How does the B3 Stock Exchange work?

The New York Stock Exchange is a major reference in the financial market, but Brazil has created its own exchange, popularly known as B3. Brazilian investors often ask themselves how the B3 stock exchange works. Check it out below. 

How B3 works

The Brazilian Stock Exchange, popularly known as B3, works like any other asset on the market: buying and selling shares. It is an environment where financial transactions take place in a safe and transparent manner. 

Before investing in shares, investors often ask themselves how does the B3 stock exchange work? In general terms, it creates and manages trades, settlements and registrations for market assets. 

Currently, you can find various financial products and securities available on the Stock Exchange, such as Fixed Income and Variable Income. B3 is where the primary market takes place, i.e. where companies' first share offers are made. 

The exchange also works with the secondary market, i.e. where share trades take place between investors. All the services offered by B3 take place in a completely online environment. 

Although trading takes place entirely online, it's important to note that B3 doesn't operate 24 hours a day. In addition, in the case of shares, it is only possible to carry out transactions from Monday to Friday. Other than on these days, it is necessary to schedule trades for when the exchange opens again. 

The history of the Brazilian Stock Exchange (B3) 

Currently known as B3, the Brazilian Stock Exchange was created in 1895. Decades after its creation, it was renamed Bovespa. And by the 2000s, this institution commanded almost the entire stock market in the country.

During this period, Bovespa began to concentrate all its trading on the Brazilian stock market. In parallel, another stock exchange operated in the country, trading commodity contracts such as commodities and derivatives. 

In 2008, this stock exchange merged with Bovespa, creating one of the most valuable stock exchanges in Latin America. The merger didn't stop there, as in 2017 a new company merged with the exchange. 

At the time, CETIP was incorporated into BM & F Bovespa, making it the fifth largest asset trading company in the world. Since then, it has been possible to buy shares easily over the internet by simply accessing the stock exchange. 

What is B3's main function?

The Brazilian Stock Exchange, popularly known as B3, is the place where financial assets are bought and sold. In this sense, it functions as a trading market with various products. Check them out below:

• Actions;
• Real estate funds;
• ETFs and Commodities;
• Futures contracts.

By investing in the Brazilian Stock Exchange, investors are able to buy and sell derivatives of all kinds of investments. It's worth noting that the financial returns can be short, medium or long term. 

Today there are more than 300 companies listed on the Brazilian Stock Exchange. These companies represent various sectors of the economy, such as: financial, oil and gas, technology, industrial, health and biofuel. 

The transactions that take place at B3 are made through stock brokers, which are financial institutions focused on investments. These operations take place with the authorization of regulatory bodies. 

In order to join B3, companies need to carry out an IPO, which is nothing more than listing on the stock exchange. Currently, all trading on the exchange is done online. 

B3 Indices

Investors know how common it is to hear that the stock markets are down or up. This behavioral difference is defined by indices, i.e. how assets are doing when buying and selling. 

Generally speaking, one of the main stock market indices in Brazil is the Bovespa. In this sense, when this index rises on the market, it is common to hear the following term: the stock market has risen. The opposite is also true, which is why it's possible to find information about the stock market going down. 

The indices are represented in a theoretical portfolio, i.e. where the assets are traded on the stock exchange. The Ibovespa is responsible for showing the average performance of all the companies listed on B3. There are more indices for these comparisons, such as: 

• IBrX: This is the index made up of the most traded shares on B3. It indicates their average performance, taking into account their representativeness and tradability;

• SMLL: The SMLL index works to track the lowest-value companies on the market. These are companies that are still developing in the market, but which have everything it takes to deliver excellent returns in the long term; 

• IFIX: Last but not least, the IFIX is another index that shows how the main real estate funds in the country performed. 

Which assets are traded on B3

As mentioned above, there are several assets that are traded on the Stock Exchange. Check them out below:

• Shares: These assets are the most popular on the Brazilian Stock Exchange. In this case, investors buy shares in a company, becoming a partner in it, since they have acquired a small part of the capital;

• ETFs: Other assets traded on the stock exchange are ETFs. These models work like investment funds. This investment is recommended for investors who are just starting out in this market; 

• Real estate funds: One of the most accessible investments on the stock exchange are real estate funds. In this case, investors buy a share and receive a monthly "rent";

• Options: The stock exchange also trades contracts to buy and sell commodities, also known as commodities, combined for the future. A fixed price is agreed for a possible future sale. 

The Stock Exchange plays one of the most important roles in society, especially in the financial sector. This is because, through this system, investors are able to invest in shares in companies which, in turn, use the money to carry out their projects. 

In this way, the Stock Exchange creates jobs for Brazilians, making the economy grow significantly.