Proprietary Trading Desk

The fundamental principle of operations in the Proprietary Trading Desk area is capital preservation and therefore, it entails prioritizing prudent risk management over high returns. This principle is the foundation of the Bank’s policy of not setting return targets for the Proprietary Trading Desk area. It's also the area's function to serve as platform for providing technical support and market intelligence to the Bank’s other businesses

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  • Support the Credit and Funding areas, including: (a) structuring and pricing derivatives and other products; (b) facilitating access to markets; (c) promoting the exchange of research and financial technology; (d) hedging the loan portfolio; and (e) setting the price levels at which the Bank can tap the market for funding;

  • Invest shareholders’ equity and manage cash by investing cash balances and managing mismatches between assets and liabilities;

  • Invest in short, medium, and long-term directional positions. These positions are discussed in various committees with senior executives and are based on detailed analysis from the Research area. The Proprietary Trading Desk’s directional positions are ruled by the Bank’s investment policy, which requires the area to comply with (a) VaR limits and (b) liquidity thresholds. The policy is sufficiently flexible to allow for investment in different markets and asset classes provided the above conditions are met.

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The Bank´s Proprietary Trading Desk takes positions through fixed-income instruments and through trading in currency and derivatives. Management believes that sound business practices and rigorous risk management thresholds underpin the Bank´s Proprietary Trading Desk operations, enabling it to achieve results that are solid and replicable in a market that is often volatile. Banco BBM´s Proprietary Trading Desk almost exclusively trades liquid assets, allowing it to quickly react to events and market volatility.

Though it does not have a fixed target for returns, the Proprietary Trading Desk area has historically contributed significantly to the Bank´s net operating income, partly due to what Management considers a conservative approach to risk by its ‘head traders’. Among other risk-management metrics, the Bank employs VaR to monitor its exposure. The VaR limit is determined every six months by the Executive Board and monitored daily by the Risk area.

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Banco BBM puts particular emphasis on having a comprehensive in-house knowledge base covering all risk factors to which it is actually or potentially exposed.

The Bank has invested substantially in developing its research capabilities and operates with a first-class team of seasoned analysts covering the domestic and global economies, industries, currencies, individual companies, and financial institutions.

The Research area comprises four main segments:

  • Macroeconomic Research (domestic and international) - provides support to Proprietary Trading Desk operations and Asset Management, and underpins the Bank’s overall view on macroeconomic trends;
  • Variable Income Research – supports Proprietary Trading Desk and Asset Management areas;
  • Credit Research - supports the Commercial area in assessing counterparty and industry risks, and acts as a critical element in the credit risk management process; and
  • Quantitative Research - provides technical analysis to support all business areas and the Risk Management area.

The Research area’s coverage is global, consistent with the Bank’s view that understanding global economic trends is crucial for effective operation in its main market, Brazil.