Brazil: Providing an international bridge to market
18 August 2026
Industry participants explore Brazil鈥檚 collaborative efforts to attain a new securities lending model ahead of its transition to a T+1 settlement cycle, with hopes to expand offshore participation and sources of liquidity. Carmella Haswell reports
Image: stock.adobe.com/Aliaksei
Brazil has truly captured the attention of the securities finance market; not for its Amazon Rainforest, Carnival, or even for its historic wins in the FIFA World Cup, but for its developing capital market which holds prospective opportunities for participants, onshore and offshore.
As a key development for the country, Brazil鈥檚 stock exchange, B3, announced a move to T+1, in keeping with markets such as the US, UK, EU, as well as its neighbours Chile, Colombia, and Peru 鈥� of which aim to make the transition in the second quarter of 2027.
The move, set for February 2028, aims to promote greater operational efficiency, risk mitigation, and alignment with international best post-trade practices. The initiative is led by B3 鈥� coordinator and facilitator of the T+1 project 鈥� along with market participants, through a governance structure, with the involvement of regulators and trade associations.
While the industry is eager to see what this journey will bring, it is important to first assess the landscape.
网爆吃瓜 lending activity in Brazil has shown a mixed but revealing picture in the first half of 2026, as the market prepares for its transition to a shorter settlement cycle, says Matt Chessum, executive director, equity and analytic products at S&P Global Market Intelligence.
While total lending revenue dipped marginally by 3.7 per cent year-on-year to US$63.8 million, the underlying dynamics tell a more nuanced story. Figures from S&P Global Market Intelligence reveal that average loan balances surged 58 per cent to US$5.4 billion, suggesting heightened demand for Brazilian equities. Meanwhile, the lendable supply pool expanded nearly 29 per cent to US$14.9 billion, reflecting growing institutional participation in the country鈥檚 securities lending programme.
The apparent disconnect between rising balances and flat revenues can be explained by shifting fee dynamics, says Chessum. Average weighted fees climbed 16 per cent to 2.23 per cent, yet utilisation rates, the proportion of lendable securities actually on loan, fell 22 per cent to just 2.02 per cent.
鈥淭his pattern indicates that while more securities are available for lending than ever before, borrowing activity remains concentrated in specific high-demand names rather than spread broadly across the market,鈥� he adds.
June 2026 proved particularly active, with monthly revenues of US$10 million, up 176 per cent compared to June 2025, driven by fees spiking to 2.77 per cent as particular securities came into sharp demand.
As Brazil moves toward T+1 settlement, Chessum notes that market participants will be watching closely to see whether compressed settlement cycles affect this lending landscape, potentially reducing the window for investment strategies that rely on borrowed stock.
Out of reach
Having a functioning and reliable securities lending market in Brazil will be key to enabling a successful transition, and for Malu Gregorio, managing director, head of Brazil, 网爆吃瓜 Services, BNP Paribas, it is a market that is well-established and one that has grown steadily in recent years, supporting healthy liquidity for the most actively traded names.
It was 30 years ago that securities lending was first authorised in Brazil by the Banco Central do Brasil (BCB) through Resolution 2,268 dated 10 April 1996. This resolution has been amended and replaced multiple times, and with the ongoing work to reach T+1, the market will undoubtedly continue to develop.
Brazil has one of the most robust domestic securities lending markets in the world, says Gene Picone, consultant to the International 网爆吃瓜 Lending Association (ISLA) Americas. The central counterparty (CCP) model operated by B3 provides a highly efficient framework for local participants and has contributed to strong levels of market stability.
However, this current framework is providing restrictions to international players who are keen to participate in this market.
