Fidessa, the front-office technology provider, has adapted its trading system to support electronic trading in Brazil.
Fidessa has adjusted its platform to incorporate Brazil-specific market structure and regulations, enabling both domestic and international clients to trade efficiently while remaining compliant with local requirements. As a result, the Fidessa platform is able to perform all the complex middle-office charge calculations that are required and support the trade of odd lot or mixed lot orders, real-time auction monitoring and other market-specific demands.
BM&F Bovespa, the Brazilian equity and derivatives market, operates a vertical clearing and settlement model and monitors the positions of the clearing member, the broker and the end-client.
To facilitate this a broker is required to act as the intermediary, setting pre-trade limits on an order and monitoring it in real time. Using this data, BM&F Bovespa's risk management system runs a mark-to-market valuation of a client's portfolio every ten minutes and calculates its exposure. Then, depending on the exposure and the collateral deposited, the exchange asks either the broker or the client to rework their position or post more collateral.
Dark trading is not permissible under Brazilian regulations, so to cope with large orders with minimal market impact, the exchange operates an auction function. The parameters for the system are adjusted daily, based on volume and liquidity, which determine whether an order should be placed into auction.
Numerous criteria might be a trigger, for example if an order is determined to be of a large size, or if it is +/- 5% of the previous day's closing price. An auction for the order is then opened, and the price at which the securities are auctioned becomes the future benchmark price for the parameters used by the system. The period of the auctions in these cases is determined by the amount or percentage of stock under auction but will normally only last a matter of minutes.
The Brazilian version of the Fidessa trading platform retains all of the features and functions available to users in other markets, including straight-through processing from order inception to trade confirmation, real-time global market data, local market gateways and the ability to aggregate market data across multiple liquidity venues. The platform also offers order routing with the associated pre-trade client risk checks, as well as care order flow functionality and trading tools like pairs, algorithms and baskets.
Fidessa continues to work closely with BM&F Bovespa to provide ongoing support to order entry feeds required to accommodate the exchange's new matching engine, which is due to launch in Q3 2011 for derivatives and Q1 2012 for equities.
Alice Botis, head of business development, Latin America at Fidessa, said, “Brazil is a very attractive market for our international clients and they are aggressively seeking trusted partners to provide local market knowledge to steer them through this fast-moving environment, and proven technology to provide the same level of functionality they use in other markets.”
The Fidessa global connectivity network has added 16 Latin American brokers to its network in the last year: Celfin Capital; InterBolsa Comisionista de Bolsa; Agora; BES Securities; Casa de Bolsa Finamex; Credit Suisse Hedging-Griffo; Fator Securities; Grupo Bursatil Mexicano; ICAP Brazil; Interacciones Casa de Bolsa; Itau Securities; IXE Casa de Bolsa; Santander Investment Securities; Planner Corretora De Valores; Terra Futuros Corretora de Mercadorias; and XP Investimentos.