FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

August 31, 2011 • 10:16 pm 0

Avaloq acquires a majority stake in B-Source from BSI

The Avaloq group, the reference for integrated and comprehensive banking solutions, has acquired a majority stake in B-Source AG, a leading banking business process outsourcer (BPO) in Switzerland. BSI, part of the Generali Group and original founders of B-Source, will remain a minority shareholder and an important customer of B-Source. BSI thereby ensures a forward-looking, growth-oriented ownership structure for its banking BPO subsidiary. The acquisition of B-Source means that Avaloq group extends its value chain and become the largest independent provider of comprehensive solutions for the execution of banking business. B-Source remains a legally independent entity forming part of the Avaloq group and will continue to operate under its own name. The Avaloq group will retain B-Source’s existing locations in Ticino, Zurich, Lucerne, Romandie as well as in other countries. The acquisition will not result in job losses.

Avaloq and B-Source see this move as a logical extension of the successful and long-standing cooperation between the two banking specialists. As a result of the acquisition, the Avaloq group offering will now extend beyond banking technology and consultancy services to include data centre services, application management services, and will be able to outsource banks’ entire back-office and IT operations. The group now employs more than 1,200 staff, generating an annual turnover of CHF 360 million (Swiss Francs) (2011E) and has customers in more than 20 countries. The acquisition of B-Source will not result in any job losses. The Avaloq group will retain both companies’ existing head offices and locations in Switzerland as well as in other countries. It is committed to Switzerland as a financial centre and centre of expertise, and plans to further grow at its Swiss locations.

Francisco Fernandez, Member of the Board of Directors of B-Source and CEO of Avaloq Group AG, says: “Acquiring the majority stake in B-Source makes the Avaloq group the leading independent provider of modular and fully integrated solutions for the execution of banking business. This applies to both large and small retail, wealth management and universal banks in Switzerland and around the world. Joining forces with B-Source will enable us to take further steps to address the growing complexity in operational, compliance, reporting and IT management. It will also enable our customers to wholly concentrate on providing excellent service to their clients, which ultimately sets them apart, allowing them to grow and become more profitable.”

B-Source will remain a legally independent entity forming part of the Avaloq group, and it will continue to operate under its own name. BSI AG will retain 49 percent of B-Source and will remain an important customer for
B-Source. The parties have agreed to keep the purchase price confidential. Avaloq and B-Source will continue to work with an extensive network of domestic and international technology, distribution and implementation partners, which will be expanded further following the acquisition.

Dr Alfredo Gysi (BSI CEO) is to remain Chairman of the Board of Directors of B-Source, and Gianni Aprile (Deputy CEO of BSI) will remain on the B-Source Board of Directors. They will be joined by new appointees, Dr Didier Sangiorgio (Chairman of Avaloq Group AG), Philipp E. Achermann (Member of the Board of Directors Avaloq Group AG) and Francisco Fernandez (CEO of Avaloq). The general management of B-Source is unchanged, consisting of CEO Markus Gröninger, Andrea Bosetti, Andrea Frei, Joseph M. Kaister, Rainer Link, Matteo Marini, Frank Müller Erkelenz and Benjamin Stäheli. The Avaloq Executive Board, consisting of Francisco Fernandez (CEO), Enrico Ardielli, Adrian Bult, Klaus Rausch, Mathias Schütz and Ronald Strässler, remains also unchanged.

Dr Alfredo Gysi, Chairman of the Board of Directors of B-Source and CEO of BSI, says: “As the founder and very first customer of B-Source, we have successfully grown and developed the company to become one of Switzerland’s leading providers of BPO services. Our objective was to secure an ownership structure for B-Source that would enable it to achieve sustained growth in an attractive market. The acquisition of a majority stake by our strong technology partner Avaloq will allow B-Source to seize even more opportunities in the BPO market. This strategic move will give BSI the freedom to concentrate more heavily on its core competences and enable it to benefit from improved standards of performance and quality and take advantage of a cost efficient structure.”

Markus Gröninger, B-Source CEO, says: “Merging Avaloq and B-Source will create benefits for customers that are demanding more integrated, high-performing IT and BPO solutions. The business rationale is undeniable and the new ownership of B-Source will accelerate growth in Switzerland and beyond.”
The Avaloq subsidiary, B-Source, already settles almost all domestic and international transactions for BSI in Switzerland, Singapore, Luxembourg, Nassau and Monaco. In Switzerland, Reichmuth & Co Privatbankiers, NBAD Private Bank (Suisse) SA and QNB Banque Privée (Suisse) SA, all use the cutting-edge B-Source Master “powered by Avaloq”.

