and Custodian Agents Custodian Agents are to commit to giving customers prior notice of intent to discontinue their activities as a Custodian Agent or to terminate the service provision, pursuant to the Operating Procedures; customers are to acknowledge that sanctions and penalties BM&FBOVESPA may impose on a Custodian Agent due to illegal or irregular actions of a customer may also extend to, and be imposed on such customer; statement of the commencement date of the custodial services; and customers are to consent to the Custodian Agent implementing a Block for Sale, if so required 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) are subject to the governing law of the Federative Republic of Brazil, its agencies and entities; a provision to the effect that the Global Custodian (or Omnibus Account holder) undertakes to give prior knowledge to its customers about the requirements of Brazilian capital markets legislation by furnishing a 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 market legislation; a provision to the effect that the Custodian Agent undertakes to provide the Global Custodian (or Omnibus Account holder) with copies of the Brazilian laws, statutes, codes, regulations, rules and requirements applicable to the domestic capital market, as enacted and issued by the Brazilian government authorities, regulatory agencies and self-regulatory entities; a provision to the effect that the Global Custodian (or Omnibus Account holder) undertakes to settle disputes related to the agreement established with the Custodian Agent, 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 said delegate to act in the name and on behalf of the 24

25 grantor for the purpose of receiving service of process and judicial and/or extrajudicial notifications issued by any Brazilian court, administrative authority and local selfregulatory agencies in connection with the operations contemplated in the relevant 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 institutional purposes and requirements of regulatory agencies and self-regulatory entities, giving due regard to the deadlines assigned by the relevant agency or entity, each acting within its own 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 antimoney laundering standards and processes; 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 and subparagraphs 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 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 a contractual relationship 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 to carry out transactions on the Brazilian financial and capital markets. 39 In the situations contemplated in the Operating Procedures, the Custodian Agents may engage a Full Clearing Agent and agree a joint liability arrangement for Deposits of certain Securities with the Depository Service. 25

26 Section VII Withdrawal of Accreditation 40. Custodian Agents may, at any time, elect to terminate the Custody Service Agreement, provided they give the Management of BM&FBOVESPA at least fifteen (15) business days 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 this Rulebook, the Clearinghouse may withdraw the authorization granted to any Custodian Agents. CHAPTER IV GROSS SETTLEMENT AGENTS Section I Eligibility 42 Brokerage houses, broker-dealers, multi-service banks, commercial banks, investment banks, and other institutions, in the discretion of the Clearinghouse, are eligible to qualify as Gross Settlement Agents. Section II Admission 43 Set forth below are the essential requirements applicable to Gross Settlement Agents: 43.1 adhering formally to this Rulebook and the Clearinghouse Operating Procedures and other applicable regulatory and operating rules adopted by the Clearinghouse, by entering into a Gross Settlement Service Agreement; 43.2 having recognized organizational and operating capabilities, in particular as related to the Settlement of Transactions; 43.3 presenting a financial and economic standing consistent with the nature of the activities of Gross Settlement Agents, in particular the maintenance of adequate capitalization, liquidity and indebtedness levels; 43.4 presenting an adequate profitability level, consistent with the levels of business and capitalization; 43.5 having been licensed as a Clearinghouse Custodian Agent; 43.6 having as directors, officers and representatives persons of good professional, ethical, and credit repute; 26

27 43.7 meeting the requirements set out in the basic audit guide of the BM&FBOVESPA operational qualification program (PQO); and 43.8 adhering formally to BSM s rules and regulations and to the Market Arbitration Chamber, by entering into the Gross Settlement Service Agreement. Section III Capital Requirements 44 For the performance of their activities, Gross Settlement Agents must meet minimum capital, liquidity and investment requirements, in addition to other requirements related to their financial and economic standing, as established by the Clearinghouse, according to the market in which they operate. Section IV Technical and Operational Requirements 45 Gross Settlement Agents must meet the operational requirements set forth below: 45.1 having been granted access to the systems and functionalities required by the activities of a Gross Settlement Agent; 45.2 engaging a Settlement Agent licensed by the Central Bank of Brazil and duly registered at the Clearinghouse on the basis of the documentation listed in Appendix 1 of the Operating Procedures; 45.3 allocating to perform settlement activities a minimum of two (2) employees that successfully completed the Clearinghouse qualification and certification program; 45.4 designating the officer responsible for Settlement activities; 45.5 providing a document describing the main features of the operating and technology systems employed in the provision of services, including a specification of the systems intrinsic and extrinsic operating routines and related internal procedures and controls. 46 Gross Settlement Agents must meet minimum adequacy standards related to technology infrastructure and contingency procedures appropriate for the performance of their activities, as set forth under Title X ( Technology Infrastructure and Contingency Procedures ) of this Rulebook and in special additional rules issued by BM&FBOVESPA. Section V Contractual Relationships 47 Gross Settlement Agents are required to enter into proper instruments in order to: 47.1 vis-à-vis BM&FBOVESPA, adhere formally to this Rulebook, declaring: 27

28 that they have knowledge of the rules governing their activities; that they have knowledge that BM&FBOVESPA will neither act as Central Counterparty for the Markets in which they will operate, nor for the Transactions they will settle, and that the role to be performed by BM&FBOVESPA will only be one of a facilitator of Delivery versus payment; that they exempt BM&FBOVESPA from liability in case the Settlement Agent fails to meet the obligation to transfer funds received from BM&FBOVESPA and associated with the Settlement of Transactions Vis-à-vis its Settlement Agent, Gross Settlement Agents: must implement the relevant service agreement, in particular as related to the transfer of funds in their name and for their account vis-à-vis customers, Gross Settlement Agents must implement the relevant service agreements, which at a minimum should contain provisions addressing the following: customers are to take full responsibility for the decision to engage a Gross Settlement Agent and for the actions of the Gross Settlement Agent they engage in the course of rendering services; customers are to exempt BM&FBOVESPA from liability in case the Gross Settlement Agent fails to meet its obligations towards the customer, regardless of the circumstances leading to failure; customers are to acknowledge awareness of, and expressly adhere to the terms and conditions of this Rulebook; Gross Settlement Agents are to commit to giving customers prior notice of intent to discontinue their activities as a Gross Settlement Agent or to terminate the service provision; customers are to acknowledge that sanctions and penalties that BM&FBOVESPA may impose on a Gross Settlement Agent due to illegal or irregular actions of a customer may also extend to, and be imposed on such customer; statement of the commencement date of the services. Section VI Withdrawal of Accreditation 48 Gross Settlement Agents may, at any time, elect to terminate the provision of Gross Settlement services, provided they give the Management of BM&FBOVESPA at least 28

29 three (3) business days prior written notice of the decision, in addition to giving prior notice to customers, in accordance with the provisions of the Operating Procedures Gross Settlement Agents will remain responsible for any Transactions pending Settlement and any other obligations assumed by their customers or related to proprietary portfolios, until they are completely extinguished. 49 Pursuant to the provisions under Title IX ( Sanctions ) and Title XI ( Emergency Actions ) of this Rulebook, the Clearinghouse may withdraw the authorization granted to any Gross Settlement Agents. CHAPTER V QUALIFIED INVESTORS Section I Eligibility 50 Any of the following parties are eligible for accreditation under the designation of Qualified Investor: 50.1 commercial banks, multi-service banks, investment banks; 50.2 closed-end pension funds licensed by the Brazilian Supplementary Pension Plan Secretariat [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 investment funds licensed to operate by the Brazilian Securities and Exchange 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 the Clearinghouse. 51 In the discretion of the Clearinghouse, legal representatives may authorize Investors to be designated as Qualified Investors. Section II Withdrawal of Accreditation 52 A Qualified Investor may submit a formal waiver of accreditation as Qualified Investor to the Clearing Agent or the Clearinghouse. 29

30 53 Pursuant to the provisions of the Operating Procedures, the Clearing Agent or the Clearinghouse may decide to withdraw the accreditation of any Qualified Investors. CHAPTER VI REGISTRATION PARTICIPANTS Section I Eligibility 54 The following institutions are eligible to qualify as Registration Participants: 54.1 multi-service banks, commercial banks, investment banks, development banks, savings banks [caixas econômicas], brokerage houses and broker-dealers, with the purpose of registering bank certificates of deposit, pursuant to the specific rules and procedures set forth for the Registration System; 54.2 commercial banks, multi-service banks holding real estate loan portfolios, the Brazilian Savings Bank [Caixa Econômica Federal], real estate credit companies, mortgage companies, brokerage houses and broker-dealers, with the purpose of registering real estate credit certificates, pursuant to the specific rules and procedures set forth for the Registration System; 54.3 multi-service banks, commercial banks, investment banks, development banks, savings banks [caixas econômicas], brokerage houses and broker-dealers, with the purpose of registering structured finance notes [certificado de operações estruturadas - COE], pursuant to the specific rules and procedures set forth for the Registration System; 54.4 multi-service banks, commercial banks, investment banks, development banks, commercial credit companies, savings & loans banks [caixas econômicas], real estate credit companies, mortgage companies, credit unions and the Brazilian Development Bank (BNDES), when these wish to register financial bills pursuant to the specific rules and procedures of the Registration System; and 54.5 other institutions, at the discretion of the Clearinghouse. Section II Admission 55 The performance of a Registration Participant s activities is contingent on the essential requirements set forth below: 55.1 abiding by the rules set forth for the Registration System; 55.2 submitting a signed application to the Clearinghouse accompanied by the documentation described in the specific rules and procedures set forth for the relevant Registration System; 30

31 55.3 adhering formally to the specific rules and procedures set forth for the relevant Registration System, by entering into the relevant instrument of access; 55.4 adhering formally to this Rulebook and the Clearinghouse Operating Procedures and other applicable regulatory and operating rules adopted by the Clearinghouse, by entering into the relevant instrument of access; 55.5 having recognized organizational and operating capabilities, regarding in particular to Gross Settlement and Bilateral Settlement of rights and obligations resulting from the registration of Securities and Transactions in registration environments managed by BM&FBOVESPA; 55.6 presenting a financial and economic standing consistent with the nature of the activities of a Registration Participant, concerning in particular the maintenance of adequate capitalization, liquidity and indebtedness levels; 55.7 presenting an adequate profitability level, consistent with its levels of business and capitalization; 55.8 having as directors, officers and representatives persons of good professional, ethical and credit repute; 55.9 meeting the requirements set out in the basic audit guide of the BM&FBOVESPA operational qualification program (PQO); and adhering formally to BSM s rules and regulations and to the Market Arbitration Chamber, by entering into the relevant instrument of access. Section III Capital Requirements 56 For the performance of their activities, Registration Participants must meet minimum capital, liquidity requirements, requirements of property and equipment, in addition to other requirements related to their financial and economic standing, as established by the Clearinghouse, according to the market in which they operate. Section IV Technical and Operational Requirements 57 Registration Participants must meet the operational requirements set forth below: 57.1 having been granted access to the systems and functionalities required by the activities of a Registration Participant; 57.2 providing infrastructure for hardware, software and connectivity, including to the World Wide Web, as appropriate for the performance of their activities; 31

32 57.3 engaging a Settlement Agent licensed by the Central Bank of Brazil and duly registered at the Clearinghouse on the basis of the documentation listed in Appendix 1 of the Operating Procedures, except when already acting in the capacity of a Settlement Agent; 57.4 allocating to settlement activities a minimum of one (1) employee qualified to the performance thereof; 57.5 designating the Officer responsible for Settlement activities; 57.6 providing a document describing the main features of the operating and technology systems employed in the provision of services, including a specification of the systems intrinsic and extrinsic operating routines and related internal procedures and controls. 58 Registration Participants must meet minimum adequacy standards related to technology infrastructure and contingency procedures appropriate for the performance of their activities, as set forth under Title X ( Technology Infrastructure and Contingency Procedures ) of this Rulebook and in special additional rules issued by the BM&FBOVESPA. Section V Contractual Relationships 59 Registration Participants are required to enter into proper instruments in order to: 59.1 vis-à-vis BM&FBOVESPA, adhere formally to this Rulebook, declaring: that they have knowledge of the rules governing their activities; that they have knowledge that BM&FBOVESPA will neither act as Central Counterparty for the Markets in which they will operate, nor for the Transactions they will settle, and that the role to be performed by BM&FBOVESPA will only be one of a facilitator of cash settlement between two Registration Participants; that they exempt BM&FBOVESPA from liability in case the Settlement Agent they engage fails to meet the obligation to transfer funds received from BM&FBOVESPA and associated with Gross Settlement or Bilateral Settlement of rights and obligations resulting from the registration of Securities and Transactions in the registration environments managed by BM&FBOVESPA, and exempt BM&FBOVESPA from any responsibility if there is not the delivery of Securities where such is foreseen; 59.2 vis-à-vis the engaged Settlement Agent, Registration Participants: must implement the relevant service agreement, in particular as related to the transfer of funds in their name and for their account. 32

33 59.3 Vis-à-vis customers, Registration Participants must implement the relevant service agreements, which at a minimum should contain provisions addressing the following: customers are to take full responsibility for the decision to engage a Registration Participant and for the actions of the Registration Participant they engage in the course of rendering services; customers are to exempt BM&FBOVESPA from liability in case the Registration Participant fails to meet 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 this Rulebook, the Clearinghouse Operating Procedures and the specific rules and procedures of the relevant Registration System; Registration Participants are to commit to giving customers prior notice of intent to discontinue their activities as a Registration Participant or to terminate the service provision; customers are to acknowledge that sanctions and penalties that BM&FBOVESPA may impose on a Registration Participant due to illegal or irregular actions of a customer may also extend to, and be imposed on such customer; statement of the commencement date of the services. Section VI Withdrawal of Accreditation 60 Registration Participants may, at any time, elect to terminate the provision of Gross Settlement and Bilateral Settlement services, provided they give the Management of BM&FBOVESPA at least three (3) business days prior written notice of the decision, in addition to giving prior notice to customers, in accordance with the provisions of the Operating Procedures Registration Participants will remain responsible for the rights and obligations, in financial resources, resulting from Securities and Transactions pending Settlement and any other obligations assumed by their customers or related to proprietary portfolios, until they are completely extinguished. 61 Pursuant to the provisions under Title IX ( Sanctions ) and Title XI ( Emergency Actions ) of this Rulebook, the Clearinghouse may withdraw the authorization granted to any Registration Participants. 33

