The Brazil Securities Commission (CVM), through its Office for Economic Analysis, Risk Management and Integrity (ASA), published the final Regulatory Impact Assessment on order internalization, setting out recommendations for how CVM should regulate internalization in the securities market. The report recommends keeping internalization confined to specific exchange-based trading procedures such as the Retail Liquidity Provider (RLP) mechanism, while introducing material flexibilities, and advises against permitting internalization in organised OTC environments at this stage. The recommended changes include removing limits on eligible assets so internalization could apply to any cash equity instrument, including odd lots, and eliminating quantitative caps on the financial volumes of retail flow that may be internalised. The study also calls for new, standardised transparency reports covering best execution and intermediaries’ conflicts of interest, drawing on US-style disclosure approaches. ASA framed the core policy trade-off as potential retail transaction-cost reductions versus risks to visible order book liquidity and price formation, noting econometric modelling suggesting unrestricted internalization could increase implicit costs (spreads) for investors by draining liquidity from open-access venues; for organised OTC internalization, the report points to operational risks and compliance and redress costs that could offset net retail gains. If the recommendations are adopted, the report proposes a Regulatory Outcome Evaluation within five years of implementation to test whether retail benefits materialised without adverse market-wide effects. It also notes that further work on tick-size fragmentation and consolidated tapes remains on CVM’s agenda, and that the proposed best-execution disclosure standards will still need to go through internal processes before any implementation.
Brazil Securities Commission (CVM) 2026-02-11
Brazil Securities Commission publishes impact assessment recommending expanded exchange-based retail order internalization with new transparency standards
The Brazil Securities Commission (CVM) recommends limiting order internalization to exchange-based procedures like the Retail Liquidity Provider mechanism, with increased flexibility. The report advises against internalization in organized OTC environments, suggests removing asset limits and volume caps, and introduces standardized transparency reports. A Regulatory Outcome Evaluation is proposed within five years to assess retail benefits and market effects.