The current securities lending landscape is niche, says Patrick Morrissey, director of product and strategy for securities lending at Vanguard. It is a niche market for local investors and for those entities that have risk tolerance. 鈥淚t鈥檚 a very unique market infrastructure, and it鈥檚 one that isn鈥檛 favourable to a lot of foreign institutional investors.鈥�
Providing insight on the topic, Morrissey indicates that due to Brazil鈥檚 use of the central clearing counterparty model for securities lending, many foreign institutional investors have been kept out of the market for different reasons. For instance, US mutual funds 鈥渨ere never really allowed to participate in the CCP model鈥� from a regulatory perspective.
Similarly, Fred Leonel, head of Investor Services for Brazil at Citi, says the current structure can hold international lenders, such as beneficial owners and agent lenders, back from participating. 鈥淭hese participants do not take possession of collateral, and the market does not utilise a segregated account structure for collateral, which means lenders do not have direct visibility into the specific securities allocated.鈥�
As of right now, a bilateral securities lending framework does not exist. To achieve a more robust securities lending market, Morrissey says a new model must become available to both local and foreign investors, with a focus on collateral control.
The ISLA Americas鈥� working group has been collaborating with B3 over the past two years to propose a new securities lending model to Brazilian regulators.
According to Leonel, the proposed model introduces key structural improvements such as the use of bilateral collateral exchange in the US, meanwhile maintaining the settlement of the underlying securities in the local Brazilian market. This structure aligns Brazil with other established offshore lending markets.
In addition, the model aims to unlock international capital, enabling 鈥渁 substantial volume鈥� of international lenders, such as US mutual funds and global pension funds, to enter the Brazilian securities lending market. Further, it aims to stimulate local demand, with a strong expectation that as this new supply enters the market, it will draw in local borrowers who are currently sitting on the sidelines due to limited inventory.
While this model is a key talking point for participants, and would be a significant step forward for the market, bottlenecks remain. Picone says the industry has identified several areas where additional refinements would make Brazil more accessible to global investors. These include settlement and recall timelines, collateral flexibility, buy-in practices, fail management, and billing conventions.
He continues: 鈥淭hrough ongoing collaboration between ISLA Americas, B3, market participants, and other stakeholders, many of the historical barriers have either been resolved or are well on their way to resolution. Those changes should meaningfully expand offshore participation and provide additional sources of liquidity as Brazil approaches T+1.鈥�
Working in tandem鈥r almost
As previously mentioned, Colombia, Chile, and Peru have also confirmed their transition to T+1, with a plan to move to a shorter settlement cycle in the second quarter of 2027. But just how important is it to align these capital markets?
Well, for Picone, the broader transition across Latin America represents an important milestone for the region. By modernising settlement infrastructure and simplifying securities finance practices, he says these countries are creating a more efficient and attractive investment environment. 鈥淏razil鈥檚 transition complements this broader regional evolution and further strengthens Latin America鈥檚 position in global capital markets.鈥�
With the globe moving to T+1, greater regional consistency benefits all. Although there may be an estimated seven-month gap between Brazil and its neighbours in regards to T+1 implementation deadlines, Gregorio believes it is a valuable opportunity for the region: lessons on funding, FX cut-off times, and cross-border securities lending from the first wave can support Brazil鈥檚 own transition.
Morrissey adds: 鈥淭he mindset of all participants, regardless of jurisdiction, should be frictionless engagement throughout the settlement ecosystem, which includes a robust and near-real-time securities lending infrastructure.
鈥淲hile market-specific nuances will always exist and present unique challenges, building an adaptable and scalable programme with the right guardrails will help ensure alignment as the LatAm market continues to grow.鈥�
Looking towards the future, market participants value regulatory alignment, early planning, automation, common operational standards, and close collaboration as key principles for a successful implementation. These points have been a core focus for other jurisdictions which have moved to a shorter settlement cycle, highlighting the importance of learning the lessons of previous movers.
Liquidity will also be a key consideration for participants or for any regulator that wants to move to a T+1 cash equity settlement cycle. Morrissey indicates that, to be successful, there needs to be various bridges to liquidity through the lenses of frictionless workflows, standardised lifecycle events, well-defined onboard and documentation, reasonable penalty regimes, and tax considerations up and down the value chain.