34 T I T L E I V N A T U R E O F A C T I V I T I E S AND O P E R A T I N G D I S C I P L I N E CHAPTER I LEGAL NATURE 62 As provider of deferred net settlement systems for Securities, the Clearinghouse assumes the role of Central Counterparty to Transactions solely towards Clearing Agents, in accordance with applicable legislation and regulations, as well as its own rules, following the Acceptance of such Transactions. 63 As provider of gross settlement systems for Securities, the Clearinghouse does not assume the role of Central Counterparty towards Gross Settlement Agents, in accordance with applicable regulatory rules. 64 As provider of gross settlement and bilateral settlement systems for rights and obligations in financial resources resulting from the registration of Securities and Transactions, the Clearinghouse does not assume the role of Central Counterparty towards Registration Participants, in accordance with applicable regulatory rules. 65 As manager of deferred net settlement systems and gross settlement systems for Securities, the Clearinghouse coordinates Settlement on a Delivery versus payment basis. 66 As Central Counterparty, the Clearinghouse also undertakes responsibility for ensuring the final Settlement of securities lending agreements registered in the Securities Lending Service. 67 BM&FBOVESPA may enter into agreements with Trading Environments, or the managers thereof, in order to ensure prompt relay of information associated with Transactions executed in such Trading Environments, for purposes of the performance of Clearing, Settlement and Risk Management activities. 68 As Depository, the Clearinghouse manages the Depository Service, in accordance with applicable regulatory rules. 69 With the purpose of ensuring proper performance of the activities associated with Clearing, Settlement and Risk Management of Transactions and with Securities Deposits, BM&FBOVESPA executes agreements with each of the Participants. 70 In its discretion, BM&FBOVESPA may also enter into agreements with Issuers, Gold Depositaries and Gold Refiners, in order to ensure performance of the activities associated with its Depository Service. 34

35 CHAPTER II TRANSACTION REGISTRATION AND ACCEPTANCE 71 Based on the information received through Trading Systems, the Clearinghouse promptly registers the Transactions carried out on Trading Environments. 72 Registered Transactions are accepted for Settlement, provided the Clearinghouse ascertains that specific criteria, as described in the Operating Procedures, regarding securities, price, quantity, Operating Limits, deadlines and timetables, and other provisions foreseen in this Rulebook have been met. 73 Acceptance will be deemed to have occurred upon the Clearinghouse relaying the corresponding information to the relevant Clearing Agents, as established in the Operating Procedures Transactions not accepted will be reported to the relevant Full Trading Participants and Trading Environments, as established in the Operating Procedures. CHAPTER III CLEARING AND SETTLEMENT 74 Clearing and Settlement processes entail the relationships established along the chain of responsibilities for the Settlement of reciprocal debits and credits in Securities and financial resources between Counterparties In the chain of responsibilities, Clearing and Settlement processes involve the relationships between the Clearinghouse and Clearing Agents, between the latter and Qualified Investors and Full Trading Participants, and between the latter and Investors. 75 On acting in the capacity of Central Counterparty to ensure the Settlement of accepted Transactions, the Clearinghouse will give regard to operating rules that, among other things, are conducive to the following results: 75.1 multilateral netting of the rights and obligations of Clearing Agents, and thus successively through to the end of the chain of responsibilities; 75.2 final Settlement of Transactions towards Clearing Agents at the time that financial resources are transferred through STR and Securities are transferred in the Depository Service or in other Depositories, on simultaneous, irrevocable and unconditional basis, for the relevant net creditors; 75.3 integration with the communication system established by the Central Bank of Brazil to receive, send and handle all the messages exchanged with Participants, within the scope of the Clearinghouse operations as a provider of deferred net settlement systems; 35

36 75.4 adherence to timetables and operating rules established by the Central Bank of Brazil for financial resources transferred through STR regarding the Settlement of Transactions, as prescribed by the Operating Procedures; 75.5 in the event of Default by a Clearing Agent, adoption of the actions prescribed under Title VII ( State of Arrears and Default ) of this Rulebook; and 75.6 Transaction suspension or cancellation, regardless of prior Acceptance by the Clearinghouse, but giving regard to a Settlement s irrevocability and unconditionality, if and when so determined by the Central Bank of Brazil, the Brazilian Securities and Exchange Commission, BSM, Trading Environments, or BM&FBOVESPA (acting in the capacity of oversight entity), each acting within its own sphere of authority. Section I Multilateral Netting 76 The Settlement of Transactions by the Clearinghouse when acting as Central Counterparty and also as provider of deferred net settlement systems must be preceded by multilateral netting of rights and obligations under accepted Transactions. 77 The Clearinghouse will calculate the rights and obligations of Clearing Agents, in Securities and funds, and proceed to clear: 77.1 identical Securities; and 77.2 funds as a single consolidated multilateral net balance covering all the Markets for which the Clearinghouse provides services as Central Counterparty. 78 The Clearinghouse will notify the Clearing Agents their rights and obligations resulting from multilateral net clearing process, for purposes of Settlement within the deadlines and timetables established in the Operating Procedures. Section II Settlement Subsection I Structure of Settlement Accounts 79 In order to conduct Settlement activities for Transactions, the Clearinghouse established Settlement Accounts in STR and its Depository Service, and it may also hold Settlement Accounts at other depositories The Clearinghouse holds a Settlement Account in STR for purposes of transferring funds required to ensure final Settlement, in bank reserves, of Transactions carried out on Trading Environments. 36

37 79.2 The Clearinghouse holds a Securities Settlement Account at its Depository Service and other depositories for purposes of transferring Securities associated with the Settlement of Transactions carried out on Trading Environments. 80 The Settlement Accounts held by the Clearinghouse in STR, its Depository Service and other depositories 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 81 In regard to the Delivery of Securities owed by Clearing Agents that are net debtors towards the Clearinghouse, the following must be observed: 81.1 for Securities deposited with the Depository Service, Clearing Agents that are net debtors on securities towards the Clearinghouse will transfer the relevant Securities to the Clearinghouse Securities Settlement Account with the Depository Service, according to the rules provided in the Operating Procedures; 81.2 for Securities deposited with other depositories, the Clearinghouse and the Clearing Agents which are net debtors will transfer the relevant Securities to the Clearinghouse Securities Settlement Account, according to the rules established by the relevant depository and the rules provided in the Operating Procedures; and 81.3 Delivery will only be deemed effective upon the Clearinghouse receiving confirmation from the relevant depositories that the Securities have been transferred. 82 After Delivery by the Clearing Agents is confirmed, the Clearinghouse notifies their respective Settlement Agents of the transfers of funds required to be made and completed by no later than the opening of the Clearinghouse Settlement Window in STR. 83 Clearing Agents are required to settle their net debt positions through their Settlement Agents, by debiting their respective Bank Reserves Accounts or Settlement Accounts and crediting the Clearinghouse Settlement Account in STR for the same amount In order to settle a Clearing Agent s net debt position, by the opening of the Clearinghouse Window the Settlement Agent will debit the relevant funds from its Bank Reserves Account or Settlement Account and credit the Clearinghouse Settlement Account in STR for the same amount The Clearinghouse will not net credit and debt positions of Clearing Agents that engage the same Settlement Agent. 37

38 83.2 Payment by a Clearing Agent will only be deemed to have been effectively made upon the Clearinghouse receiving confirmation from the Central Bank of Brazil that the relevant funds have been credited to the Settlement Account. 84 In regard to Delivery and Payment by the Clearinghouse to Clearing Agents with a credit position, the following must be observed: 84.1 at the closing of the Clearinghouse Settlement Window, the Clearinghouse will coordinate Delivery versus Payment on a simultaneous, final, irrevocable and unconditional basis, through synchronized movement of Securities and funds, as follows: the Clearinghouse will provide Payments by debiting the corresponding funds from its Settlement Account in STR and crediting those funds to the net creditors Clearing Agents through their Settlement Agents Bank Reserves Accounts or Settlement Accounts; and the Clearinghouse will implement the Delivery of Securities by debiting the relevant Securities from its Securities Settlement Account at the Depository Service or other depositories and crediting the Clearing Agents which are net creditors on Securities Upon completion of these simultaneous transfers of funds by STR and Securities by the Depository Service or other depositories, Settlement will be deemed effective, final and irrevocable. 85 In the event of a failed Delivery or of a failed Payment to the Clearinghouse, the special mechanisms contemplated in the Operating Procedures will be implemented. CHAPTER IV RISK MANAGEMENT Section I Nature; Scope 86 BM&FBOVESPA will perform Risk Management activities based on guidelines and standards established by the BM&FBOVESPA Management, in accordance with the provisions of this Rulebook. 87 Pursuant to the BM&FBOVESPA Bylaws, BM&FBOVESPA established a Market Risk Committee responsible for advising it on Risk Management guidelines. 88 Risk Management activities include, among other purposes, identification, measurement, and coverage or transfer of risk exposures, in particular credit risks, liquidity risks, operational risks, legal risks and market risks. 38

39 Section II Credit Risk on Settlement 89 BM&FBOVESPA maintains a system to manage risk and control exposure to credit risk related to Transactions for which it acts or may come to act as Central Counterparty Credit risk on Settlement is the maximum possible loss, associated with the security or confidence levels provided in Risk Management guidelines, from fluctuations in the market prices of Securities under Transactions not settled by the relevant Clearing Agent Based on the chain of responsibilities referred to under Title VI of this Rulebook: the Clearinghouse undertakes responsibility for managing and controlling its own exposure to credit risk towards the Clearing Agents; Clearing Agents undertake responsibility for managing and controlling their own exposure to credit risk towards Full Trading Participants and Qualified Investors, and vice versa; Full Trading Participants undertake responsibility for managing and controlling their own exposure to credit risk towards Investors, and vice versa. 90 The mechanisms employed in credit risk management are intended to the following: 90.1 identify and measure the Clearinghouse credit risk exposure moment-to-moment towards each Clearing Agent; 90.2 determine how to cover or transfer the credit risk referred to in subparagraph 90.1, whether by requiring Collateral or by using another form of protection; 90.3 avoid that the credit risk of Transactions to be settled is not covered by Collateral or other form of protection. 91 The identification, measurement and coverage or transfer of the Clearinghouse credit risk towards Clearing Agents will be made effective by adopting the portfolio method, whereas giving regard to the following: 91.1 for risk related to rights and obligations that terminate on completion of the Settlement Cycle: the portfolio of each Clearing Agent encompasses all the Transactions it is responsible for settling in the relevant Settlement Cycles, and they will be netted irrespective of the Full Trading Participants and Investors, whether Qualified or not, that executed them on Trading Environments; 39

40 the credit risk exposure calculated pursuant to this paragraph will be covered directly by the relevant Clearing Agent For rights and obligations outstanding at the end of the relevant Settlement Cycles, such as those associated with derivatives positions, Securities lending and Transactions not settled at the end of the relevant Settlement Cycles due to a failed Delivery of Securities: the portfolio of each Clearing Agent encompasses all the Transactions it is responsible for settling on maturity or termination, and only the Transactions executed by the same Investor through the same Full Trading Participant, or those executed by the same Qualified Investor, as the case may be, will be netted; the credit risk exposure calculated pursuant to this paragraph will be covered by the relevant Investor, through the corresponding Full Trading Participant and Clearing Agent, or, as the case may be, by the relevant Qualified Investor, through the corresponding Clearing Agent; the Full Trading Participant and the relevant Clearing Agent are co-obligors of the Investor, successively liable for covering the credit risk exposure calculated pursuant to this paragraph. Similarly, the Clearing Agent is the co-obligor of the Qualified Investor Credit risk measurement and coverage are performed on a daily basis and, if so required, at any time of the day. 92 In order to control its credit risk exposure towards Clearing Agents, the Clearinghouse employs Risk Management mechanisms which at a minimum include the following procedures: 92.1 continuing monitoring of minimum capital requirements applicable to Clearing Agents, as provided in Chapter I of Title III; 92.2 supervising the market for closer monitoring of atypical fluctuations in market prices and volumes traded, of the concentration of trades by Full Trading Participants, and of the concentration of responsibilities by their respective Clearing Agents; 92.3 assigning Operating Limits and monitoring the use thereof; 92.4 collecting and managing Collateral; 92.5 marking to market Transactions to be settled and deposited Collateral; 92.6 managing the Settlement Fund with the aim of covering losses in excess of the value of deposited Collateral, in the event of Default by a Clearing Agent; and 92.7 segregating the Special Funds. 40

41 93 BM&FBOVESPA sets the required levels of Collateral, as well as the composition and calculation method thereof, implementing any changes thereto whenever it deems necessary or convenient. Any such change may be implemented retroactively, including for purposes of implementing additional Collateral calls at any time, or suspending the activities of any Clearing Agent due to Collateral insufficiency. 94 BM&FBOVESPA may establish funds for specific purposes, carry insurance and adopt other mechanisms to cover or transfer credit risk on Settlement, with the aim of improving performance. Subsection I Collateral 95 In order to cover credit risk on Settlement, BM&FBOVESPA collects Collateral from Participants, through Collateral Accounts held with SELIC, the Clearinghouse Depository Service and other local and cross-border depositories, wherein Collateral pledged in the form of Securities is deposited Collateral entering Clearinghouse Collateral Accounts is segregated by Participant and used only to cover losses arising from failure to perform any obligations, such as contemplated herein. 96 The Securities acceptable as Collateral are defined in the Operating Procedures and consist primarily of liquid Securities, which the Clearinghouse is responsible for managing and, as the case may be, executing. 97 The Securities accepted as Collateral are segregated into individual or collective Collateral Accounts, based on the purpose thereof, in accordance with the Operating Procedures. 98 Securities will be accepted as Collateral at an appropriate haircut considering the market prices thereof, based on inherent risks and taking into account the relevant liquidation costs. Subsection II Operating Limits 99 The rules set forth below are established for assignment of Operating Limits to Clearing Agents and their customers: 99.1 the Clearinghouse will assign Operating Limits based on the value of Collateral previously deposited by each particular Clearing Agent; 99.2 the Clearinghouse will establish to each particular Clearing Agent a single Operating Limit for credit risk exposure associated with the Transactions executed on the Trading Environments and to be settled in the relevant Settlement Cycles; 41

