Even as more established markets have experienced a slowdown over economic uncertainty this year, the Latin American region is expecting to see the largest worldwide growth of trading participants, says a white paper from Fidessa, the financial services software provider.
Electronic trading volumes in Brazil have increased rapidly over 400% over the last decade increasing the demand for foreign partnerships. The BM&FBovespa and the Shanghai Stock Exchange recently signed a memorandum of understanding, which could lead to cross-listing of stocks in the future. A partnership with the CME Group is also underway, with the aim of identifying mutual opportunities.
While the market desires more foreign involvement, however, regulations could prove a hurdle. Opening an account and obtaining approval to trade in Brazil can take up between three and eight months, and the trading and post-trading fees are 13 to 27 times higher than NYSEs and twice as high as the Australian Stock Exchanges, the white paper says.
In Mexico, while the 45% of foreign traders is not so different from Brazils 42%, high-frequency trading is dominated by foreigners. On the Mexican Derivatives Exchange, about 90% of average daily volumes come from American high-frequency traders (HFT). HFT represents 20% of all Mexican trades.
The Bolsa Mexicana de Valores (BMV) is updating its infrastructure to attract more foreign interest, employing their proprietary Monet matching system capable of 100-microsecond message latency and a capacity of 200,000 messages per second. It has already adopted the FIX 4.4 messaging system.
In addition, it is in the process of completing its adoption of the RINO II rules, which have brought pegged orders, improved crossing and average prices and decimal bids for fixed income. It also introduced a dark pool, which allows placing of orders not available to the public, something which Brazils regulator has refused to implement.
BMV is also planning to join the Mercado Integrado Latinoamericano (MILA), which according to Fidessa would bring the combined exchanges value to $965 billion dollars, close to Brazils $1.2 trillion.
For the Andean exchange, which over the last year has seen the launch of the S&P MILA 40, the Global X FTSE Andean 40 ETF, and the creation of a Blackrock ETF that will be traded locally in Colombia and Chile, the main challenges are its multiple currencies and national regulations which could be overcome by investments in technology, Fidessa says.
(OS)