Brazil's securities regulator has opened a probe into unusual trading patterns in the interest rate futures market just before a surprise central bank rate cut in August, local media reported on Saturday. Brazil's market watchdog known as the CVM is focusing on trading of interest futures contracts on August 30 and August 31, when the central bank unexpectedly cut the benchmark Selic interest rate to 12 percent from 12.5 percent, the O Globo newspaper reported.
The paper said the CVM confirmed an investigation was under way. A CVM spokeswoman did not immediately respond to phone calls seeking comment. O Globo quoted a source saying that "two or three banks" had completely changed their bets on interest rates "from one day to the next."
All 20 analysts in a Reuters survey had expected the central bank to keep the Selic rate unchanged. During the week leading up to the central bank's monetary policy committee meeting, the number of interest futures contracts traded on the BM&FBovespa exchange rose from 1.5 million to 2 million, and reached 3.4 million on August 30 and August 31, O Globo reported. Trading volumes of those contracts was only around 1 million in the run-up to the July 19 and 20 rate-setting meeting, the paper added. Brazil's O Estado de S. Paulo newspaper reported that the CVM investigation was focused on interest rate options expiring between October 2011 and January 2012, without saying where it got the information.