42 99.3 a raise in Operating Limits requires additional Collateral to be deposited; 99.4 the Clearinghouse may change the Operating Limits at any time, on the basis of general market conditions or particular Clearing Agent conditions; 99.5 the Clearinghouse will communicate each Clearing Agent of its assigned Operating Limit and any changes thereto; 99.6 Clearing Agents are required to allocate to customers, in whole or in part, and by Trading System, the Operating Limits they were granted by the Clearinghouse; 99.7 Clearing Agents are to allocate their Operating Limits to customers on the basis of their own evaluations and the contractually agreed conditions for provision of Settlement services; 99.8 Clearing Agents are permitted to transfer the Operating Limit allocated to the same customer among Trading Systems, as long as it is not exceeded; 99.9 Clearing Agents are entitled to raise, at any time, the Operating limits allocated to their customers, as long as their own Operating Limits are not exceeded; Clearing Agents have the prerogative of cutting, at any time, the Operating Limit allocated to a customer, without prejudice to their responsibility for the Settlement of Transactions already allocated to said customer; Clearing Agents are required to give the Clearinghouse notice of the Operating Limits allocated to customers and any changes thereto; and the Clearinghouse will not accept Transactions carried out in excess of the relevant Operating Limits. 100 The Clearinghouse will be 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: where exposure to credit risk under Transactions to be settled by any particular Clearing Agent exceeds its Operating Limit, the Clearinghouse, based on Operating Limit monitoring, may require, at any time, additional Collateral of said Clearing Agent The Clearinghouse will provide Clearing Agents with the means to access information permitting them to monitor their own and their customers Operating Limits The Clearinghouse will provide Full Trading Participants with the means to access information permitting them to monitor their own Operating Limits. 42

43 100.4 The Clearinghouse may also provide data and calculation information for Clearing Agents to allocate Operating Limits and manage customer risk, being exempt from any liability for how Clearing Agents use such data and information The credit risk associated with the Transactions intermediated by any particular Full Trading Participant affects the Operating Limit assigned to said Full Trading Participant and that of its designated Clearing Agent in the corresponding Trading Systems Transactions allocated to a Qualified Investor and not subject to reallocation cease to affect the Operating Limits of the intermediating Full Trading Participant and its designated Clearing Agent, and start to affect the Operating Limits of the allocated Qualified Investor and corresponding Clearing Agent. 101 The calculation formulas and criteria designed to define, measure 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 102 BM&FBOVESPA maintains procedures to manage and control exposure to the liquidity risk related to Transactions carried out on markets in which it operates or may operate as Central Counterparty Liquidity risk is the financial value of a Payment or the number of deliverable Securities which the Clearinghouse, substituting for a Clearing Agent in Default or State of Arrears, is to pay or deliver as and when required. 103 The procedures used in managing liquidity risk are intended to the following: identify and measure the liquidity risk to which the Clearinghouse is exposed; determine appropriate corrective actions for situations of illiquidity and of liquidity provision, whether via financial resources or Securities; limit exposure to the liquidity risk referred to in this paragraph. 104 The Clearinghouse establishes voluntary and compulsory mechanisms to treat Delivery or Payment failures, which among other things, and as further provided in the Operating Procedures, include the following: Securities lending arrangements and financial loans; replacement of the Participants declared in Default; delivering substitute Securities; and 43

44 104.4 repurchasing Securities. 105 The Clearinghouse will set limits to open derivatives positions and open Securities lending positions and, as provided in the Operating Procedures, performs daily monitoring of adherence to those limits, in order to avoid exposure to the liquidity risk associated with the concentration of positions. Section IV Settlement Fund 106 BM&FBOVESPA maintains a Settlement Fund designed to cover losses, in the event of Default by a Clearing Agent, in excess of deposited Collateral and to provide liquidity to the Clearinghouse in situations of lack of Delivery or Payment The rules that regulate the Settlement Fund are set forth under Title VIII ( Settlement Fund ) of this Rulebook. Section V Special Funds 107 BM&FBOVESPA will segregate Special Funds, under applicable legislation, exclusively to meet its obligations as Central Counterparty The yields generated from the Special Funds, net of related charges, will be incorporated into the Special Funds. CHAPTER V GROSS SETTLEMENT AND BILATERAL SETTLEMENT SERVICES 108 The Clearinghouse offers services for Gross Settlement of Transactions carried out on Trading Environments with which it has signed agreements. 109 The types of Transactions and the phases of the Gross Settlement process are set forth in the Operating Procedures In performing the role of provider of Gross Settlement services, the Clearinghouse operates to facilitate and coordinate Gross Settlement, by offering appropriate infrastructure for efficient registration, preparation and Settlement of Transactions, however without interposing itself as Central Counterparty. 110 The Gross Settlement service operated by the Clearinghouse entails coordinating transfers of Securities and funds in the Depository Service and in STR. 111 In the event of failed Delivery or failed Payment, the Clearinghouse deems the Transaction as not settled, notifies the Counterparties accordingly, and returns Securities or funds, as the case may be, to the performing Counterparty. 44

45 112 The Clearinghouse further provides Gross Settlement and Bilateral Settlement services for Securities and Transactions registered in Registration Systems. 113 The types of Securities and Transactions and the phases of the Gross Settlement and Bilateral Settlement processes are set out in the Operating Procedures and also in the specific rules and procedures set forth for the Registration System In performing the role of provider of Gross Settlement and Bilateral Settlement services, the Clearinghouse operates to facilitate and coordinate Gross Settlement and Bilateral Settlement, by offering appropriate infrastructure for efficient registration, preparation and Settlement of rights and obligations in financial resources resulting from the registration of Securities and Transactions, however without interposing itself as Central Counterparty. 114 The Gross Settlement and Bilateral Settlement services operated by the Clearinghouse for rights and obligations in financial resources resulting from the registration of Securities and Transactions in Registration Systems entail coordinating transfers of funds in STR. 115 In the event of failed Payment, the Clearinghouse deems the rights and obligations in financial resources resulting from the registration of Securities and Transactions in the Registration System as not settled, notifies the Counterparties accordingly, and returns funds to the performing Counterparty. 116 The Clearinghouse systems and the Registration Systems communicate through a mechanism that provides the integration thereof, in order to enable or not the transfer of ownership in the Registration System, pursuant to the Operating Procedures. When obligations are met, the Clearinghouse systems report to the Registration System that settlement has been carried through to completion, in which case the transfer of ownership may occur. When Payment fails, the Clearinghouse systems report to the Registration System that settlement has not been carried through to completion, in which case the transfer of ownership does not occur. Section I Gross Settlement Subsection I Structure of Settlement Accounts 117 In order to perform the activities associated with Gross Settlement of Transactions carried out on Trading Environments and of Transactions and Securities registered in Registration Systems, the Clearinghouse established Settlement Accounts in STR and its Depository Service, and it may also hold Settlement Accounts at other depositories The Clearinghouse will hold a Settlement Account in STR for purposes of transferring funds required to ensure final Settlement, in bank reserves, of Transactions carried out 45

46 on Trading Environments and of Transactions and Securities registered in Registration Systems The Clearinghouse holds a Securities Settlement Account in its Depository Service and other depositories for purposes of transferring Securities associated with the Settlement of Transactions carried out on Trading Environments. 118 The Settlement Accounts held by the Clearinghouse in STR, in its Depository Service and other depositories 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 119 In regard to the Delivery of Securities owed by Gross Settlement Agents to the Clearinghouse, the following must be observed: for Securities deposited with the Clearinghouse Depository Service, Gross Settlement Agents will transfer the relevant Securities to the Securities Settlement Account the Clearinghouse holds with its the Depository Service, in accordance with the rules provided in the Operating Procedures; for Securities deposited with other depositories, the Clearinghouse and Gross Settlement Agents owing Securities shall transfer the relevant Securities to the Clearinghouse Securities Settlement Account, in accordance with the rules established by the relevant depository and the rules provided in the Operating Procedures; and Delivery will only be deemed effective upon the Clearinghouse receiving confirmation from the relevant depositories that the Securities have been transferred. 120 After Delivery is confirmed, the Clearinghouse notifies the Gross Settlement Agents and their respective Settlement Agents of the transfers of funds, required to be made and completed by no later than a designated time. 121 Gross Settlement Agents are required to settle their Payment through their Settlement Agents, by debiting their respective Bank Reserves Accounts or Settlement Accounts and crediting the Clearinghouse Settlement Account in STR In order to settle the debt positions of Gross Settlement Agents, by the designated time, Settlement Agents will instruct the debit of relevant funds from their respective Bank Reserves Accounts or Settlement Accounts and credit the Clearinghouse Settlement Account in STR for the same amounts Payment will be deemed effective upon the Clearinghouse receiving confirmation from the Central Bank of Brazil that the relevant funds have been credited. 46

47 122 In regard to Delivery and Payment by the Clearinghouse to Gross Settlement Agents with a credit position, the Clearinghouse will coordinate Delivery versus Payment on a simultaneous, final, irrevocable and unconditional basis through synchronized movement of Securities and funds, as follows: the Clearinghouse will perform Payments by debiting the corresponding funds from its Settlement Account in STR and crediting those funds to the relevant Gross Settlement Agents through their Settlement Agents Bank Reserves Accounts or Settlement Accounts; and the Clearinghouse will perform the Delivery of Securities by debiting the relevant Securities from its Securities Settlement Account at its Depository Service or other depositories, and crediting the respective Settlement Accounts of the Gross Settlement Agents, as the case may be. 123 Upon completion of these simultaneous transfers of funds by STR and Securities by the Clearinghouse Depository Service or other depositories, Settlement will be deemed effective, final and irrevocable. Subsection III Payment 124 In regard to the Settlement of Transactions and Securities registered in Registration Systems, the Payment of funds is subject to the provisions set forth below: 125 The Clearinghouse notifies Registration Participants and their respective Settlement Agents of the transfers of funds required to be made and completed for purposes of Settlement within the deadlines and timetables established in the Operating Procedures. 126 Registration Participants are required to settle their debt positions through their Settlement Agents, by debiting their respective Bank Reserves Accounts or Settlement Accounts and crediting the Clearinghouse Settlement Account in STR In order to settle the debt positions of Registration Participants, by the designated time Settlement Agents will instruct the debit of relevant funds from their respective Bank Reserves Accounts or Settlement Accounts and credit the Clearinghouse Settlement Account in STR for the same amounts Payment will be deemed effective upon the Clearinghouse receiving confirmation from the Central Bank of Brazil that the relevant funds have been credited. 127 The Clearinghouse will provide Payments by debiting the corresponding funds from its Settlement Account in STR and crediting those funds to the relevant Registration Participants through their Settlement Agents Bank Reserves Accounts or Settlement Accounts. 47

48 128 Upon completion of these transfers of funds through STR, Settlement will be deemed effective, final and irrevocable. Section II Bilateral Settlement 129 Bilateral Settlement implies the netting of rights and obligations, in financial resources, between two Registration Participants, resulting from the registration of Securities and Transactions in Registration System. Subsection I Structure of Settlement Accounts 130 In order to conduct Bilateral Settlement activities for rights and obligations in financial resources resulting from the registration of Securities and Transactions in the Registration System, the Clearinghouse holds Settlement Accounts in STR The Clearinghouse holds a Settlement Account in STR for purposes of transferring funds associated with the Bilateral Settlement of rights and obligations in financial resources resulting from the registration of Securities and Transactions in the Registration System, in order to ensure their final Settlement, in bank reserves. 131 The Settlement Accounts held by the Clearinghouse in STR serve the purpose of facilitating coordination activities to ensure cash settlement is executed and accomplished on a final, irrevocable and unconditional basis. Subsection II Bilateral Netting 132 In order to complete the Bilateral Settlement of rights and obligations in financial resources resulting from the registration of Securities and Transactions in the Registration System, the Clearinghouse will first implement the bilateral netting of rights and obligations of those Securities and Transactions under the responsibility of two Registration Participants. 133 The Clearinghouse will calculate the rights and obligations of both Registration Participants in financial resources, and proceed to process the netting thereof in a single bilateral net balance. 134 The Clearinghouse notifies the Registration Participants and their Settlement Agents of their rights and obligations resulting from bilateral netting, for purposes of Settlement within the deadlines and timetables established in the Operating Procedures. 135 Registration Participants are required to settle their debt positions through their Settlement Agents, by debiting their respective Bank Reserves Accounts or Settlement Accounts and crediting the Clearinghouse Settlement Account in STR. 48

49 135.1 In order to settle the debt positions of Registration Participants, by the designated time Settlement Agents will instruct the debit the relevant funds from their respective Bank Reserves Accounts or Settlement Accounts and credit the Clearinghouse Settlement Account in STR for the same amounts Payment will be deemed effective upon the Clearinghouse receiving confirmation from the Central Bank of Brazil that the relevant funds have been credited. 136 The Clearinghouse will provide Payments by debiting the corresponding funds from its Settlement Account in STR and crediting those funds to the relevant Registration Participants through their Settlement Agents Bank Reserves Accounts or Settlement Accounts. Subsection III Failure to pay a bilateral net balance 137 The Settlement of bilateral net balances will be cancelled for Registration Participants that fail to make the payments due by the time established in the Operating Procedures In the event referred to in the previous paragraph, the rules and procedures applicable to Gross Settlement, as set forth herein, will apply to the termination of rights and obligations that made up bilateral net balances Failure to comply with the time limit for Payment at Gross Settlement will result in the adoption of the specific rules and procedures set forth for the Registration System. CHAPTER VI SECURITIES DEPOSITORY SERVICE 138 Acting in the capacity of Depository of Securities and gold as a financial asset, the Clearinghouse adopts operating standards conducive to the following procedures, among other things: analytical control of ownership of Securities and gold as a financial asset held in custody; treatment of Corporate Actions; Deposits, Withdrawals and Transfers of Securities and gold as a financial asset, based on transfer instructions received from Custodian Agents; registration of Securities and gold as a financial asset, held in the Depository Service, under the Clearinghouse fiduciary ownership in the Issuer s records or in the Gold Depositary records, respectively; 49

50 138.5 reconciliation of balances under Custody Accounts with the synthetic positions registered by Issuers and with the positions in gold bars held at Gold Depositaries; segregation of Securities and gold as a financial asset deposited as Collateral; ensuring the integrity of Securities and gold as a financial asset held under custody; ensuring the confidentiality of data on characteristics and volumes of Securities under custody; and establishing rules on Custody Limits, in addition to monitoring adherence thereto. 139 The Clearinghouse undertakes no responsibility for Issuer compliance with issue-related obligations, such as redemption of principal and interest, in connection with Securities held under custody at its Depository Service. 140 BM&FBOVESPA or a special purpose vehicle or an outsourced entity may establish special purpose funds, carry insurance, or adopt other mechanisms to compensate Investors for losses arising from error, failure, omission and fraud on the part of directors, officers, employees or representatives of Custodian Agents, pursuant to terms and limitations established by BM&FBOVESPA. Section I Structure of Custody Accounts 141 For the provision of the Depository Service, the Clearinghouse adopts a structure based on individual Custody Accounts. The Clearinghouse, in its discretion, may also establish a service structure based on collective accounts. 142 For Settlement purposes, the Clearinghouse established a Securities Settlement Account and a Gold Settlement Account at its Depository Service. 143 Pursuant to the provisions of the Operating Procedures, the Clearinghouse will maintain at its Depository Service special purpose accounts with specific features. 144 For transferring funds related to Corporate Actions, the Clearinghouse will use primarily the Settlement Account it holds in STR. Section II Deposit, Withdrawal and Transfer of Securities 145 Deposits, Withdrawals and Transfers of Securities and gold as a financial asset at the Depository Service will only be carried through pursuant to instructions received from the relevant Custodian Agents, whether acting for themselves or their customers. 50