Filed under: Banking, Data Management, News, , , , , , ,

August 30, 2011 • 11:31 pm 0

CME Group and BM&FBOVESPA Brazils exchange develop a joint trading platform

BM&FBOVESPA and CME Group are jointly developing a multi-asset electronic trading platform. This shall substitute the Global Trading System (GTS), Mega Bolsa, BOVESPA FIX and SISBEX, integrating them into a single system with greater processing capacity, extremely low latency, and new functions.

The implementation of the new platform, named the Puma Trading System (Puma), shall occur in stages:

1st Stage: Launch of the Puma Trading System on August 29, 2011

Puma shall substitute the GTS system gradually, in a four-stage process. At each stage a combination of instruments shall be transferred to Puma, as of which the orders sent to the Exchange for these contracts shall be processed exclusively by the new system.

We hereby inform you that when the first stage of development and integrated tests with the market are concluded, the Exchange shall implement Puma in the spot foreign exchange market on August 29, 2011 (Monday). The other stages shall be executed in the following weeks, at dates to be announced at an opportune moment.

Source: FOREX.Webtronic.com, 30.08.2011

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, Trading Technology, , , , , , , ,

August 30, 2011 • 11:21 pm 1

Brazil to increase primary surplus and make room for interest rates cut – prepares for global slowdown

Brazil plans to further contain government spending this year to prepare the country for a global slowdown and make room for a cut in interest rates, Finance Minister Guido Mantega said on Monday.

The government raised its target for the 2011 budget surplus before interest payments to 91 billion Real (57 billion dollars) from 81.7 billion Real, Mantega told reporters in Brasilia.

Brazil joins countries from Mexico to Turkey in signalling that rate cuts may be on the horizon as global growth sputters and a debt crisis in Europe worsens.

“It makes it viable in the medium- or long-term to cut interest rates,” Mantega said. “As you reduce or stop increasing public spending, you open space for a reduction in interest rates when the central bank thinks it is possible.”

The central bank’s board of directors, led by President Alexandre Tombini, begins its August policy meeting Tuesday, with inflation above 7% for the first time since 2005. Traders are wagering that policy makers will cut rates a quarter-point this week, and between 0.75 and 1 percentage point by year-end, as the economy shows signs of cooling and the global recovery falters.

Mantega said he sees no immediate need for monetary stimulus and added that inflation is a permanent concern for President Dilma Rousseff’s government.

Mexico policy makers kept the benchmark rate at a record low 4.5% for the 21st consecutive meeting on Aug. 26 and said they would consider adjusting it if the national or global economic outlook worsens. The Turkish central bank also left its benchmark rate unchanged on Aug. 23 and Governor Erdem Basci said the institution may have to loosen monetary policy. Peru and Chile also held rates this month.

Brazil’s budget surplus (before interest payments) widened in July to a record for the month pushing the year-to-date total to almost 80% of the 2011 target.

The so-called primary surplus, which includes federal and local governments as well as state companies, last month rose to 13.8 billion Real from 13.4 billion Real in June. The government earlier this year cut 50.7 billion Real from its 2011 budget.

Brazil’s economic activity shrank in June for the first time since December, 2008. Industrial production fell 1.6% in June the second-biggest drop in output since 2008, and business confidence in the second quarter fell to its lowest level since 2009.

Source: Merco Press-South Atlantic News Agency, 30.08.2011

Filed under: Brazil, Events, Mexico, News, Risk Management, , , , , , , , , ,

August 29, 2011 • 1:23 am 0

Data Strategy : Consolidate and integrate Reference and Markets Data

 A DATA STRATEGY – Framework & Knowledge Management is a presentation to the Data Management Association in the London showing  how a clear strategy and tactical implementation can:

  • consolidated several dozens of internal and external data feeds & legacy system,
  • streamlined and simplified data operations and
  • finally implanted a consistent data governance and change management policy, which is based on a solid metadata management.

This applies specifically to reference data, corporate action, financial reporting, client- and market data in the financial services industry.

