Brazilian exchange BM&F Bovespa has announced a new pricing policy for high-frequency traders, who are to register in order to receive progressive discounts based on trading volume.
The plan comes into effect in two phases, the first began on 1 November when the exchange promised to provide registered HFTs with a scaled fee structure based on volumes traded. This will be transitioned to the second phase on 3 January 2011, when the exchange will provide registered HFTs with the ability to consolidate volumes traded through multiple brokerage firms for the same account.
BM&F Bovespa will use the average daily trading value (ADTV) to calculate fees its equity market. Fees range from 0.019% for R$20 million ADTV up to 0.01% for firms trading over R$500 million.
Investors who wish to be accredited as high-frequency traders must attend a meeting scheduled by their brokerage firm with the BM&F Bovespa Control Center in which the investor’s technical specifications and operational logic will be analysed.
Trading volume from high-frequency trader order flow accounted for 4.4% of overall derivatives volume at BM&F in Q3 2010, with an average of 207,000 contracts, according to the firm's own data. The most actively traded contracts were foreign exchange, equity index-based and mini contracts. The new price cuts will give further impetus to the growth of low-latency trading on Bovespa's equities exchange.
BM&F Bovespa's embrace of the high-frequency trader comes amid a host of measures to secure foreign flows into the exchange. The venue has been investing in technology upgrades to facilitate high-frequency trading for some time, including the addition of many more slots for co-location close to its matching engine.
Furthermore, the signing of an agreement with US derivatives venue the Chicago Mercantile Exchange in February this year has been widely seen as a major step towards making BM&F Bovespa more attractive to foreign investors, by opening up more products to be traded on the Brazilian exchange and enticing US trading firms to enter the market.
Brazilian broker Alpes and trading technology provider Orc Software recently signed a trading connectivity deal designed to facilitate low-latency trading and cater for high-frequency traders in Brazil, in November 2010.