鈥淭he transition to T+1 should be viewed not simply as a settlement initiative, but as an opportunity to modernise Brazil鈥檚 securities lending ecosystem, attract greater international participation, and enhance overall market liquidity for years to come,鈥� concludes Picone.
As a key development for the country, Brazil鈥檚 stock exchange, B3, announced a move to T+1, in keeping with markets such as the US, UK, EU, as well as its neighbours Chile, Colombia, and Peru 鈥� of which aim to make the transition in the second quarter of 2027.
The move, set for February 2028, aims to promote greater operational efficiency, risk mitigation, and alignment with international best post-trade practices. The initiative is led by B3 鈥� coordinator and facilitator of the T+1 project 鈥� along with market participants, through a governance structure, with the involvement of regulators and trade associations.
While the industry is eager to see what this journey will bring, it is important to first assess the landscape.
网爆吃瓜 lending activity in Brazil has shown a mixed but revealing picture in the first half of 2026, as the market prepares for its transition to a shorter settlement cycle, says Matt Chessum, executive director, equity and analytic products at S&P Global Market Intelligence.
While total lending revenue dipped marginally by 3.7 per cent year-on-year to US$63.8 million, the underlying dynamics tell a more nuanced story. Figures from S&P Global Market Intelligence reveal that average loan balances surged 58 per cent to US$5.4 billion, suggesting heightened demand for Brazilian equities. Meanwhile, the lendable supply pool expanded nearly 29 per cent to US$14.9 billion, reflecting growing institutional participation in the country鈥檚 securities lending programme.
The apparent disconnect between rising balances and flat revenues can be explained by shifting fee dynamics, says Chessum. Average weighted fees climbed 16 per cent to 2.23 per cent, yet utilisation rates, the proportion of lendable securities actually on loan, fell 22 per cent to just 2.02 per cent.
鈥淭his pattern indicates that while more securities are available for lending than ever before, borrowing activity remains concentrated in specific high-demand names rather than spread broadly across the market,鈥� he adds.
June 2026 proved particularly active, with monthly revenues of US$10 million, up 176 per cent compared to June 2025, driven by fees spiking to 2.77 per cent as particular securities came into sharp demand.
As Brazil moves toward T+1 settlement, Chessum notes that market participants will be watching closely to see whether compressed settlement cycles affect this lending landscape, potentially reducing the window for investment strategies that rely on borrowed stock.
Out of reach
Having a functioning and reliable securities lending market in Brazil will be key to enabling a successful transition, and for Malu Gregorio, managing director, head of Brazil, 网爆吃瓜 Services, BNP Paribas, it is a market that is well-established and one that has grown steadily in recent years, supporting healthy liquidity for the most actively traded names.
It was 30 years ago that securities lending was first authorised in Brazil by the Banco Central do Brasil (BCB) through Resolution 2,268 dated 10 April 1996. This resolution has been amended and replaced multiple times, and with the ongoing work to reach T+1, the market will undoubtedly continue to develop.
Brazil has one of the most robust domestic securities lending markets in the world, says Gene Picone, consultant to the International 网爆吃瓜 Lending Association (ISLA) Americas. The central counterparty (CCP) model operated by B3 provides a highly efficient framework for local participants and has contributed to strong levels of market stability.
However, this current framework is providing restrictions to international players who are keen to participate in this market.
The current securities lending landscape is niche, says Patrick Morrissey, director of product and strategy for securities lending at Vanguard. It is a niche market for local investors and for those entities that have risk tolerance. 鈥淚t鈥檚 a very unique market infrastructure, and it鈥檚 one that isn鈥檛 favourable to a lot of foreign institutional investors.鈥�
Providing insight on the topic, Morrissey indicates that due to Brazil鈥檚 use of the central clearing counterparty model for securities lending, many foreign institutional investors have been kept out of the market for different reasons. For instance, US mutual funds 鈥渨ere never really allowed to participate in the CCP model鈥� from a regulatory perspective.
