New exchange to open in Rio de Janeiro

An all-electronic platform for Brazilian equities is planned for Rio de Janeiro – the first time the city has had an exchange since 2002.
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An all-electronic platform for Brazilian equities is planned for Rio de Janeiro – the first time the city has had an exchange since 2002.

The new exchange will be run by US-based market operator Direct Edge and is planned to open in Q4 2012, pending regulatory approval from the country’s regulator, the Comissao de Valores Mobiliarios.

“Rio has been a global financial hub for years; the financial markets in Brazil started here,” added Eduarda La Rocque, municipal secretary of finance, for the city. “The decision by Direct Edge to establish its headquarters in Rio reinforces the relevance of the local economy and highlights how the global financial markets realise the plentiful growth opportunities that exist in our city. The pending arrival of a world class stock exchange can create opportunities for Rio’s young professionals, and will boost efforts to revitalise the financial sector in our city.”

William O’Brien, chief executive of Direct Edge believes a second stock exchange in Brazil will spur even greater investor participation in the booming emerging market through competition that drives innovation and price improvement.

“The exchange will leverage proven Direct Edge technology and architecture that will be customised to the unique needs of the Brazilian market,” O’Brien said.

Direct Edge Brazil will operate as an independent, local company majority-owned by Direct Edge. A Brazil-based CEO will be appointed to lead the Rio de Janeiro team, develop Direct Edge Brazil and maintain relationships with the Brazilian financial community as well as with local officials and vendors.

In February, American rival, BATS Global Markets signed a memorandum of understanding with Claritas, a Brazilian asset management firm, for the potential creation of a new stock exchange in Brazil.

Under the agreement, the organisations are collaborating to explore the possibility of creating a new market that has clearing and depository services in Brazil. Freitas e Leite Advogados (FreitasLeite), a Brazilian law firm specialising in financial and capital markets, has been retained for local legal expertise.

However, BM&F Bovespa, the domestic Brazilian stock exchange group, could make life difficult for new entrants looking to set up in the country. The exchange’s chief executive recently told the press he would not provide third-parties with access to BM&F Bovespa’s clearing house. This means that would-be competitors will be required to establish their own clearing services in the country, which could be costly and complicated to achieve.