51 146 Except for certain cases established in the Operating Procedures, Securities Deposits in the Depository Service are contingent on the transfer of fiduciary ownership by the Issuer to the Clearinghouse. 147 Except for certain cases established in the Operating Procedures, the Deposit of gold as a financial asset in the Depository Service is contingent on the transfer of fiduciary ownership of the corresponding gold bars by the Gold Depositary to the Clearinghouse. 148 Withdrawal of Securities from Custody Accounts held at the Depository Service is contingent on a record of transfer of ownership being made by the Issuer. 149 Withdrawal of gold as a financial asset from Custody Accounts held at the Depository Service is contingent on a record of transfer of ownership of the corresponding gold bars being made by the Gold Depositary. Section III Custody Limits and Limit Monitoring 150 The guidelines set forth below are established for the assignment of Custody Limits to Custodian Agents: The Clearinghouse may assign Custody Limits to Custodian Agents on the basis of their shareholders equity multiplied by a rate established by the Clearinghouse Shareholders equity for purposes of the preceding paragraph is the consolidated shareholders equity, as determined on the financial statements of the Custodian Agent and economic group of which the Custodian Agent is a constituent member The Clearinghouse 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 The Clearinghouse will communicate each Custodian Agent of its assigned Custody Limit, and any revisions thereof. 151 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, as the case may be The value of the following Securities may be disregarded for purposes of adherence to Custody Limits: the proprietary Securities of the Custodian Agent or of customers (whether natural or legal persons) belonging to the same economic group as the Custodian Agent; Securities sold in a primary offering and delivered in the Custody Account of a customer which waives any and all claims against the Investor compensation 51

52 mechanisms maintained by the Clearinghouse or any Trading Environments for which the Clearinghouse provides services The Clearinghouse will provide to Custodian Agents periodic information on the value of Securities held under Custody Accounts they manage, for said 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, the Clearinghouse will cease to receive Deposits or Transfers to Custody Accounts managed by the relevant Custodian Agent pending an adjustment for conformity with the Custody Limit The calculation method to determine a Custody Limit will be released by the Clearinghouse. Section IV Treatment of Corporate Actions 152 On treating Corporate Actions, the Clearinghouse will: receive from the Issuer and transfer to the Custodian Agent funds or Securities associated with redemption of principal and interest; receive from the Custodian Agent and transfer to the Issuer funds or Securities associated with redemption of principal and interest. 153 For Corporate Actions in cash, receipt and transfer will preferably be made through the Clearinghouse Settlement Account in STR Any transfers of cash will be contingent on the Clearinghouse first receiving the relevant funds on an irrevocable and final basis. 154 For Corporate Actions in Securities, the Issuer is expected to make a record of the relevant Securities under the Clearinghouse s fiduciary ownership The credit of Securities will be made to the Custody Accounts of the relevant Investors contingent, however, on the Issuer or regulatory entity, as applicable, communicating or confirming the Corporate Action. CHAPTER VII FEES 155 The Clearinghouse charges fees for its services, which are established by the Chief Executive Officer of BM&FBOVESPA pursuant to proper instruments made available to Participants. 52

53 CHAPTER VIII INTERNAL CONTROLS 156 The quality and security of custody of documents, records and file systems must 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 those systems conform to applicable regulations, this Rulebook and other rules and internal procedures related to the activities of the Clearinghouse contemplated by this Rulebook. 157 The Clearinghouse adopts an internal controls structure based on control activities established for all activities contemplated herein, and implemented pursuant to predefined objectives and related procedures, which include continuing monitoring and compliance processes. 158 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. 53

54 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 T H E C L E A R I N G H O U S E AND C L E A R I N G H O U S E P A R T I C I P A N T S CHAPTER I RIGHTS AND RESPONSIBILITIES OF THE CLEARINGHOUSE Section I Responsibilities of the Clearinghouse 159 Set forth below are the responsibilities of the Clearinghouse: before the Brazilian Securities and Exchange Commission and the Central Bank of Brazil: meeting the obligations established under legal and regulatory rules, and the requests for information in connection with the activities performed within the scope of this Rulebook; 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 updated information related to Operating Limits assigned to Full Trading Participants; reporting to relevant person any events that may affect trading activities, in particular suspension of Clearing Agents; and providing access to information on Investors identified by Full Trading Participants; before Registration Systems: processing Gross Settlement and Bilateral Settlement of rights and obligations, in financial resources, resulting from Securities and Transactions registered therein; and reporting to relevant person in the context of this Rulebook any events that may affect Settlement activities, in particular suspension of Registration Participants; before Clearing Agents: acting as Central Counterparty for the Settlement of accepted Transactions; 54

55 assigning Operating Limits to Clearing Agents and providing tools permitting them to manage such Limits when allocated by them to customers; providing Clearing Agents with access to information giving them the ability to monitor the consumption of the Operating Limits by their customers; ensuring the integrity of information related to the Clearing process; coordinating Delivery versus Payment; managing Collateral required of Clearing Agents in connection with Transactions executed under their responsibility; 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 and settlement of Transactions under their responsibility; suspending or cancelling Gross Settlement of Transactions, if and when so determined by the Central Bank of Brazil, the Brazilian Securities and Exchange Commission, BSM or the operator of Trading Environments to which the Clearinghouse provides Settlement services, each of the above acting within its own sphere of authority; holding Settlement Accounts in STR, its Depository Service or other depositories for the transfer of funds and Securities for Gross Settlement of Transactions carried out on Trading Environments to which the Clearinghouse provides Gross Settlement services; and coordinating Delivery versus Payment; before Custodian Agents: ensuring the integrity of Securities and of gold as a financial asset held under custody and keeping the confidentiality of information regarding the characteristics and volumes thereof, unless required by regulators, Issuers, Gold Depositaries and other institutions authorized by law; ensuring Securities and gold as a financial asset held under custody stay deposited in Custody Accounts designated by Custodian Agents; implementing Deposits, Withdrawals and Transfers of Securities between Custody Accounts only by command or formal request of Custodian Agents; receiving and transferring funds or Securities resulting from Corporate Actions handled by the Clearinghouse; 55

56 on receiving formal request from Custodian Agents, exercising rights related to Corporate Actions attributable to Securities held under custody at the Depository Service and, as the case may be, transferring funds to accomplish this goal; and on receiving formal request from Custodian Agents, returning deposited Securities to Investors (as adjusted to include entitlements), irrespective of the order number of the certificates received for Deposit, but subjecting Withdrawal to adherence to legal, regulatory and Issuer requirements; on receiving written request from Custodian Agents, returning deposited gold bars to Investors, irrespective of the characteristics of the gold bars received for Deposit, but subjecting Withdrawal to adherence to legal and regulatory requirements; before Investors, acting as lenders of Securities within the scope of the Securities Lending Service operated by the Clearinghouse: returning the quantity of Securities, as adjusted to include related entitlements; before Registration Participants: providing services to facilitate and coordinate Gross Settlement and Bilateral Settlement of rights and obligations, in financial resources, resulting from the registration of Securities and Transactions in Registration Systems, as well as providing an efficient infrastructure for preparation and settlement of those Securities and Transactions under their responsibility; suspending or cancelling Gross Settlement and Bilateral Settlement, if and when so determined by the Central Bank of Brazil, the Securities and Exchange Commission of Brazil, BSM or the operator of an organized market to which the Clearinghouse provides Settlement services for Securities and Transactions, each of the above acting within its own sphere of authority; and holding Settlement Accounts in STR for the transfer of funds for both Gross Settlement and Bilateral Settlement. 160 The Clearinghouse will keep the confidentiality of any information of which it becomes aware in the course of its activities, with disclosures being permitted only in certain instances and under conditions contemplated by applicable legislation, or authorized by regulators. 161 The Clearinghouse will provide the information and functionalities required for Participants to perform their activities, as provided in this Rulebook and the Operating Procedures. 162 The Clearinghouse will review and correct any errors or imperfections claimed by Clearing Agents, Gross Settlement Agents and Custodian Agents, upon receiving 56

57 complaint filed in the form and within the deadlines assigned for this purpose in the Operating Procedures. Section II Rights of the Clearinghouse 163 Set forth below are the rights of the Clearinghouse: regarding self-regulation of the 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 this Rulebook; approving and admitting 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 this Rulebook and where needed for keeping the normal course of business; requiring compliance with adequate integrity and ethical standards, judging and punishing dishonest or unethical behavior by Clearing Agents, Custodian Agents and Gross Settlement Agents, their directors, officers and representatives; demanding adherence to minimum capital requirements and technical and operational requirements prescribed for Clearing Agents, Custodian Agents and Gross Settlement Agents; being notified of the contractual relationship between Clearing Agents, Custodian Agents or Gross Settlement Agents and their customers, as formalized under proper instruments which at a minimum should contain the provisions set forth in this Rulebook; being notified of the following by letter (with return receipt) of the following: (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 report to the Clearinghouse is to be made as of the termination date; requiring information or clarification of Clearing Agents, Custodian Agents and Gross Settlement Agents to be provided within the assigned deadlines, in particular as to 57

58 record information required to be kept current, accurate and complete regarding themselves, their employees, accredited representatives and their customers; requiring of Custodian Agents (within the assigned deadlines) timely information and 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 their activities at the Clearinghouse; at the periodic audits foreseen in previous paragraph, 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 as well as withdrawal of accreditation of a Qualified Investor on indications of irregularities or other claims adversely affecting or potentially affecting their activities or due to violation of the provisions of this Rulebook; being promptly notified by Clearing Agents, Custodian Agents and Gross Settlement Agents, by communication addressed to BM&FBOVESPA Officers, of any indications of irregularities or other development that affect or threaten to affect their activities and those of the Clearinghouse; establishing, raising or lowering values referring to fines, collecting fines or setting them aside, on the terms and within the deadlines foreseen in this Rulebook; suspending the activities of any Participant at the Clearinghouse, when the safety of the Clearinghouse activities so requires, giving notice of the event to the Central Bank of Brazil, the Brazilian Securities and Exchange Commission, BSM and Trading Environments, as the case may be; declaring a Clearing Agent in Default, such as provided in this Rulebook; terminating a suspension, authorizing the punished Participant to resume activities upon collecting amounts payable and accruing interest at market rates, plus fines and other applicable legal or contractual charges; adopting special Settlement procedures in the event of failure by Clearing Agents to comply with their obligations, as provided in the Operating Procedures; demanding additional Collateral and changing required Collateral levels; demanding Custodian Agents to adhere to assigned Custody Limits; 58

59 changing the Operating Limit assigned to any particular Clearing Agent, based on criteria that include level of liquidity, credit availability, obligations assumed and concentration of Transactions, in addition to revising criteria for granting Operating Limits and procedures for measuring the use of such limits; changing required Collateral amounts and calculation methods; establishing fee schedules and contributions and require the payment thereof; regarding the activities contemplated in this Rulebook: requiring Clearing Agents to: comply with obligations related to the Clearing and Settlement processes, as well as Collateral requirements, whereas giving regard to the provisions of the Operating Procedures, in particular as to deadlines and timetables, in addition to imposing penalties, as applicable; perform their activities pursuant to adequate standards of security so as not to compromise their ability to settle Transactions under their responsibility; provide sufficiently complete information for the Clearinghouse to monitor adherence to minimum capital requirements, as provided in paragraph 13 of this Rulebook; select customers, allocate them Operating Limits and monitor and manage customer adherence to the Operating Limit threshold; and provide information on the Operating Limits allocated to customers, in the case of Full Clearing Agents; where permitted, changing Settlement Cycle deadlines and timetables, giving notice to Participants; halting, preventing or refusing the Settlement of Transactions where there are indications of breach of 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 the account and order of any particular customer at the Clearinghouse in the execution of Transactions carried out on Trading Environments; rejecting Securities and documents which, for being formally or legally defective, are unusable in trade Settlement; being compensated for losses incurred in the Settlement of Transactions under the responsibility of a defaulting Clearing Agent through the proceeds from execution of Collateral pledged by such Clearing Agent; 59

60 borrowing Securities in the name of an Investor and under responsibility of the relevant Clearing Agent, in order to settle Transactions left unsettled due to a failed Delivery of Securities; acting in the capacity of Central Counterparty, denying indefinitely registration of Transactions which, in its discretion, threaten to jeopardize the activities of the Clearinghouse, of Participants and the market as a whole; consenting to, or disallowing a replacement of Collateral; for enforcement of assigned Operating Limits, requiring positions of Clearing Agents, Full Trading Participants or Investors to be closed out, as foreseen in the Operating Procedures; under applicable regulations, authorizing the registration of Transactions for Gross Settlement on a trade-by-trade basis, considering, however, that: such Transactions will not be computed in the consolidated multilateral net balance set to be settled by the Clearinghouse in its Settlement Window in STR; and the Clearinghouse will coordinate Delivery versus Payment for the Gross Settlement of Transactions as mentioned in the subparagraph above, but will not act as Central Counterparty; establishing minimum Collateral requirements pursuant to this Rulebook; assigning Custody Limits to Custodian Agents; assigning Operating Limits to markets in which it performs Settlement activities; rejecting any Transaction suspected of being illegal under applicable Brazilian legislation, whereas reporting the event to the responsible authorities; rejecting Deposits of Securities and gold as a financial asset deemed illegal or invalid, regardless of eligibility; having Custodian Agents undertake responsibility for the formal and substantive legal existence and good standing of Securities delivered for Deposit, and for the veracity of endorsements and the truthfulness of every other document and information submitted in connection with movements of Securities and, as the case may be, transfers of funds for the exercise of rights related to Corporate Actions; having Custodian Agents undertake responsibility for the formal and substantive legal existence and good standing of the gold bars and certificates delivered to the Gold Depositary, and for the veracity of endorsements and the truthfulness of every other document and information submitted in connection with their transactions; 60

