Latin America appeal grows for institutional investors
From the growth of Brazil, to upgrades to Mexico’s trading infrastructure as well as the Andean region’s efforts to boost liquidity, Latin America is becoming increasingly attractive to institutional investors, says Fidessa.
Brazil, owning 80% of the market share in Latin
America, is set to become a key, global trading destination, according to a
white paper from the technology vendor.
But despite this growth, the paper points out that Brazil’s regulatory
requirements have proved difficult to navigate since it can take between three
and eight months to open an account and obtain approval to trade in the country which, for foreign institutions hoping to participate, can be expensive and
The Andean exchanges have focused on regional
co-operation, in an attempt to stimulate trading and exploit economies of scale,
though the Mercado Integrado Latinoamericano (MILA), a link between the stock
exchanges of Chile, Columbia and Peru.
The past 12 months have seen the launch of the
S&P MILA 40 index, tracking the initiative’s 40 most liquid companies; the
Global X FTSE Andean 40 exchange-traded fund (ETF), the first targeting the region to be traded on NYSE Euronext; and the creation of Blackrock’s ETFs in Colombia and Chile that can be traded
Brokers participating in MILA require specific
technology functionality. Support for multi-regional, multi-currency and FX
functionality is required and, since securities are held in custody in local
currency, investors actively need to decide on currency
exposure and take necessary precautions to hedge FX risk.
Bolsa Mexicana de Valores (BMV), Mexico's main stock market, holds 11% of the Latin American market and will upgrade to a proprietary built matching engine called Monet in
September 2012. The new technology will seek to provide global investors with more efficient
trading and connectivity to Mexico. The upgrade follows the exchange’s recent move to version 4.4 of the FIX messaging standard.
RINO II, the second phase of Mexico’s plan to modernise its regulations, has introduced pegged orders, improvements in
crossing and average price operations, price delivery regardless of volume, and
decimal bids for fixed income to Mexico. The purpose of RINO II is to attract more liquidity to the market and to bring the country’s regulations up to
Sell-side firms are upgrading their capabilities to help buy-side clients take
advantage of trading opportunities across the region.
Alice Botis, Fidessa’s head of business development in Latin America,
said: “Brokers are looking at the unique benefits each country has to offer and
are taking the necessary steps to gain a presence in multiple locations across
the region, in financial centers such as Brazil, Chile, Colombia, Mexico and
Peru. Each country retains its unique style of trading, so it is important for
buy-side and sell-side firms to understand how the marketplace is evolving in
each region within Latin America and how those developments fit in with their
local and global trading strategies.”
Reporting by Sophie Pallier