Trading Volumes on Latin American Markets are Accelerating, Reports Tabb

According to a new research report, the number of single stock option contracts traded in March 2010 on the Brazilian derivatives exchange Bolsa de Valores, Mercadorias & Futuros de Sao Paulo (BM&FBovespa) surpassed the number of contracts traded on Chicago Board Options Exchange (CBOE), International Securities Exchange (ISE) or Nasdaq OMX PHLX, as Brazil continues to dominate the Latin American region with the largest equity and derivatives exchanges.

The new report, ‘Latin American Electronic Trading: Caliente!’, from the Tabb Group, shows that in the Brazilian derivatives market alone, BM&FBovespa is now the sixth largest derivatives market in the world with growth of 67% in the first quarter of 2010.

In March 2010, BM&FBovespa traded 87,508,189 single-stock contracts, while CBOE traded 79,335,680, ISE 66,556,260 and Nasdaq OMX PHLX 58,886,053, according to Martin Koopman, author of the report. Major Latin American stock markets were up 400% in value over the last 10 years, he added.

“Although Brazil and the rest of Latin America have not received the same acclaim as other emerging markets,” said Koopman, “this changed in 2009, as Brazil emerged early and unscathed from the worldwide financial crisis and show no signs of cooling, hence the term caliente, or hot.

In the last two years, Bovespa, BM&F and the Mexican Stock Exchange have gone public. With equity trading volumes soaring 10 times over in Brazil since 2000, brokers have rushed to deploy electronic trading services, early-mover technology vendors have racked up impressive sales and high frequency trading has begun.

According to Koopman, proprietary trading shops of local banks, which are co-located at the exchanges, are battling it out with traders who have just flown in from Chicago. He described a trading environment new to the Latin American markets. “Brokerage firms are rushing to deploy new algorithms to their buy-side clients. Exchanges are playing ‘hard to get’ with global exchanges eager to bolster their emerging market credentials. Local technology vendors with relationships are trying to keep out foreign vendors with advanced technology. Brazilian bankers are migrating back from New York to Sao Paulo because the bonuses are better. And everyone’s trying to arbitrage local stocks against American depository receipts,” he said.

The report covers the major exchange’s trading volumes and growth rates with a focus on Bovespa (Brazil equities), BM&F (Brazil derivatives) and the Mexico Exchange, as well as exchanges in Chile, Argentina, Peru and Columbia. It reviews the current state and future plans of the major exchanges in each market, including BM&FBovespa, Mexico Exchange, Santiago Exchange (Chile) and the Argentinean exchanges, as well as technologies used internally, trading systems and networks offered to clients and partnerships, such as BM&F and Chicago Mercantile Exchange (CME).


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