61 in its discretion, withdrawing Securities registered in Custody Accounts and authorizing the transfer thereof back to the relevant Investor in the Issuer registry, in the event of termination of the agreements between BM&FBOVESPA and the Issuer, or in the event the Settlement of Transactions is suspended in any Trading Environment; in its discretion, transferring the gold bars to another Gold Depositary licensed by the Clearinghouse, in the event of termination of the agreements between BM&FBOVESPA and the Gold Depositary; where the Clearinghouse 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 any such Securities; and where the Clearinghouse is acting as fiduciary owner of gold as a financial asset and the Gold Depositary for any reason declines to transfer to BM&FBOVESPA any number of gold bars, requiring Custodian Agents to replace any such gold bars. CHAPTER II RIGHTS AND RESPONSIBILITIES OF CLEARING AGENTS Section I Responsibilities of Clearing Agents 164 Set forth below are the responsibilities of Full Clearing Agents: before the Clearinghouse: undertaking responsibility for the Settlement and Risk Management of customer Transactions, including Collateral posting; undertaking responsibility for their decision to provide Settlement services to customers, whereas exempting BM&FBOVESPA from any liability in the event a customer fails to meet its contractual obligations, regardless of the reasons leading to failure; engaging the services of Settlement Agents for the transfer of funds to and from the Clearinghouse, related to the Settlement of Full Clearing Agents Transactions; undertaking responsibility for their choice of Settlement Agents, informing the Clearinghouse of the contractual relationship established, as formalized under proper instruments which at a minimum should contain the provisions required by this Rulebook, in addition to exempting BM&FBOVESPA from any liability in the event that a Settlement Agent fails to meet its contractual obligations, regardless of the reasons leading to failure; performing their activities pursuant to adequate standards of security, so as not to compromise their ability to perform them, for this purpose carefully selecting 61

62 customers, allocating them Operating Limits and monitoring customer adherence to the Operating Limit threshold; providing sufficiently complete information for the Clearinghouse to monitor adherence to minimum capital requirements prescribed by BM&FBOVESPA, as provided in paragraph 13 of this Rulebook; keeping the confidentiality of any information of which they become aware in the course of their activities 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 thereto; communicating to the Clearinghouse the Operating Limits allocated to customers; adhering to liquidity requirements established by the Clearinghouse, in order to handle a failed Delivery or a failed Payment; providing to BM&FBOVESPA audit teams full access to internal systems and procedures used within the scope of their activities as Clearing Agents; giving notice in case of the Operating Limit threshold is about to be crossed; settling the obligations of customers, for this purpose providing the relevant Securities and funds in a timely manner; depositing Collateral in connection with Transactions, as and when established in the Operating Procedures; making contributions to the Settlement Fund, as and when required by the Clearinghouse; refunding BM&FBOVESPA for any expenses and losses it may incur in settling Transactions on which they defaulted; ensuring the truthfulness and accuracy of information provided to the Clearinghouse, in particular ensuring and keeping updated record information on themselves, their employees, accredited representatives and their customers; accepting liability for the actions of employees and representatives registered with the Clearinghouse in the course of discharging their functions, whereas ensuring they adhere to integrity and ethical standards required by the Clearinghouse; 62

63 notifying the Chief Executive Officer of BM&FBOVESPA of any irregularity or occurrence which adversely affects or threatens to affect their activities and those of the Clearinghouse, including those that could entail customer Default; abiding by the oversight authority of BM&FBOVESPA and BSM, accepting their intervention in disputes to which they are a party and respecting the decision issued; providing information and clarification requested by the Clearinghouse, BSM and regulatory agencies, within the assigned deadlines; submitting to fee schedules and contribution requirements established by BM&FBOVESPA and be responsible for the payment thereof; making records and documentation associated with the Settlement of executed Transactions available to the Clearinghouse and BSM at all times; and giving the Clearinghouse prior notice of cessation of activities, or disruption of the provision of services to any particular customer, as provided in the Operating Procedures; before customers: formalizing their contractual relationship with customers, under proper instruments which at a minimum should contain the provisions required by this Rulebook; using the Clearinghouse services to settle the obligations of customers, giving regard to the Operating Limits they were allocated; allocating Operating Limits to customers and monitoring adherence thereto; giving notice to customers in case they are about to cross the Operating Limit threshold; advising customers of the rules applicable to their activities, such as timetables, deadlines, costs and penalties, as set forth herein; keeping registration and control systems to track Transactions in futures markets for follow-up purposes, individually by Transaction and by Investor, through to the completion thereof; and keeping updated and complete record information on customers at all times before Settlement Agents: providing sufficiently complete information permitting them to carry out their activities effectively. 63

64 165 Proprietary Clearing Agents and Special Clearing Agents have the same responsibilities as those assigned to Full Clearing Agents, as applicable. Section II Rights of Clearing Agents 166 Set forth below are the rights of Clearing Agents: before the Clearinghouse: using the Clearinghouse services to settle the obligations of customers, giving regard to the Operating Limits they were allocated; declaring a customer in Default; accrediting Investors as Qualified Investors, giving regard to eligibility requirements set by the Clearinghouse; in their discretion, rejecting requests for the accreditation of Qualified Investor; in their discretion, withdrawing the accreditation of a Qualified Investor; accessing information required for risk assessment activities; accessing information to monitor the Operating Limits allocated to customers; and requesting the Clearinghouse to review their 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 the deadlines assigned for this purpose in the Operating Procedures; before customers: receiving the Securities and funds required for the Settlement of Transactions in a timely manner; requiring deposits of Collateral in connection with the obligations underlying customer Transactions, whether at the levels required by the Clearinghouse or otherwise, including higher levels, in their discretion; being compensated for losses incurred in the Settlement of a defaulting customer s Transactions, including through the use of Collateral deposited by the defaulting customer; charging fees for services rendered, and collecting refund for expenses with fines arising from faults committed by customers and for any other operating costs incurred. 64

65 CHAPTER III RIGHTS AND RESPONSIBILITIES OF CUSTODIAN AGENTS Section I Responsibilities of Custodian Agents 167 Set forth below are the responsibilities of Custodian Agents vis-à-vis the Clearinghouse: controlling Securities and gold as a financial asset deposited for custody under their responsibility, and keeping records of movement or transfer orders and consents; control of deposited Securities and gold as a financial asset must be kept under the names of customers; authorizing or not authorizing movements of Securities and gold as a financial asset held under custody for Settlement purposes, as provided in the Operating Procedures; allowing the Transfer of Securities resulting from settlement by delivery of securities linked to the Securities and Trades registered in the Registration System, when such is foreseen; withdrawing Securities deposited at the Clearinghouse under their responsibility (as adjusted to include related entitlements), subject however to adherence to legal, regulatory and Issuer requirements; withdrawing gold as a financial asset recorded in fungible book-entry form under their responsibility, subject however to adherence to legal, regulatory and Gold Depositary requirements; in the event that Custodian Agents do not hold a Bank Reserves Account or a Settlement Account, engaging a Settlement Agent to transfer funds to and from the Clearinghouse, corresponding to payments associated with the performance of their activities; complying with, and causing compliance with legal provisions governing restrictions on ownership of Securities and gold as a financial asset, including, as the case may be, by taking action for the sale of such Securities; undertaking responsibility for the formal and substantive legal existence and good standing of Securities delivered at the Clearinghouse Depository, and for the veracity of endorsements and the truthfulness of every other document and information submitted in connection with their Transactions; undertaking responsibility for the formal and substantive legal existence and good standing of gold bars and certificates delivered to the Gold Depositary, and for the veracity of endorsements and the truthfulness of every other document and information submitted in connection with their transactions; 65

66 where the Clearinghouse is acting as fiduciary owner of Securities and the Issuer for any reason declines to transfer to the Clearinghouse any number of securities being deposited, replacing any such Securities; where the Clearinghouse is acting as fiduciary owner of gold as a financial asset and the Gold Depositary for any reason declines to transfer to the Clearinghouse any number of gold bars being deposited, replacing any such gold bars; presenting formal request for the Clearinghouse, as the case may be, to exercise rights underlying Corporate Actions attributable to Securities held under their custody at the Depository Service; such formal request is contingent on an order from the customer; transferring to the Clearinghouse on a timely manner, the funds required to exercise rights of Corporate Actions as applicable in the case of the paragraph above; keeping in their own systems and those of the Clearinghouse, current and complete record information regarding themselves and their customers; providing the Clearinghouse with documentary evidence of their own and their customers record information; notifying the Clearinghouse of any irregularity which adversely affects or threatens to affect their activities; giving notice to the Clearinghouse by letter (with return receipt) of the following: (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 the Global Custodian (or Omnibus Account holder); keeping properly filed and available to the Clearinghouse (upon request) the agreements executed with Global Custodians (or Omnibus Account holders); using complete record information of Non-Resident Investors, in case the Clearinghouse advises that a regulatory agency is requiring such record information to be provided; on receiving notice from the Clearinghouse to the effect that a regulatory agency is requiring record information to be provided regarding any Non-Resident Investor, Custodian Agents are responsible for advising Global Custodians (or Omnibus Account holders) that they are required to use complete record information for Non-Resident Investors to operate in the domestic financial and capital markets; 66

67 formalizing their contractual relationship with customers, giving regard to the minimum provisions required by this Rulebook; and obtaining formal consent from customer Investors for free of Payment Transfer of Securities and gold as a financial asset between Custody Accounts; adhering to the assigned Custody Limits, and where the threshold is crossed, adhering to restrictions established by the Clearinghouse concerning Deposits and Transfers of Securities and gold as a financial asset; providing sufficiently complete information for the Clearinghouse to monitor adherence to minimum capital requirements; abiding by the oversight authority of BM&FBOVESPA and BSM, accepting their intervention in disputes to which they are a party and respecting the decision issued; providing (within the assigned deadlines) information and clarification requested by BM&FBOVESPA, BSM and regulatory agencies; submitting to fee schedules and contribution requirements established by BM&FBOVESPA and be responsible for the payment thereof. 168 Set forth below are the responsibilities of Custodian Agents vis-à-vis their customers: ensuring the integrity of Securities and gold as a financial asset held under custody and keeping the confidentiality of information regarding the characteristics and volumes thereof; keeping individual Custody Accounts for Securities and gold as a financial asset held under custody, identified by customer, in addition to assuming full responsibility for movements of Securities entered in Custody Accounts; implementing Deposits, Withdrawals and Transfers of Securities based exclusively on orders provided by customers; withdrawing Securities deposited at the Clearinghouse (as adjusted to include related entitlements), irrespective of the order number of the certificates received for Deposit, subject however to adherence to legal, regulatory and Issuer requirements; withdrawing gold as a financial asset recorded in fungible book-entry form under their responsibility, irrespective of the number of the gold bars received for Deposit by the Gold Depositary, subject however to adherence to legal, regulatory and Gold Depositary requirements; transferring funds or Securities resulting from treatment of Corporate Actions by the Clearinghouse and, as the case may be, arranging for payment of related taxes; and 67

68 168.7 presenting formal request for the Clearinghouse to provide the information required for the representation of customers vis-à-vis the Issuers of Securities held in custody. Section II Rights of Custodian Agents 169 Set forth below are the rights of Custodian Agents: keeping Securities and gold as a financial asset deposited under individual Custody Accounts, including, as the case may be, individual accounts by customer, due regard given to the assigned Custody Limits; implementing Deposits, Withdrawals and Transfers of Securities and gold as a financial asset held in Custody Accounts under their responsibility; keeping Securities updated upon occurrence of Corporate Actions; requesting, as the case may be, the exercise of rights underlying Corporate Actions attributable to Securities held under their custody at the Depository Service; such formal request is contingent on an order from the customer; accessing information on Custody Account balances, by type of Securities and by owner; and receiving sufficiently complete information permitting them to perform their functions effectively as foreseen in this Rulebook. CHAPTER IV RIGHTS AND RESPONSIBILITIES OF GROSS SETTLEMENT AGENTS Section I Responsibilities of Gross Settlement Agents 170 Set forth below are the responsibilities of Gross Settlement Agents: vis-à-vis the Clearinghouse: implementing the Settlement of Transactions for their customers, providing the relevant Securities and funds in a timely fashion; undertaking liability for the decision to provide Gross Settlement services to customers, whereas exempting BM&FBOVESPA from any liability in the event a customer fails to meet its contractual obligations, regardless of the reasons leading to failure; engaging the services of a Settlement Agent to transfer funds to and from the Clearinghouse, related to the Settlement of Gross Settlement Agents Transactions; 68

69 undertaking responsibility for their choice of Settlement Agents, informing the Clearinghouse of the contractual relationship established,, as formalized under proper instruments which at a minimum should contain the provisions required by this Rulebook, in addition to exempting BM&FBOVESPA from any liability in the event that a Settlement Agent fails to meet its contractual obligations, regardless of the reasons leading to failure; keeping the confidentiality of any information of which they become aware in the course of their activities as Gross Settlement 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; abiding by the oversight authority of BM&FBOVESPA and BSM, accepting their intervention in disputes to which they are a party and respecting the decision issued; providing (within the assigned deadlines) information and clarification requested by the Clearinghouse, BSM and regulatory agencies; submitting to fee schedules and contribution requirements established by BM&FBOVESPA and be responsible for the payment thereof; ensuring the truthfulness and accuracy of information provided to the Clearinghouse, in particular ensuring and keeping updated record information on themselves, their employees, accredited representatives and their customers; accepting liability for the actions of employees and representatives registered with the Clearinghouse in the course of discharging their functions, whereas ensuring they adhere to integrity and ethical standards required by the Clearinghouse; making records and documentation associated with the Settlement of executed Transactions available to the Clearinghouse and BSM at all times; and providing to the Clearinghouse audit teams full access to internal systems and processes used within the scope of their activities as Gross Settlement Agents; vis-à-vis customers: formalizing their contractual relationship with customers, under proper instruments which at a minimum should contain the provisions required by this Rulebook; using the Clearinghouse services to settle customer obligations; advising customers of the rules applicable to their activities, such as timetables, deadlines, costs and penalties, as set forth herein; keeping updated and complete record information at all times; 69

