Brazil beats BRIC rivals in buy-side connectivity battle – The TRADE Poll

Brazil has topped the August poll on as the BRIC market for which there is most buy-side demand for better connectivity.
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Brazil has topped the August poll on as the BRIC market for which there is most buy-side demand for better connectivity.

Voting was uneven across the four countries, with Brazil leading by a wide margin at 36%, while China languished at the bottom of the poll with just 16% of the votes cast. India came in for second place with 27%.

The findings of the survey are in keeping with a recent spate of new market access offerings: over the past 12 months several global brokers and connectivity providers have launched or extended their Brazilian electronic trading services.

“The advantage of Brazil is that the macro-economic fundamentals are there,“ said Laurence Latimer, head of trading and client connectivity – Americas at trading software and services provider SunGard. “Brazil is a relatively open and very transparent business environment that has a lot of certainty round it. There is transparency on regulation, as well as acceptance of international standards.”

With 27% of voters choosing India and 21% citing Russia as the investment destination for which improved connectivity is most in demand, perhaps the biggest surprise of the survey was the comparatively low interest in China. It may be that the buy-side is comfortable with the access to H-shares in China's largest companies via Hong Kong, but differences in regulatory burden are also cited as a major factor, with onerous legislation sometimes stifling appetite for opportunity.

“From personal experience, I can say that operating here in Brazil is far easier than in China and India,” commented Latimer. “There are many fewer rules around joint ownership. Brazil is by far the most transparent in terms of rules and regulations. In China, if I was a broker-dealer and I wanted to set up business, there's incredible pressure to either do a joint venture, or partner with a local exchange. You don't have that in Brazil.”

Differences in levels of political stability and government intervention in other fast-growing economies also bolstered Brazil's position, with some market participants expressing caution about the long-term security of operations in certain countries as well as concerns about the stability of the regulatory environment.

“I think the advantage that Brazil has is that it doesn't have any major political issues either externally or internally,” said Philippe Carre, global head of connectivity at SunGard. “It doesn't have any issues with its neighbours, it doesn't have an aggressive international agenda. Brazil has been very adept at making alliances in the financial markets and getting order flow in. You don't see the same in Moscow, Shanghai or Mumbai.”

Other commentators concurred that Brazil's success in creating a positive environment for international investors has been key, enabling it to weather the stormy waters of the recent financial crisis better than many of its competitors.

“Over recent months, we've seen an increased demand for Latin American executing brokers,” said Alice Botis, head of business development in Latin America at connectivity and trading technology provider Fidessa. “We are also seeing increased interest from high-frequency trading firms in the US who want to start trading in Brazil. They initially connect directly to the exchange in order to gain sponsored direct market access, with the long term goal of co-locating their strategies at the exchange.”

“If you look at the equity as well as the futures markets in Brazil, we've seen massive growth over the last ten years. Even 2008 and 2009 financial crisis

– it was a blip on the radar for Brazil. The same can't really be said for India or China or Russia,” said Latimer.