Innovation in self-regulatory organisations in the Brazilian capital markets : The BSM Market Supervision case

Abstract

The capital market plays an important part in Brazil’s economic development. It meets a large part of companies’ financing requirements and protects against market fluctuations. BSM is the main self-regulator of the Brazilian capital market. It performs self-regulation, supervision and inspection for organised markets managed by B3 — Brasil, Bolsa, Balcao — one of the world’s largest financial market infrastructure companies, providing trading services in an exchange and over-the-counter (OTC) environment. Pursuant to these goals, BSM monitors operations, orders and trades executed in this trading environments, supervises market participants and, if necessary, applies penalties against those who violate regulations. In this paper, the author shares how, in his current role, he verified the need for strategic mapping of BSM’s self-regulatory agenda. The paper aims to map opportunities for creating and updating legal standards that govern the capital market, to establish incentives for economic agents to reduce cost of compliance and make their regulation more efficient and effective. Several key drivers for BSM developments are: autonomy and empowerment, collaborative culture, agility and adaptability, and technology and digital transformation. BSM is adopting innovations in several areas, including trading technology with advanced analytical tools for monitoring electronic trading platforms, risk management systems and advanced analytical tools, as well as market surveillance monitoring: artificial intelligence (AI), machine learning (ML) and other technologies to detect abusive trading activities. Furthermore, it is promoting education and research: workshops, executive education courses and partnerships with universities and market schools and other initiatives to strengthen market understanding and improve trading analysis practices. All these tools bring to self-regulatory organisations (SROs) significant benefits, including greater transparency and efficiency.