70 170.3 vis-à-vis Settlement Agents: providing sufficiently complete information permitting them to carry out their activities effectively. Section II Rights of Gross Settlement Agents 171 Set forth below are the rights of Gross Settlement Agents: vis-à-vis the Clearinghouse: using the Clearinghouse services to settle customer obligations; having the Clearinghouse review their 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 the deadlines assigned for this purpose in the Operating Procedures; vis-à-vis customers: receiving the Securities and funds required for the Gross Settlement of Transactions in a timely fashion; charging fees for services rendered, and collecting refund for expenses with fines arising from faults committed by customers and for any other operating costs incurred. CHAPTER V RIGHTS AND RESPONSIBILITIES OF REGISTRATION PARTICIPANTS Section I Responsibilities of Registration Participants 172 Set forth below are the responsibilities of Registration Participants: vis-à-vis the Clearinghouse: undertaking responsibility for the Settlement of rights and obligations in Securities and in financial resources, resulting from the registration of Securities and Transactions, under their responsibility, in the Registration System, providing the Securities and relevant funds, as the case may be, in a timely manner; undertaking responsibility for their decision to provide Gross Settlement and Bilateral Settlement services to customers, whereas exempting BM&FBOVESPA from any liability in the event a customer fails to meet its contractual obligations, regardless of the reasons leading to failure, as well as being responsible for the decision to provide 70

71 services for the delivery of Securities to their customers, when such is foreseen, exempting BM&FBOVESPA from any responsibility should the customer or any of the Participants involved in this delivery not meet their contractual obligations foreseen in these Rules, regardless of the reasons for failure to comply; engaging the services of Settlement Agents for the transfer of funds to and from the Clearinghouse, related to the Settlement of rights and obligations, in financial resources, resulting from the registration of Securities and Transactions under their responsibility; designating to the Clearinghouse and the Registration System the Custody Agent contracted by the investor involved in Securities and Transactions with delivery foreseen of the Security deposited in the Clearinghouse Depository so that this latter may permit the Transfers of Securities, informing the Clearinghouse of the contractual relationship/s established, formalized in a proper instrument, which must contain the minimum clauses established in these Rules and exempting BM&FBOVESPA from any responsibility should its customer or any Participant involved not meet their contractual obligations, regardless of the reasons for this failure to comply; undertaking responsibility for their choice of Settlement Agents, informing the Clearinghouse of the contractual relationship established, as formalized under proper instruments which at a minimum should contain the provisions required by this Rulebook, in addition to exempting BM&FBOVESPA from any liability in the event that a Settlement Agent fails to meet its contractual obligations, regardless of the reasons leading to failure; keeping the confidentiality of any information of which they become aware in the course of their activities as Registration Participants, 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; abiding by the oversight authority of BM&FBOVESPA and BSM, accepting their intervention in disputes to which they are a party and respecting the decision issued; providing information and clarification requested by the Clearinghouse, BSM and regulatory agencies, within the assigned deadlines; submitting to fee schedules and contribution requirements established by BM&FBOVESPA and be responsible for the payment thereof; ensuring the truthfulness and accuracy of information provided to the Clearinghouse, in particular ensuring and keeping updated record information on themselves, their employees, accredited representatives and their customers; accepting liability for the actions of employees and representatives registered with the Clearinghouse in the course of discharging their functions, whereas ensuring they adhere to integrity and ethical standards required by the Clearinghouse; 71

72 making records and documentation associated with the Settlement of rights and obligations, in financial resources, resulting from the registration of Securities and Transactions in Registration Systems available to the Clearinghouse and BSM at all times, as well as those regarding delivery of the Security when such is foreseen; and providing to the Clearinghouse audit teams full access to internal systems and processes used within the scope of their activities as Registration Participants; vis-à-vis customers: formalizing their contractual relationship with customers, under proper instruments which at a minimum should contain the provisions required by this Rulebook; using the Clearinghouse Depository and Clearinghouse services, as the case may be, to settle the obligations of customers; advising customers of the rules applicable to their activities, such as timetables, deadlines, costs and penalties, as set forth herein; keeping updated and complete record information at all times; vis-à-vis Settlement Agents: providing sufficiently complete information permitting them to carry out their activities effectively. Section II Rights of Registration Participants 173 Set forth below are the rights of Registration Participants: vis-à-vis the Clearinghouse: using the Clearinghouse Depository and Clearinghouse services, as the case may be, to settle the rights and obligations under their responsibility; requesting the Clearinghouse to review their records to investigate claims of error, imperfections or mistakes related to the receipt of financial resources, upon filing complaint in the form and within the deadlines assigned for this purpose in the Operating Procedures; vis-à-vis customers: receiving the funds required for Gross Settlement and Bilateral Settlement of rights and obligations, in financial resources, resulting from the registration of Securities and Transactions in Registration Systems; 72

73 charging fees for services rendered, and collecting refund for expenses with fines arising from faults committed by customers and for any other operating costs incurred. CHAPTER VI RIGHTS AND RESPONSIBILITIES OF QUALIFIED INVESTORS Section I Responsibilities of Qualified Investors 174 Set forth below are the responsibilities of Qualified Investors: 174. vis-à-vis the Clearinghouse: formalizing their contractual relationship with Clearing Agents, under proper instruments which at a minimum should contain the provisions required by this Rulebook; before Clearing Agents: settling their Transactions, and meeting Collateral requirements; adhering to the assigned Operating Limits; refunding a Clearing Agent for any expenses or losses it may incur in settling a Transaction on which they defaulted; and notifying Clearing Agents of any changes to their record information. Section II Rights of Qualified Investors 175. Set forth below are the rights of Qualified Investors: vis-à-vis the Clearinghouse: having their Transactions settled directly by a Full Clearing Agent, irrespective of the Full Trading Participant through which said Transactions may have been executed; vis-à-vis Full Trading Participants: receiving (directly or indirectly) from Full Trading Participants information regarding the Clearing Agents responsible for the Settlement of their Transactions; vis-à-vis Clearing Agents: being made aware of the full contents of this Rulebook; 73

74 receiving from Clearing Agents prior notice of cessation of activities or disruption of the provision of services, as provided in the Operating Procedures. CHAPTER VII RIGHTS AND RESPONSIBILITIES OF FULL TRADING PARTICIPANTS Section I Responsibilities of Full Trading Participants 176 Set forth below are the responsibilities of Full Trading Participants: vis-à-vis the Clearinghouse: engaging 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 fails to meet contractual obligations, regardless of the reasons leading to failure; formalizing their contractual relationship with Clearing Agents or Gross Settlement Agents, under proper instruments which at a minimum should contain the provisions required by this Rulebook; allocating Investors 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, individually by Transaction and by Investor, through to the completion thereof; keeping updated and complete record information on each of their customer Investors at all times, in accordance with applicable regulatory requirements; vis-à-vis Clearing Agents: settling the Transactions they intermediate, and meeting Collateral requirements; adhering to the assigned Operating Limits; refunding a Clearing Agent for any expenses or losses it may incur in settling a Transaction (whether or not proprietary) on which they defaulted; vis-à-vis Gross Settlement Agents: settling the Transactions they intermediate; refunding a Gross Settlement Agent for any expenses or losses it may incur in settling a Transaction (whether or not proprietary); 74

75 176.4 vis-à-vis customers: providing (directly or indirectly) information regarding the Clearing Agents or Gross Settlement Agents responsible for the Settlement of their Transactions; and settling the Transactions they intermediate. Section II Rights of Full Trading Participants 177 Set forth below are the rights of Full Trading Participants: collecting refund for expenses with fines incurred due to customers failure to meet their obligations and for any other operating costs incurred as a consequence thereof, as provided in the Operating Procedures; receiving from Clearing Agents and Gross Settlement Agents, as the case may be, prior notice of cessation of activities or disruption of the provision of services, as provided in the Operating Procedures; and receiving notice from Clearing Agents in case their Operating Limit threshold is about to be crossed. CHAPTER VIII RIGHTS AND RESPONSIBILITIES OF INVESTORS Section I Responsibilities of Investors 178 Set forth below are the responsibilities of Investors: vis-à-vis Full Trading Participants: providing Securities and funds required for the Settlement of their Transactions, within the deadlines established in the Operating Procedures; refunding a Full Trading Participant for any operating costs or losses it may incur in settling a Transaction on which they defaulted; and keeping their record information updated at all times; vis-à-vis Custodian Agents: providing funds required for the exercise of rights regarding Corporate Actions related to Securities held in custody; 75

76 keeping their record information updated at all times, in addition to providing documentary evidence of the accuracy and truthfulness of said record information; and upon request from the Clearinghouse, promptly providing the same documentation required to be provided to an Issuer for purposes of the record of ownership of Securities; vis-à-vis Registration Participants: providing the Securities and funds, as the case may be, required for the Settlement of rights and obligations, in Securities and financial resources, resulting from the registration of their Securities and Transactions in Registration Systems, within the deadlines established in the Operating Procedures; refunding a Registration Participant for any operating costs or losses it may incur in settling a Transaction on which they defaulted; and keeping their record information updated at all times. Section II Rights of Investors 179 Set forth below are the rights of Investors: vis-à-vis the Clearinghouse: receiving periodic updated information regarding Securities held in custody at the Depository Service; and having the right to confidentiality regarding their Securities held in custody, provided disclosures required under applicable legislation or regulation will not be deemed to represent a breach of confidentiality; vis-à-vis Full Trading Participants: receiving the Securities and funds resulting from the Settlement of Transactions executed for their account and order; and receiving information (directly or indirectly) regarding the Clearing Agents or Gross Settlement Agents responsible for the Settlement of their Transactions; vis-à-vis Custodian Agents: receiving periodic updated information regarding Securities held in custody at the Depository Service; and having the right to confidentiality regarding their Securities held in custody; 76

77 179.4 vis-à-vis Registration Participants: receiving the Securities and funds, as the case may be, resulting from the Settlement of rights and obligations, in Securities and financial resources, as the case may be, resulting from the registration of their Securities and Transactions in Registration Systems carried out for their account and order. CHAPTER IX SETTLEMENT AGENTS 180 Settlement Agents are the institutions registered in the Clearinghouse which utilize the Bank Reserves Accounts or the Settlement Accounts they hold with the Central Bank of Brazil to make or receive Payments associated with the Settlement Process Settlement Agents holding Settlement Accounts can only utilize such accounts to make or receive Payments associated with their own obligations towards the Clearinghouse, on acting in the capacity of Clearing Agents or Gross Settlement Agents or Registration Participant Settlement Agents holding Bank Reserves Accounts can only utilize such accounts to make or receive Payments associated with their own obligations to the Clearinghouse, on acting in the capacity of Clearing Agents or Gross Settlement Agents or Registration Participant, or with the obligations of third parties to the Clearinghouse Settlement Agents are responsible for: transferring funds to the Clearinghouse Settlement Account in STR, within the deadlines and timetables established in the Operating Procedures, associated with the Settlement of Transactions and with the Settlement of rights and obligations, in financial resources, resulting from the registration of Securities and Transactions in Registration System; operating pursuant to communications and security standards required by the Central Bank of Brazil for the messaging system used for transfers of funds and Securities within the scope of the Settlement of Transactions and related activities; timely communicating to the Clearinghouse and customer Clearing Agents or Gross Settlement Agents or Registration Participant, as applicable, any hurdle or difficulty of a credit, operational or technological nature, or resulting from fortuity or events of force majeure, which threaten to prevent the transfer of all or some of the funds required; and communicating to the Clearinghouse any indications of irregularities or other development that prevent or threaten to prevent the fulfillment of Settlement obligations by Clearing Agents or Gross Settlement Agents or Registration Participant. 181 Settlement Agents are also responsible for: 77

78 181.1 receiving from Clearing Agents or from Gross Settlement Agents or from Registration Participant or from the Clearinghouse, as applicable, the information required for the performance of their activities, within the scope provided in this Rulebook; and rejecting funds transfer orders from Clearing Agents or Gross Settlement Agents or Registration Participant, as the case may be, based on the particular standards contractually agreed with them. CHAPTER X GOLD DEPOSITARIES 182 Gold Depositories are the financial institutions registered by BM&FBOVESPA to be responsible for receiving, holding in custody and preserving the gold bars underlying certificates of gold as a financial asset held under custody at the Depository Service. Section I Responsibilities of Gold Depositaries Set forth below are the responsibilities of Gold Depositaries: accepting into custody only gold bars delivered by Gold Refiners registered with BM&FBOVESPA; keeping gold bars under custody and taking the necessary measures for the security of the gold bars accepted for custody; carrying out reconciliation between the amount of gold deposited under their custody and the book-entry balance kept in the Depository Service; for disclosure purposes, giving the Depository Service notice of the custodial fees to be charged; upon request from the depositor, issuing and delivering, within twenty-four (24) hours, and for each gold bar to be held under custody, a nominative and endorsable gold certificate, which must include the information specified in the Clearinghouse Operating Procedures; maintaining current and accurate records for each gold bar held in custody; for systematic audit purposes, permitting auditors from either BSM or the institution specifically engaged by the Clearinghouse for this purpose to access the gold bars held in custody and the records relating thereto; allowing the Clearinghouse, or whoever the Clearinghouse designates, to conduct systematic arbitration proceedings of the gold bars held in custody, as provided in the Clearinghouse Operating Procedures; 78

79 under their sole and exclusive responsibility, transferring gold bars held in the custody of another depositary to their own custody, upon request from whoever it may concern; communicating to the Depository Service any changes associated with the records of gold bars, any losses of, or amendments to custody certificates or other documents, and any information that may be of interest to the market; and executing an insurance contract covering the gold bars accepted for custody and vouching for the custody and preservation of the bars entrusted to their custody, as well as for the replacement of lost bars by an equivalent cash amount or by other gold bars. 79

80 Section II Rights of Gold Depositaries Set forth below are the rights of Gold Depositaries: maintaining physical custody of gold bars at the venues authorized by the Clearinghouse; and cancelling their accreditation at any time, by giving a prior thirty (30)-day written notice, without prejudice, however, to any obligations previously assumed. CHAPTER XI GOLD REFINERS 183 Gold Refiners are the financial institutions registered by BM&FBOVESPA to be responsible for producing the gold bars underlying certificates of gold as a financial asset held under custody at the Depository Service. Section I Responsibilities of Gold Refiners Set forth below are the responsibilities of Gold Refiners: undertaking liability for properly identifying customers, and for diligently fulfilling know your customer (KYC) requirements and applying better recommended antimoney laundering and anti-terrorist financing standards; employing and maintaining mechanisms and processes to control and prevent the practice of slavery or child labor in gold mining, as well as any environmental violations; determining the actual weight of each gold bar they produce and issuing certificates of gold purity and weight for each bar, as set forth in the Clearinghouse Operating Procedures; undertaking responsibility for compliance of gold weight and purity with BM&FBOVESPA requirements, including for settlement purposes, pursuant to the certificates of gold purity and weight or the letters of guarantee they issue for the set of bars they produce; producing fine gold in bars with weight and purity not less than those established by BM&FBOVESPA; submitting to inspection their production and quality control processes, and also the purity and weight of the gold bars they produce, whenever required by the Depository Service; 80