Similarly, Fred Leonel, head of Investor Services for Brazil at Citi, says the current structure can hold international lenders, such as beneficial owners and agent lenders, back from participating. 鈥淭hese participants do not take possession of collateral, and the market does not utilise a segregated account structure for collateral, which means lenders do not have direct visibility into the specific securities allocated.鈥�
As of right now, a bilateral securities lending framework does not exist. To achieve a more robust securities lending market, Morrissey says a new model must become available to both local and foreign investors, with a focus on collateral control.
The ISLA Americas鈥� working group has been collaborating with B3 over the past two years to propose a new securities lending model to Brazilian regulators.
According to Leonel, the proposed model introduces key structural improvements such as the use of bilateral collateral exchange in the US, meanwhile maintaining the settlement of the underlying securities in the local Brazilian market. This structure aligns Brazil with other established offshore lending markets.
In addition, the model aims to unlock international capital, enabling 鈥渁 substantial volume鈥� of international lenders, such as US mutual funds and global pension funds, to enter the Brazilian securities lending market. Further, it aims to stimulate local demand, with a strong expectation that as this new supply enters the market, it will draw in local borrowers who are currently sitting on the sidelines due to limited inventory.
While this model is a key talking point for participants, and would be a significant step forward for the market, bottlenecks remain. Picone says the industry has identified several areas where additional refinements would make Brazil more accessible to global investors. These include settlement and recall timelines, collateral flexibility, buy-in practices, fail management, and billing conventions.
He continues: 鈥淭hrough ongoing collaboration between ISLA Americas, B3, market participants, and other stakeholders, many of the historical barriers have either been resolved or are well on their way to resolution. Those changes should meaningfully expand offshore participation and provide additional sources of liquidity as Brazil approaches T+1.鈥�
Working in tandem鈥r almost
As previously mentioned, Colombia, Chile, and Peru have also confirmed their transition to T+1, with a plan to move to a shorter settlement cycle in the second quarter of 2027. But just how important is it to align these capital markets?
Well, for Picone, the broader transition across Latin America represents an important milestone for the region. By modernising settlement infrastructure and simplifying securities finance practices, he says these countries are creating a more efficient and attractive investment environment. 鈥淏razil鈥檚 transition complements this broader regional evolution and further strengthens Latin America鈥檚 position in global capital markets.鈥�
With the globe moving to T+1, greater regional consistency benefits all. Although there may be an estimated seven-month gap between Brazil and its neighbours in regards to T+1 implementation deadlines, Gregorio believes it is a valuable opportunity for the region: lessons on funding, FX cut-off times, and cross-border securities lending from the first wave can support Brazil鈥檚 own transition.
Morrissey adds: 鈥淭he mindset of all participants, regardless of jurisdiction, should be frictionless engagement throughout the settlement ecosystem, which includes a robust and near-real-time securities lending infrastructure.
鈥淲hile market-specific nuances will always exist and present unique challenges, building an adaptable and scalable programme with the right guardrails will help ensure alignment as the LatAm market continues to grow.鈥�
Looking towards the future, market participants value regulatory alignment, early planning, automation, common operational standards, and close collaboration as key principles for a successful implementation. These points have been a core focus for other jurisdictions which have moved to a shorter settlement cycle, highlighting the importance of learning the lessons of previous movers.
Liquidity will also be a key consideration for participants or for any regulator that wants to move to a T+1 cash equity settlement cycle. Morrissey indicates that, to be successful, there needs to be various bridges to liquidity through the lenses of frictionless workflows, standardised lifecycle events, well-defined onboard and documentation, reasonable penalty regimes, and tax considerations up and down the value chain.
鈥淭he transition to T+1 should be viewed not simply as a settlement initiative, but as an opportunity to modernise Brazil鈥檚 securities lending ecosystem, attract greater international participation, and enhance overall market liquidity for years to come,鈥� concludes Picone.
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