Bloomberg News

BM&FBovespa Preparing Bond Trading Platform for Mid-2012

September 29, 2011

(Updates share price in ninth paragraph.)

Sept. 29 (Bloomberg) -- BM&FBovespa SA, the operator of Latin America’s largest securities exchange, is planning to start a bond trading platform by the middle of next year, executives including Chief Executive Officer Edemir Pinto said in an interview in New York.

“We are developing a platform,” Marcelo Maziero, BM&FBovespa’s head of product and customer development, said in the interview yesterday, which was attended by several BM&FBovespa executives. “We are accelerating the fixed-income side, so it gets to the same level as stocks.”

Brazil is not seen as a “safe haven” anymore by international investors after government intervention in the economy during the past year, Pinto said.

The central bank raised the country’s benchmark interest rate five times before cutting it a half point to 12 percent on Aug. 31, citing a “substantial deterioration” in the global economy. On July 27, the government imposed a 1 percent tax on some currency derivatives trades as the real reached a 12-year high against the dollar. This added to a decision taken in October to triple to 6 percent a tax on foreigners’ purchase of fixed-income assets while holding at 2 percent the tax on their equity purchases. The real weakened 16 percent from July 27 to yesterday.

“The government’s intervention is very bad for markets,” Pinto said. “In the past, you had Brazil as the only safe haven for foreign investors, but not anymore.”

High-Frequency Trading

BM&FBovespa also plans to speed up processing capabilities as it aims to promote high-frequency trading for derivatives and stocks. The speed should go to 1.1 millisecond by the middle of next year, from 15 milliseconds now, Cicero Vieira, a BM&FBovespa executive director, said in the interview.

High-frequency trading refers to strategies that involve executing orders in fractions of a second. The technique is helping computers replace humans as market makers in the U.S. and elsewhere.

“The arrival of high-frequency in Brazil will be natural,” Pinto said. “We have to structure its control system according to the exchange rules, the market conditions.”

BM&FBovespa rose 0.5 percent to 8.91 reais today. The exchange operator has slumped 32 percent this year amid concerns over the impact of increased government regulation on the exchange operations, Pinto said.

IPOs

Initial public offerings in Brazil will not resume at full strength until the Greek sovereign-debt crisis is dealt with and volatility decreases, Chief Financial Officer Eduardo Guardia said in the interview.

“The perspectives in Brazil are still very positive but we are very dependent on inflows for the IPOs,” Guardia said. “If you have a situation of instability in the markets involved, Europe and United States, the landscape for IPOs became complicated and if the companies can postpone it, they will.”

Guardia reiterated the exchange’s forecast of 200 companies becoming public in Brazil by the end of 2014.

BM&FBovespa is talking to Mila, a platform which combines trading in stocks from Colombia, Chile and Peru, to help them develop, with an eye to eventually joining Latin America’s first joint exchange, Pinto said.

“We’ve been talking to them for a while now,” he said. “The idea is to help them develop local markets by offering technology and expertise.”

BM&FBovespa SA and China’s Shenzhen Stock Exchange signed an agreement last month to exchange information, personnel and training as the Brazilian bourse seeks ways to bring more small and medium-sized companies to capital markets.

--With assistance from Alexander Cuadros in Sao Paulo. Editors: Marie-France Han, Darren Boey

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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