81 submitting the gold bars held in custody at the Depository Service to systematic arbitration proceedings, according to the criteria defined by BM&FBOVESPA; maintaining current and accurate records of quality control analyses conducted for each gold bar they produce; identifying each gold bar they produce with the stamps specified in the Clearinghouse Operating Procedures; replacing any bars rejected by the Gold Depositary, upon receipt thereof, due to a divergence between the actual weight contained in the certificate of purity and weight, and the weight calculated by the Gold Depositary, bearing the costs and responsibility for said replacement; delivering the gold bars to the Gold Depositary, accompanied at least by the certificate of purity and weight; and maintaining, throughout the term of the agreement signed with BM&FBOVESPA, a letter of credit in favor of BM&FBOVESPA in the amount equivalent to fifty (50) kilograms of gold, further ensuring performance of their obligations, remaining, however, liable for refunding any and all losses they may give cause to in excess of the amount covered by the letter of credit, subject to the provisions of the Clearinghouse Operating Procedures. Section II Rights of Gold Refiners Set forth below are the rights of Gold Refiners: selecting, under their sole responsibility, a carrier to transport gold bars from their facilities to those of the Gold Depositary designated by the owner of the gold bars; and cancelling their accreditations at any time, by giving a prior thirty (30)-day written notice, without prejudice, however, to any obligations previously assumed. 81

82 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 184 As Central Counterparty, the responsibility of the Clearinghouse, undertaken towards Clearing Agents only, is restricted to transferring Securities and funds, which in the latter case is accomplished through Settlement Agents engaged by Clearing Agents for this purpose. 185 Where a Clearing Agent fails to make Payment within the Settlement Cycle, the Clearinghouse will proceed to settle Payments owed to Counterparty Clearing Agents, thereby acquiring right of recourse against the Securities exchanged for Payment. 186 The Clearinghouse will adopt appropriate action, as may be necessary, to treat Default on Settlement, and may liquidate Collateral deposited by the defaulting Clearing Agent to obtain compensation for losses thus incurred, without prejudice to other applicable penalties. The expenses the Clearinghouse incurs with Default treatment will be borne by the defaulting Clearing Agent. 187 The Settlement of Transactions accepted by the Clearinghouse implies a unique chain of responsibilities, which is set forth below Regarding Clearing Agents: as Counterparties, Clearing Agents undertake responsibility, towards their customers and the Clearinghouse, for delivering Securities and transferring funds for the Settlement of Transactions for which they are responsible. As may be necessary, they will extend the action taken to treat their Default on Settlement to the defaulting customer, leading to liquidation of Collateral of the defaulting customer, at the expense of the defaulting customer, for refund of ensuing losses, without prejudice to other applicable penalties; Clearing Agents further undertake responsibility towards the Clearinghouse for posting required Collateral; in the event a customer fails to make Payment within the Settlement Cycle, the relevant Clearing Agent will be required to make the Payment due by the defaulting customer to the Clearinghouse, with recourse against the Securities exchanged for said Payment; Clearing Agents undertake no liability towards Investors or Full Trading Participants for Default on either of their mutual obligations; and Clearing Agents are fully liable for their choice of customers, therefore exempting BM&FBOVESPA from any liability for customer violations of this Rulebook and other applicable legal provisions. 82

83 187.2 Regarding Gross Settlement Agents: as Counterparties, Gross Settlement Agents undertake responsibility, towards their customers and the Clearinghouse, for delivering Securities and transferring funds for Gross Settlement of Transactions for which they are responsible; Gross Settlement Agents undertake no liability towards Investors or Full Trading Participants for Default on either of their mutual obligations; and Gross Settlement Agents are fully liable for their choice of customers, therefore exempting BM&FBOVESPA from any liability for customer violations of this Rulebook and other applicable legal provisions Regarding Full Trading Participants: as Counterparties, Full Trading Participants undertake responsibility, towards their customer Investors and Clearing Agents, for delivering Securities and transferring funds for the Settlement of Transactions they intermediate. As may be necessary, they will extend the action taken to treat their Default on Settlement to the defaulting customer, leading to liquidation of Collateral of the defaulting customer, at the expense of the defaulting customer, for refund of ensuing losses, without prejudice to other applicable penalties; Full Trading Participants further undertake responsibility for posting Collateral required by Clearing Agents; in the event an Investor fails to make Payment within the Settlement Cycle, the relevant Full Trading Participant will be required to make the Payment due by the defaulting Investor to the Clearing Agent, with recourse against the Securities exchanged for said Payment; and Full Trading Participants are fully liable for their choice of Clearing Agents or Gross Settlement Agents, as the case may be, or of customers, therefore exempting BM&FBOVESPA from any liability for Clearing Agent or Gross Settlement Agent or customer violations of this Rulebook and other applicable legal provisions Regarding Qualified investors: as Counterparties, Qualified Investors undertake responsibility, towards Clearing Agents, for delivering Securities and transferring funds for the Settlement of their Transactions, and for posting required Collateral; Qualified Investors are fully liable for their choice of Clearing Agents, which they engage directly or through third parties, therefore undertaking full liability for the actions ensuing from such choice Regarding Investors: 83

84 as Counterparties, Investors undertake responsibility, towards Full Trading Participants, for delivering Securities and transferring funds for the Settlement of their Transactions, and for posting required Collateral, as the case may be; and Investors are fully liable for their choice of Full Trading Participants. CHAPTER II RESPONSIBILITIES RELATED TO THE DEPOSITORY SERVICE 188 The Clearinghouse is responsible towards Custodian Agent: for the integrity of Securities and gold as a financial asset held under custody and for adjustments regarding Corporate Actions; for transferring Securities or funds resulting from treatment of Corporate Actions by the Clearinghouse; for Deposits, Withdrawals and Transfers of Securities and gold as a financial asset pursuant to the instructions of Custodian Agents, including for Settlement purposes, as well as for the Settlement of rights and obligations resulting from Securities and Transactions registered in the Registration System; and for managing individual Custody Account structures, if any. 189 The chain of responsibilities within the scope of the Depository Service is set forth below Regarding Custodian Agents: Custodian Agents are fully liable for their choice of customers, for whom they are liable towards the Clearinghouse, 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 and gold as a financial asset in Custody Accounts, for the formal and substantive legal existence and good standing of delivered Securities, gold bars and certificates, for the veracity of endorsements and the truthfulness of every other document submitted in connection with their Transactions and Securities registered in the Registration System, and for the confidentiality of information related to Securities and gold as a financial asset held under custody for customers; Custodian Agents are fully liable for their choice of customers, therefore exempting BM&FBOVESPA from any liability for losses and damages caused by their customers or third parties; 84

85 Custodian Agents undertake responsibility towards customers for transferring Securities and funds resulting from treatment of Corporate Actions by the Clearinghouse and, as the case may be, arranging for related taxes to be paid; and Custodian Agents undertake responsibility towards customers for Deposits, Withdrawals and Transfers of Securities and gold as a financial asset implemented under their instructions, including for Settlement purposes, as well as for purposes of the Transfer of Securities related to the Settlement with delivery of Securities involved in the registration of Securities and Transactions in the Registration System Regarding Investors, as customers of Custodian Agents: Investors are liable towards their Custodian Agents for the accuracy and truthfulness of record information they provide, and for the formal and substantive legal existence and good standing of delivered Securities, gold bars and certificates, for the veracity of endorsements and the truthfulness of every other document submitted in connection with their Transactions and Securities registered in the Registration System, and for providing funds related to the exercise of Corporate Action rights; and Investors are fully liable for their choice of Custodian Agents, therefore exempting BM&FBOVESPA from any liability for unauthorized movement of Securities and other actions entailing violations of this Rulebook and other applicable legal provisions. CHAPTER III BM&FBOVESPA EXEMPTIONS AND LIMITATIONS OF LIABILITY 190 BM&FBOVESPA will be exempt from liability related to any of the following: Qualified Investors or Full Trading Participants that, as customers of Clearing Agents, fail to meet their obligations towards Clearing Agents, regardless of the circumstances leading to failure; Full Trading Participants that, as customer of Gross Settlement Agents, fail to meet their obligations towards Gross Settlement Agents, regardless of the circumstances leading to failure; Clearing Agents or Gross Settlement Agents that fail to meet their obligations towards their customers, regardless of the circumstances leading to failure; Full Trading Participants that fail to meet their obligations towards their customer Investors, regardless of the circumstances leading to failure; Settlement Agents that fail to meet their obligations, in particular those of transferring funds at a predefined time within the Settlement Cycle; any irregular or unauthorized movement of Securities held under custody, implemented on instructions of Custodian Agents; and 85

86 190.7 Investors that fail to meet their obligations towards Custodian Agents, regardless of the circumstances leading to failure. 191 Additionally, BM&FBOVESPA assumes no liability for any of the following: information provided by Securities Issuers; actions of third parties that do not operate, or do business, or have business within the scope of the activities performed by the Clearinghouse, as contemplated herein; breach of responsibilities by any Participant, regardless of the circumstances leading to breach, or violation of this Rulebook or of any other applicable legal rules; indemnities claimed by any Participant for losses incurred as a result of actions of Custodian Agents entailing use, or unauthorized movement of Securities and gold as a financial asset held in custody at the Depository Service; indemnities claimed by any Participant for losses incurred as a result of violations of applicable legal rules or this Rulebook, on account of the actions of a Participant vis-àvis another, and in fortuity or force majeure which prevent performance of any of the activities contemplated in this Rulebook; Issuers failing to perform issue-related obligations, such as redemption of principal and interest of Securities; and Settlement of any Transaction whose cancellation is determined by the Central Bank of Brazil, the Brazilian Securities and Exchange Commission, Trading Environments, BSM or BM&FBOVESPA (acting in the capacity of oversight entity), each acting within its own sphere of authority, regardless of prior Acceptance by the Clearinghouse (which in this event may be annulled), but giving regard to a Settlement s irrevocability. 86

87 T I T L E V I I S T A T E O F A R R E A R S AND D E F A U L T CHAPTER I TYPIFICATION 192 A failure by a Clearing Agent to meet obligations related to the Settlement of Transactions, or to meet Collateral requirements, or to contribute to the Settlement Fund or any other protection or risk coverage 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. 193 The Clearinghouse will declare a Clearing Agent in a 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 the use of Collateral pledged by the Clearing Agent, or of appropriate liquidity coverage mechanisms, as provided in the Operating Procedures and this Rulebook The noncompliance of obligations resulting from fortuity or force majeure will not constitute State of Arrears, but the obligations of the Clearing Agent survive any such event and must still be met. 194 The Clearinghouse 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 the use of Collateral pledged by the Clearing Agent, or of appropriate liquidity coverage mechanisms, as provided in the Operating Procedures and this Rulebook. The Clearinghouse 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 the Clearinghouse. 195 Whether in State of Arrears or in Default, a Clearing Agent will nonetheless be fully liable for refunding the Clearinghouse for the ensuing losses, without prejudice to other applicable administrative, financial, legal and regulatory sanctions. CHAPTER II EFFECTS OF DEFAULT 196 A Default entails the following consequences for the defaulting Clearing Agent: loss of any rights underlying the non-performed obligation; execution of Collateral of the defaulting Clearing Agent, pursuant to Chapter IV under this Title; temporary constraint preventing any further Transaction Registration or Settlement, pending payment or performance of the defaulted obligation, with full refund of the ensuing losses; and 87

88 196.4 application of sanctions pursuant to Title IX ( Penalties ) of this Rulebook. 197 On declaring the Default of a Clearing Agent, the Clearinghouse, acting as Central Counterparty, undertakes responsibility for settling Transactions left unsettled vis-à-vis other Clearing Agents. 198 Responsibility for the Settlement of open positions in derivatives markets and other Transactions which the defaulting Clearing Agent was due to settle will be, in the discretion of the Clearinghouse: transferred to another Clearing Agent designated by the customer of the defaulting Clearing Agent or by the Clearinghouse; transferred, temporarily, to BM&FBOVESPA, which will adopt the appropriate procedures; or early settled on a compulsory basis, except for open positions in derivatives markets, Securities lending positions, and covered short sales in cash markets carried out by performing Investors. 199 Default resulting from failed funds transfer by a Settlement Agent is attributable to the respective Clearing Agent. 200 The effects of Default set forth in this Chapter apply also, as appropriate, to other Participants engaged in the Default treatment, in particular with regard to actions by Clearing Agents to execute Collateral pledged by the relevant Qualified Investor and Full Trading Participant, and actions by Full Trading Participants to liquidate Collateral pledged by the relevant Investor In the absence of actions by Clearing Agents and Full Trading Participants in the treatment of Default, BM&FBOVESPA may execute Collateral pledged by Investors, whether Qualified or not, to ensure settlement of their obligations Any balance of proceeds outstanding from execution of Collateral pledged by the defaulting Investor with a Clearing Agent or Full Trading Participant may be used to settle such Investor s obligations towards other Clearing Agents or Full Trading Participants. CHAPTER III DEFAULT REPORTING PROCEDURES 201 The Clearinghouse will report events of Default of Clearing Agents to the Central Bank of Brazil, the Brazilian Securities and Exchange Commission and Trading Environments. 88

89 201.1 Default by other Participants must be reported by their respective Counterparties to the Clearinghouse, which will report any such event to the Central Bank of Brazil, the Brazilian Securities and Exchange Commission, BSM and Trading Environments, according with their own spheres of oversight authority BM&FBOVESPA may also release information to the market regarding a Participant s Default, doing so through customary communication channels. 202 The Clearinghouse will keep records of any event of Default and related treatment actions for a period of five (5) years, during which such records will be made available to regulatory agencies. CHAPTER IV COLLATERAL TREATMENT AND EXECUTION 203 Default of any Participant will imply prompt execution of Collateral pledged by the defaulting Counterparty Collateral execution requires no prior notice or judicial notification or any other consents. 204 In executing Collateral, BM&FBOVESPA will give regard to the following order of preference: Collateral pledged to BM&FBOVESPA by the defaulting Clearing Agent or by Investors, whether Qualified or not; resources making up the Settlement Fund and corresponding to the contribution of the defaulting Clearing Agent; resources making up the Settlement Fund and corresponding to the institutional contribution of the Clearinghouse; resources corresponding to the fixed contributions of the other Clearing Agents to the Settlement Fund; other guarantee instruments, if any; and further BM&FBOVESPA resources. 205 After completion of position closeout, Collateral execution and settlement processes, any balance of proceeds then outstanding will be returned to the party or parties legally entitled to said balance. 206 Resources recovered by BM&FBOVESPA by way of full or partial refund for losses will be credited to the sources listed under paragraph 200 above, in reverse order of preference. 89

