How to Purchase Stocks on the Bovespa
Want to invest on the Brazilian stock market but don't know how to do it? In this article you will find out a simplified guide about how to purchase stocks on the Bovespa.
If you want to purchase stocks on the Bovespa – the stock market of São Paulo – you must know what a operação a vista is. Operação a vista is the purchase or sale of a determined quantity of shares with price established in trading session (pregão). So, when a deal is closed, the buyer must pay the value negotiated and the seller must deliver the stocks of the transaction in the period established by Bovespa and by the Brazilian Company of Settlement and Custody, known as CBLC.
The stocks are all type of shares that belong to companies negotiated on the Bovespa. All of these shares can be purchased or sold by investors. The prices established in the purchase transactions are formed in pregão – which means they are composed by the dynamics of the forces of supply and demand. This guarantees that the prices quoted are reliable indicators of the value that the market assigns to different types of shares.
Taking Part of The Bovespa
The stocks are traded on the stock market. In Brazil, the purchase and sale of stocks happens on the Bovespa. These negotiations are made through brokerage companies accredited by the Brazilian Securities Commission of Values, known as CVM.
If you are planning to conduct business on the stock market you will need a brokerage company to work as your intermediary in negotiations. You will have to register yourself in a brokerage company by providing the following details:
- your name
- your occupation
- your address
- a copy of your ID card
- a copy of your CPF
- and a copy of proof of residence
After submitting these details the brokerage company will open an account for you on the Bovespa. The brokerage company will act as your representative, executing your orders to purchase stocks through a representative or operator.
The company might also authorize you to register your orders in the Electronic System of Trading, using the Home Broker of the brokerage company. This will allow you to purchase stocks by internet.
Ways to Participate
Investors can participate in the market in three ways:
Individually
You declare your intention to participate to one brokerage company, that will be your intermediary in negotiations.
Collectively
If you are interested in participating collectively, you should acquire quotes from:
- investment clubs: a group of friends or family can form an investment club. The club must have at least 3 members and a maximum of 150 . This type of collective organization is less formal and strict than a stock fund .
- stocks funds: funds operates as legal entity. Each of the investors owns one stock quote, which corresponds to a portion of the total stocks that the fund has. Each fund has its own statute, which establishes its rules and the degree of risk of their investments. The fund needs to have a manager who coordinates the purchases of stocks. So when you take part of a fund, you should be in accordance with its investment policy.
Both types of collective investments – managed by brokerage companies and other institutions – are associations of investors with a common goal, which is to invest in a diversified portfolio of stocks.
Stock Negotiation on the Bovespa
In the past, Brazil had two ways to negotiated stocks on the Bovespa:
- Viva voz: representatives of brokerage companies announced their offers out loud, specifying the name of the company, the type, the amount and purchase price of the stock. In this type of negotiation only stocks with great liquidity were traded.
- Electronic System of Negotiation: the system allows brokerage companies to follow the commands of their clients remotely. The offer of purchase is made through a computer system, and the closing of the deal is automatically done through Bovespa computers.
Viva voz system of negotiation is no longer being used in Brazil . Since 1999, Home Broker was implemented in order to facilitate the electronic system of negotiation. Home Broker is a social channel between investors and brokerage partnerships that facilitates and simplifies negotiations in the stock market.
The channel permits the delivery of purchase stocks commands through internet as well as making it possible to access quotations and other information.
Purchase Orders
In Brazil, you purchase stocks by giving an order. The table below specifies types of orders and their definitions.
| Type of Order | Definition |
| Ordem a Mercado | The investor specifies only quantity and characteristics of the stocks he wants to purchase. The brokerage company will have to follow the order of the investor immediately after the order has been received. |
| Ordem Administrada | The investor specifies only quantity and characteristics of the stocks he wants to purchase, but the execution of the order is a choice made by the brokerage company. |
| Ordem Discricionária | The private person or legal entity that administrates the stocks of a client investor, establishes the conditions in which the purchase order must be executed, and afterwards will indicate the name of the investor or investors, quantity of stocks and their values, and price. |
| Ordem Limitada | The operation will be executed by a equal or better price than the one indicated by the investor. |
| Ordem Casada | This order is composed by an order to purchase stock and another to sell some other stock. The operation can only be done if both transactions are executed. |
| Ordem de Financiamento | Consists of acash purchase of a lot of stocks and the immediate sale of them in a forward market. |
| Ordem On-Stop | Is the order that specifies the level of the price from which the order must be executed. |
Following Your Negotiations
It is possible to follow the progress of your transactions in the spot market – during the trading day – through:
- Bovespa web page
- information channels
- phone, by the service Disque Bovespa
It is also possible to monitor the relevant information about after-hours negotiations – in the Daily Information Bulletin of the Stock Market, most known as BDI, and in newspapers of general circulation.
Costs of Purchase Stocks on the Bovespa
Some taxes are charged over the operations made in the Stock Market , such as:
- Operation tax: charged every time that a purchase order is created by an investor.
- Custody tax: monthly charged by the brokerage company that takes care of your stocks – the brokerage can opt to charge or not this tax.
- Brokerage tax: charged when the purchase order is made by telephone. It is calculated according to the values of the operation.
- Emoluments tax: charged by Bovespa – calculated on the value of purchase and sales of stocks.
- Administration tax: charged in clubs or funds of investment – charged annually in relation to the value invested in the club or fund.
- Performance tax: charged when the investment fund overpasses the expected profitability.
Except for the emoluments tax charged by the Bovespa, the value of the other taxes varies according to the brokerage company chosen. Therefore, before choosing a brokerage company is very important to research them thoroughly.