NYSE-ATG venture in Brazil aims to bring in new partners


NYSE-ATG venture in Brazil aims to bring in new partners

http://www.efinancialnews.com/story/2013-06-20/nyse-atg-venture-brazil-aims-to-bring-in-new-partners?omref=email_TradingTechnology

Americas Trading System Brasil, a joint venture of NYSE Euronext and Americas Trading Group, or ATG, has requested authorisation to begin operations in Brazil, the company said in a statement Wednesday morning.

 

If approved, ATS Brasil plans to start operations in the first half of 2014, and become the first exchange in more than a decade to compete with BM&FBovespa.

ATS Brasil chief executive officer Alan Gandelman said in interview it expects to have approval from Brazil’s securities and exchange regulator, or CVM, in up to around six months. The company aims to have a 15% share of the Brazilian equity market within two years of starting up.

The value of equities trading on Brazil’s sole stock-exchange operator, BM&FBovespa, hit a record 1.78 trillion reals ($820bn) in 2012.

ATG owns 80% of ATS Brasil. NYSE Technologies, the technology arm of NYSE Euronext, has a 20% stake.

 

Those stakes will likely change in coming months because ATS Brasil intends to sign as many as eight local and international banks and money management firms as partners to ensure a higher trading volume once the exchange starts to operate, Gandelman said.

The new partners, called liquidity partners, will collectively take an equity stake of as much as 24% in ATS, Gandelman said, noting it hasn’t yet been decided how much ATG’s and NYSE’s stakes will be diluted.

Talks are in an advanced stage and the partnerships with the financial institutions will likely have been decided by the end of July, the executive noted.

ATS Brasil will initially trade only equities and soon after will also offer equities derivatives, the CEO said.

 

The company could also in future extend its operations to other countries in the region, although currently this is only a possibility, Mr. Gandelman said.

ATG, which provides electronic trading products, was established in 2010 and is already connected to stock exchanges across Latin America, with the exception of Argentina and Venezuela.

ATS Brasil is preparing to enter the Brazilian market at a time of losses for local shares. The benchmark Ibovespa stocks index is down close to 20% year-to-date amid worries about slow economic growth and persistent high inflation. There are also concerns the US Federal Reserve might announce an easing of its bond-buying policy, which could lead to an even stronger US dollar and a reversal of investment flows from emerging markets to the US.

“The outlook for local stocks is not favorable, at least for the next year,” said Joao Pedro Brugger, an analyst at Brazil’s brokerage Leme Investimentos. “In the long run, however, we have a positive view of the Brazilian market and believe it will benefit from having another stock exchange,” Brugger said.

 

“We believe we are coming to Brazil in an interesting time as we expect investors to come back to the stock exchanges in short or medium term,” Gandelman said, noting that he believes recent losses have been exaggerated.

A few other international companies have shown an interest in entering the Brazilian market, but their plans haven’t yet moved forward.

New Jersey-based Direct Edge Holdings has delayed plans to request an operating license, but says it continues working on it.

One major obstacle to new arrivals is the lack of access to a clearinghouse, where equities trades are processed. BM&FBovespa owns the only clearinghouse in Brazil, but it has said several times it’s not yet opened to the possibility of allowing competitors to use its system.

 

ATS Brasil has already found a solution to clear its trading without the use of local stock exchange, Gandelman said, though he didn’t give more details on the alternative.

Kansas-based BATS Global Markets and asset management firm Claritas have said they were studying the possibility of launching a competitor to BM&FBovespa, but plans haven’t advanced.

BATS faced problems of its own after announcing that errors on its exchange went undetected for years. According to the company those errors “turned out to be a minor issue, costing customers a total of $17,000 over four years.”

–write to luciana.magalhaes@dowjones.com

 

This article first appeared in the Wall Street Journal [ http://on.wsj.com/17p74gc ]

 
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About carlarweir
I am a Cross Asset FIX Connectivity SME working for international banks. i also sit on the FIX Protocol Ltd Global Steering Committee, and am Co-Chair of the Global Cross Asset Committee. I also have a very strong background in Mobile Telephony, Cloud computing, SaaS, IaaS, PaaS, Big Data, innovation, and am a pioneer in Pseudolite technology.

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