The Sistema Especial de Liquidação e de Custódia - Selic (Special System for Settlement and Custody) is the settlement system for most - around 96% - of central government's domestic securities.
Selic started its operations in 1979, resulting from a joint effort of BCB and market participants represented by the National Association of Financial Market Institutions (Andima). Since then, all of the relevant government securities in Brazil were dematerialized and kept in custody in Selic.
With the restructuring of the Brazilian payments system in 2002, Selic was reformed to follow international recommendations for securities settlement systems, providing from then on immediate, simultaneous and final transfer of securities and, through a direct link with STR (Central Bank Money Transfers System), bank reserves (genuine DVP-1).
Further to outright purchases/sales and to repurchase agreements (repos), some facilities were developed in Selic to enhance liquidity in the secondary market. One such mechanism allows the association of an outright purchase to an intraday repo operation, so that the buyer can settle the former using funds provided by the latter and, later on, by means of a similar association, repurchase the bonds with the resources obtained by simultaneously selling them.
Among Selic's extensions, the most important, from a monetary policy perspective, are the auction systems used for National Treasury's public offerings and to BCB's open market operations. Commercial banks, investment banks and broker houses participate in Selic, but mutual funds, pension funds and other institutional investors may also hold individual accounts. Special services have been developed in Selic to meet requirements of clearinghouses, such as special accounts where guarantees are held.