Cetip

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Cetip
CETIP.jpg
Founded 1986
Headquarters Rio de Janeiro, Brazil
Key People Luiz Fernando Vendramini Fleury, CEO
Products Custody, settlement and trading of private and OTC secuirites
Website cetip.com.br

Brazil's Cetip is Latin America's largest central depository for OTC and private securities and derivatives, with over 15,000 customers in Brazil's financial services sector, and over BRL 5 trillion (about $2 trillion) in assets held in custody.[1]

Formerly known as CETIP SA Mercados Organizados, Cetip raised just over US$500 million (881.4 million reals) through an initial public offering in October 2009 with its shares trading on BM&FBOVESPA.[2]

Background

Cetip was launched in 1986 by the Central Bank of Brazil and a group of financial institutions with the aim of promoting more safety and efficiency in the Brazilian private securities market by functioning as an interconnected financial network for private securities and derivatives trading. It is the market's main custodian for corporate fixed income — for which it is currently Latin America's largest custodian — and OTC derivatives.[3]

As Brazil's main share depository, Cetip collects the Brazilian government's tax on Brazilian stocks traded as American depository receipts (ADRs). Brazil introduced the 1.5 percent tax on ADRs in mid-November 2009 to cool off the recent rapid rise in foreign investment capital flowing into Brazilian securities and pushing up the value of the Brazilian real, Dow Jones reported. One month earlier, Brazil's government imposed a 2 percent tax on forex inflows also aimed at dampening down the real.

On June 8, 2011, Cetip and Deutsche Borse's Clearstream announced a deal to launch a collateral management outsourcing service in July 2011. The new Brazilian-based service, allows Cetip customers to handle collateral exposure in their time zone and in real-time. The goal is to help those firms manage their risk across OTC derivatives markets, with an initial focus on collateralization of OTC derivative exposures managed by Cetip. Phase two will focus on assets eligible at Clearstream, thus allowing customers to meet collateral obligations from a larger collateral pool. Cetip and Clearstream began working on the partnership in March 2010, according to a Reuters report.[4]

Cetip recorded $US67 billion in offshore financial derivative contracts held by Brazilian banks in March 2010 as part of increased supervision of such contracts in Brazil. [5]

An important change happened in December of 2010, when Cetip acquired GRV Solutions, a Brazilian company founded in 1995, which is now the company’s Financing Unit. With this acquisition, Cetip doubled in size and made several changes to its management, consolidating its structure to gain speed and efficiency.[6]

Cetip became a publicly-held company with stock listed on Nova Mercado on October 28, 2009.

Cetip Trader

In August 2012, Intercontinental Exchange (ICE) and Cetip announced the creation of Cetip Trader, a Brazillian fixed income trading platform that merges electronic trading, voice confirmation, bilateral settlement of electronic buy and sell orders, and real-time historical data into a single piece of software. Under the terms of the joint venture, ICE provided the new technology which will blend with Cetip's already existing voice trading software. ICE Link will provide processing services as well as depository registration. [7]

On February 7, 2013, Brazilian regulators approved Cetip Trader; the platform is set to launch on February 25, 2013.[8]

Ownership moves

Cetip remained a mutually-owned non-profit organization until its demutualization in mid-2008 in advance of an initial public offering that had been scheduled for later that year but was postponed due to the financial crisis. In May 2009 Boston-based global private equity firm Advent International bought a 30 percent stake in Cetip for about US$170 million and was at that time Brazil's largest private-equity transaction of 2009. Then in mid-October 2009, Cetip announced it would again proceed with an IPO on Oct. 28 on Sao Paulo's BM&FBOVESPA exchange at a stock price of 13 to 17 reals.

Controlling shareholders in Cetip eventually raised 881.4 million Brazilian reals by selling 67.8 million common shares at 13 reals each in late October 2009, making it Brazil's third-biggest IPO of the year.[9] Private equity firm Advent International was CETIP's largest shareholder prior to the IPO with almost one third of its stock. Other major shareholders included Banco Santander Brasil and Bradesco, according to Reuters. But on their first day of trading, Cetip shares fell almost 8 percent to 11.89 reals as investors became concerned at the direction of the Brazilian government's tax policies toward market transactions.

On July 14, 2011, the Intercontinental Exchange announced the acquisition of 12.4 percent of CETIP, for $512 million in cash, or R$25.50 per share. Advent International, which invested in Cetip prior to its initial public offering, was the main seller and with the sale, transitioned off the board of Cetip.[10]

In December 2015 Cetip rejected an unsolicited offer made by BM&FBovespa SA, saying it undervalued the company.[11]

Financial results

Cetip's 2011 financial results, released in early March 2012, showed slight revenue growth in the fourth quarter of 2011 (Q411), and more significant change throughout the whole of 2011.[12] Net revenue in Q411 grew to 192 million Brazilian reals, a slight increase from 191.9 million in Q311, but a 12.1 percent change from Q410. Whole-year net revenues for 2011 rose 33.1 percent over 2010 to hit 741.8 million reals. A company statement recognized the significant growth despite macroeconomic instability.

Key People

  • Edgar da Silva Ramos, Chairman
  • Gilson Finkelsztain, Chief Executive Officer
  • Francisco Carlos Gomes, CEO of Corporate, Financial and Investor Relations

References

  1. INTERCONTINENTALEXCHANGE ANNOUNCES STRATEGIC INVESTMENT WITH 12.4% STAKE IN CETIP S.A., BRAZIL'S LEADING CLEARING HOUSE. Press Release.
  2. Brazil's Cetip IPO raises 881.4 mln reais - filing. Reuters.
  3. Our History. CETIP.
  4. Brazil's Cetip in talks with Germany's Clearstream. Reuters.
  5. Brazil’s Cetip Registers $67 Billion of Offshore Derivatives. Businessweek.
  6. Cetip-Our History. Cetip.
  7. Cetip and Intercontinental Exchange Launch Fixed Income Trading Platform. Yahoo Finance.
  8. Brazil approves ICE electronic platform. Financial Times.
  9. Cetip holders raise 881.4 mln reals in Brazil IPO. Reuters.
  10. Intercontinental Exchange Announces Strategic Investment with 12.4% Stake in Cetip S.A., Brazil's Leading Clearing House. ICE.
  11. Brazil’s Cetip Rejects Unsolicited Bid From BM&FBovespa. The Wall Street Journal.
  12. EXPRESSIVE GROWTH IN THE YEAR, DESPITE THE INSTABILITY IN MACROECONOMIC SCENARIO. CETIP.