90 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; MANAGEMENT; OWNERSHIP 207 The Clearinghouse maintains a single Settlement Fund as a management mechanism for credit and liquidity risks to which it is exposed in the Markets for which it acts as Central Counterparty. 208 The Settlement Fund of the Clearinghouse is a not-for-profit entity, but not a legal person. 209 The Settlement Fund will be composed of Securities contributed by BM&FBOVESPA and the Clearing Agents for deposit at BM&FBOVESPA Collateral Accounts established with SELIC, the Depository Service and other Depositories The Clearinghouse is responsible for defining the Securities that are acceptable as contribution to the Settlement Fund, and determining the discounts (haircuts) at which they will be accepted BM&FBOVESPA or the Clearing Agents, as applicable, will continue to hold title to the Securities contributed to the Settlement Fund. 210 The Settlement Fund is a mutualized fund, and the liability of each Clearing Agent to the fund is joint and limited, on an individual basis, to the value of its respective fixed contribution. 211 BM&FBOVESPA has authority to operate the Settlement Fund pursuant to powers granted on an irrevocable basis to: manage, on behalf of Clearing Agents and their collective interest, the resources earmarked to cover the risks associated with Transactions pending Settlement; liquidate Securities, selling them as and when it may deem adequate, in accordance with the provisions of this Rulebook, in order to use the proceeds from such sales to ensure that the obligations of defaulting Clearing Agents are fully or at least partially settled; and as and if possible, collect refund for losses incurred by the Settlement Fund on account of withdrawal of resources, which refund will be used in replenishing the fund. 212 The authority to establish further rules governing the Settlement Fund lies with the BM&FBOVESPA Board of Directors. 90

91 CHAPTER II PURPOSE 213 The purposes of the Settlement Fund are set forth below: covering losses from Default of Clearing Agent, whereas giving regard to the rules set forth herein for liquidation of Collateral; and providing liquidity for the Clearinghouse to tackle failed Deliveries and failed Payments, as and when required, in accordance with the provisions set forth in the Operating Procedures The provision contemplated in subparagraph is to be implemented solely with the resources corresponding to the institutional contribution of BM&FBOVESPA. 214 Losses not covered by the Settlement Fund include those that relate to: Transactions for which the Clearinghouse does not act as Central Counterparty; and fraudulent Transactions thus identified by the Central Bank of Brazil, or the Brazilian Securities and Exchange Commission, or Trading Environments, or BSM, or BM&FBOVESPA (acting in the capacity of oversight entity), each acting within its own sphere of authority. CHAPTER III FUND SIZE AND COMPOSITION 215 The Settlement Fund is made up of fixed contributions and variable contributions made by Clearing Agents The fixed contributions made by Clearing Agents to the Settlement Fund are mutualized The variable contributions made by Clearing Agents to the Settlement Fund are not mutualized. 216 The values of the fixed contributions required of Clearing Agents and BM&FBOVESPA to the Settlement Fund are proposed by the Chief Executive Officer and approved by the BM&FBOVESPA Board of Directors. Contribution values may differ by Clearing Agent category. BM&FBOVESPA s contribution value to the Settlement Fund must at least match the sum of the fixed contributions required of Clearing Agents. Current fixed contribution values required of Clearing Agents are provided in the Clearinghouse Operating Procedures and rules of access, which are released through Circular Letters. 91

92 217 The Clearinghouse is responsible for defining the methodology and parameters used in determining the size of the Settlement Fund, and also the variable contributions each Clearing Agent is required to make The methodology and parameters used in determining the size of the Settlement Fund are set forth in the Operating Procedures. 218 The variable contribution a Clearing Agent is required to make to the Settlement Fund will be in proportion to the risk associated with the Transactions under such Clearing Agent s responsibility. CHAPTER IV FUND UTILIZATION 219 The Settlement Fund can only be utilized to meet the purposes for which it has been established, subject to the rules for execution of Collateral set forth under Chapter IV ( Collateral Treatment and Liquidation ) of Title VII ( State of Arrears and Default ) of this Rulebook. CHAPTER V REVIEW OF CONTRIBUTIONS; REPLENISHMENT MECHANISM 220 The Clearinghouse from time to time will review the size of the Settlement Fund As a result of each periodic review, the fixed and the variable contributions, as the case may be, required of Clearing Agents may be revised upwards or downwards Where the values of contributions to the Settlement Fund are revised upwards, each Clearing Agent must deposit the resources needed to adhere its contributions to the new required values (i) by no later than the opening time of the market on the first business day following review, in the case of review of the variable contribution; and (ii) within twenty (20) consecutive business days counted from the date of notification of the new required values, in the case of review of the fixed contribution The obligation to adhere fixed contributions to the new required values will not apply to Clearing Agents whose accreditation is withdrawn from BM&FBOVESPA before the end of the deadline contemplated in the preceding subparagraph Where the values of contributions to the Settlement Fund are revised downwards, the Clearinghouse will make available for withdrawal by the Clearing Agents, from the date on which the new values take effect, the excess amounts of their respective contributions. 221 The use of Settlement Fund resources implies the obligation of the defaulting Clearing Agent(s) to replenish the amount(s) utilized, within the deadline established by BM&FBOVESPA. 92

93 221.1 If the defaulting Clearing Agent does not replenish the amount utilized from the Settlement Fund to cover losses from its own Default, the non-defaulting Clearing Agents must replenish the amount utilized from their own contributions, within the deadline established by BM&FBOVESPA and giving due regard to the limit defined below The total value allocated by any particular Clearing Agent, other than the defaulting Clearing Agent, for Settlement Fund replenishment purposes within any period of twenty (20) consecutive business days is limited to three (3) times the value of the individual contribution attributed to said Clearing Agent at the beginning of such period. 222 A Clearing Agent s failure to make the fixed or the variable contribution to the Settlement Fund, or other contributions related to any periodic review or replenishment of the Settlement Fund, as the case may be, will be declared in Default punishable with the sanctions provided herein. 223 The values deposited by Clearing Agents as a result of a periodic review of the Settlement Fund cannot be used to cover losses from events of Default occurring prior to the date of communication of the new values required by such review. 224 The values deposited by Clearing Agents to replenish the Settlement Fund cannot be used to cover losses from events of Default occurring prior to replenishment, including the Default that motivated the concerned replenishment. 93

94 T I T L E I X S A N C T I O N S 225 Violations of this Rulebook 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 closeout of positions and execution of Collateral pledged by the relevant Participant, except Gross Settlement Agents and Registration Participants; compulsory closing of the Custody Account, except Gross Settlement Agents and Registration Participants; suspension of activities, exclusion or withdrawal of accreditation, in addition to prompt reporting to the Central Bank of Brazil, the Brazilian Securities and Exchange Commission, BSM and Trading Environments; suspension, preclusion or rejection of Transaction Settlement or the Settlement of rights and obligations resulting from Securities and Transactions registered in the Registration System, 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 this Rulebook; transfer of positions held in Custody Accounts to another Custodian Agent; and transfer of Transactions pending Settlement to another Clearing Agent. 226 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. 227 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. 228 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. 229 In any event, if the final decision imposes 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; 94

95 229.2 within five (5) days after receiving notice of the penalty fine, the Participant may file application (without staying effects) for BM&FBOVESPA to reconsider the fine, in accordance with the specific provisions of the Operating Procedures; and In the event of suspension of the defaulting Clearing Agent, the suspension may be lifted if the Clearing Agent pays all the amounts then due and unpaid, as adjusted to include interest charged at market rates and other legal and contractual charges. 95

96 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 AND C O N T I N G E N C Y P R O C E D U R ES 230 The Clearinghouse adopts a technology infrastructure consistent with its operations as a deferred net settlement system and Securities Depository, which fulfills the security requirements established by the Central Bank of Brazil. 231 The technology infrastructure is implemented and/or adjusted with the assistance from well-renowned and highly experienced consultants, specializing in high-capacity volume-critical, large-scale complex IT systems, which encompass a variety of trading systems to operate and process in real-time transactions of different types on an interconnected basis. 232 As part of its business continuity, contingency/disaster recovery plan, the Clearinghouse also maintains an external contingency facility (back-up site) The external contingency facility duplicates the system and structure of the 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 the alternate location, for effective and continuing operation of the Clearinghouse settlement system and services through the alternate site in the event of contingency or disaster. 233 The Clearinghouse and its Participants are likewise required to maintain contingency/disaster recovery plans for their critical processes. 96

97 T I T L E X I E M E R G E N C Y A C T I O N S 234 With the aim of ensuring its activities are regularly and efficiently performed, the Clearinghouse may adopt emergency actions, as necessary in certain adverse circumstances. 235 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, which may cause losses or discontinuance of activities; and interruption of communication services affecting communications with Participants, the Central Bank of Brazil and SELIC due to operational failure, power outages or other factors adversely affecting order transmission and messaging systems, which the Clearinghouse disaster recovery and business continuity processes cannot overcome. 236 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 be applied to Transactions and/or open positions, and ongoing Settlement processes; if Management is unable to meet, the Chief Executive Officer has powers to determine appropriate emergency actions. 237 The emergency actions that the Clearinghouse may take by giving prior notice or obtaining consent from regulatory agencies, as applicable, include the following: transitory changes to rules, standards and procedures that regulate Clearinghouse activities, including as to deadlines and timetables, 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 Securities Transactions, provision of services by the Clearinghouse, and Settlement processes; halting Settlement processes for executed Transactions; and declaring the Clearinghouse in recess. 97

98 238 The 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 Settlement processes and the Depository Service. 98

99 T I T L E X I I - A R B I T R A T I O N 239 BM&FBOVESPA, Clearing Agents, Custodian Agents and Gross Settlement Agents are required to submit to arbitration, pursuant to the Arbitration Rules of the Market Arbitration Chamber, any and all disputes among them, which relate to, or arise in particular from the application, validity, effectiveness, interpretation, violation and effects of violation of the provisions of Brazilian Corporate Law (Law No. 6404/1976, as amended), their Bylaws, the rules issued by the Brazilian National Monetary Council, or the Central Bank of Brazil, or the Brazilian Securities and Exchange Commission, in addition to other rules and regulations regarding the operation of the Brazilian capital market, including the rules set forth in this Rulebook, in the Clearinghouse Operating Procedures and other rules issued by BM&FBOVESPA. 99

100 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 240 BM&FBOVESPA may enter into arrangements with Trading Environments, payment systems, providers of Clearing and Settlement services, and Depositories for the specific provision of services or performance of activities related to Transaction registration, Clearing, Settlement and Risk Management, or related to the Securities Depository Service. CHAPTER II SPECIAL PROVISIONS 241 For due legal purposes and effect, this Rulebook is binding on all the Clearinghouse Participants referred to herein. 242 Pursuant to the applicable legislation, and in compliance with the obligations of Clearing Agents stipulated above in this Rulebook, all the positions will be closed out and a single multilateral net result will be calculated for each Clearing Agent, if either of the following occurs: (i) (ii) The filing by BM&FBOVESPA of a judicial recovery claim or of an application for approval of an extrajudicial recovery plan; or the judicial declaration of the bankruptcy of BM&FBOVESPA, provided the effects thereof are not suspended or revoked within fifteen (15) consecutive calendar days Should either hypothesis (i) or hypothesis (ii) referred to in the previous paragraph occur, the Clearinghouse shall notify the Participants and the regulatory authorities The position closeout process will be performed after the occurrence of either hypothesis (i) or (ii) referred to in the previous paragraph, in accordance with the procedures and criteria defined by the Clearinghouse The multilateral net result for each Clearing Agent, as referred to in the previous paragraph, shall be calculated by the Clearinghouse and must be settled on the date it establishes. The multilateral net result for each Clearing Agent shall correspond to the netting of (i) the net proceeds from closing out of any and all open positions under its responsibility; and (ii) any obligations not settled by the Clearing Agent with the Clearinghouse or by the Clearinghouse with the Clearing Agent The Clearinghouse may use Collateral pledged by Participants pursuant to this Rulebook should any Clearing Agent showing a multilateral net debit result fail to settle the amount owed to the Clearinghouse as and when required by the paragraph above and subparagraphs. 100

101 242.5 Notwithstanding the occurrence of the hypothesis (ii) referred to in the previous paragraph, the obligations of Participants and the Clearinghouse, as described in this Rulebook, shall remain enforceable for the fifteen (15) consecutive calendar days referred thereto. 243 Pursuant to the applicable legislation, and in compliance with the obligations of Clearing Agents stipulated above in this Rulebook, in the case of total or partial default by the Clearinghouse to pay the multilateral net balance owed to a Clearing Agent, and of failure to remedy such default within twenty (20) consecutive business days of the date when the Clearinghouse receives written notice from the Clearing Agent notifying that it has not received the amount due, in the sole discretion of said Clearing Agent its positions may be closed out and a single multilateral net result calculated The Clearinghouse shall immediately notify the regulatory authorities of the occurrence of default referred to in the paragraph above The position closeout process shall be performed after end of the period of twenty (20) consecutive business days referred to in the paragraph above, in accordance with the procedures and criteria established by the Clearinghouse The Clearing Agent s multilateral net result, as referred to in the paragraph above, shall be calculated by the Clearinghouse and settled on the date it establishes. The Clearing Agent s multilateral net result shall correspond to the netting of (i) the net proceeds from the closing out of any and all open positions under its responsibility; and (ii) any obligations not settled by the Clearing Agent with the Clearinghouse or by the Clearinghouse with the Clearing Agent The Clearinghouse may use Collateral pledged by Participants pursuant to this Rulebook should any Clearing Agent showing a multilateral net debit result fail to settle the amount owed to the Clearinghouse as and when required by the paragraph above and subparagraphs Notwithstanding the occurrence of default referred to in the paragraph above, the obligations of Participants and the Clearinghouse, as described in this Rulebook, shall remain enforceable for the period of twenty (20) consecutive business days referred thereto. 244 The provisions of this Rulebook are to be included explicitly or by reference in the agreements entered into by Participants. CHAPTER III SUPPLEMENTARY RULES 245 The Chief Executive Officer of BM&FBOVESPA will rule on instances regarding which this Rulebook is silent. 101