Credit: SELIC (Sistema Especial de Liquidação e de Custódia) or the Special System for Settlement and Custody, is the Brazilian Central Bank's vehicle for undertaking open market operations -- much like the Federal Open Market Committee of the United States Federal Reserve.
[caption align="alignright" caption="The Central Bank of Brazil"] 
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The Banco Central do Brasil (Central Bank of Brazil) manages the SELIC and operates it jointly with ANBIMA (the Brazilian Association of Financial and Capital Markets, which represents institutions of the Brazilian capital market). The SELIC system has two operational centers - principal and secondary - located in Rio de Janeiro.
Besides the National Treasury and the Brazilian Central Bank, commercial banks, universal banks, investment banks, savings banks, dealers and brokers, clearing and settlement system operators, mutual investment funds and many other institutions that integrate the financial system participate in SELIC as custody account holders.
Government securities are bought and sold by SELIC in an effort to control the money supply and target desired inflation and interest rates. The SELIC rate is the Bank's overnight rate. Bonds, bills, and notes of a variety of denominations and maturities are floated on behalf of the Brazilian National Treasury and Brazilian Central Bank.
[caption align="alignnone" caption="A typical SELIC transaction process"] 
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The yield on many of these securities is tied to the SELIC rate, which is the BCB-targeted overnight bank-to-bank lending rate that is used by banks to meet reserve requirements set by the BCB. The SELIC rate is the Brazilian analogue to the federal funds rate in the United States. The current target SELIC rate of 8.5% is the BCB's lowest target in over 10 years . Although economists had originally expected the BCB to increase the target rate in the next year, new forecasts see the target SELIC rate remaining at 8.5% until the end of 2013 in order to encourage growth in the Brazilian economy ( EWZ , quote ), despite growing fears of inflation.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