The project spanning Asia, Europe and the Americas, went life with feeding the first multilingual product within 9 months of approved  funding.

Click here for the presentation: Data Strategy  for Financial Markets

Source: FiNETIK, 28.10.2008

Filed under: Corporate Action, Data Management, Data Vendor, FiNETIK Articles, Market Data, Reference Data, Standards, , , , , , , , , , , , , , ,

August 25, 2011 • 12:46 am 2

Chile: Santiago Stock Exchange Revamps IT for Latin America’s Integrated Market

One of the fastest growing regions for electronic trading is Latin America where the Santiago Stock Exchange Chiles central market has forged cooperative relationships with other exchanges in the region, including BM&F Bovespa, and revamped its IT trading infrastructure. In a Q&A with Wall Street & Technology, Andres Araya Falcone, CIO of Bolsas de Comercio de Santiago (BCS), explains how these joint initiatives in Latin America are driving the Chilean market to modernize the exchanges electronic trading infrastructure and prepare for an expected surge in messaging rates from market data.

Andres Araya Falcone

How is the Santiago exchange working with other Latin American markets?

By the end of 2010, the Santiago Stock Exchange had signed a linkage agreement with Brazils stock exchange, BM&F Bovespa, heralding the latest in a series of cooperative projects being run between Latin American bourses. The agreement, signed on December 13th, will enable connectivity between both exchanges for order routing and market data dissemination. It also includes separate initiatives for further development of the Santiago Stock Exchanges derivatives market, the establishment of joint initiatives related to settlement, clearing and central counterparty services, as well as access to the BM&F Bovespa/CME trading platform from Chile.

How will this agreement with BM&F Bovespa impact your technology needs for order routing and market data?

Market participants in both countries will be able to route orders for stocks, stock options and related derivatives listed on the others exchange. Both exchanges will also be able to receive and distribute each others market data. Clearing and settlement of orders will be done according to local market rules of listed instruments. These kinds of initiatives imply that the Santiago Stock Exchanges IT platform has to be prepared to manage more than 6 million orders per day.

Your exchange recently teamed up with the stock exchanges of Columbia and Peru to form the Integrated Latin American Market or MLA, which began operating in June. What are the goals of this initiative?

We have been working for the last 13 months on MLA to consolidate regional stock markets so they may become more attractive for local and foreign investors. MILA will attract more liquidity to the market because investors will have wider availability and a greater diversity of companies to invest in, in a bigger and more integrated market. Finally, listed companies will benefit even further from this integration through access to new and increased financial resources for their expansion.

I understand that Santiago Stock Exchange has adopted IBM Websphere Front Office as its feed handler to power its market data to investors worldwide? Why did you select IBM Websphere?

WebSphere Front Office (WFO) will be a very important technological component for the Santiago Stock Exchanges strategic integration plan with other markets, saving time and reducing project implementation risk. We found a lot of advantages in WebSphere Front Office. First of all, WFO supports over 100 data feeds, including U.S. and international data sources, with connectivity to exchanges, ECNs and consolidated data providers.

Second, the consolidated order book capability facilitates combining any number of order book feeds into a single consolidated view, with improved functionality to deliver information in a better way to our clients. Third, low data latency and high throughput on an integrated, high-performance, high-availability platform, with support for high-speed multicast and point-to-point message transport is one of the most important features of WFO and we are taking full advantage of all of them. Finally, full IBM local and international support, including services and consulting is a key part of the complete solution for the Santiago Stock Exchange.

We are implementing our technological platform over WebSphere MQ Low Latency Messaging network within which WFO is integrated. This will distribute market data feeds from MILA market (Integrated Latin American Market) and BM&FBovespa from Brazil as well.

How important is low latency trading to your marketplace?

In the Chilean market, low latency is becoming more and more important. Today, currently at least three brokerage houses are developing and using their own algorithmic trading strategies for the equities market in Chile. Additionally, we are currently observing algorithmic trading traffic from foreign brokers, especially from Brazil.

Algorithmic trading is sensitive to round trip latency. A broker who is nearer an execution venue than his peers will have an advantage because he will experience shorter network propagation delays. This has led to the practice of locating algorithmic trading servers in close proximity to execution venue servers. In practice this means that the Santiago Stock Exchange will need to check the following list: sufficient bandwidth to handle peak order and trade flows; support for the most popular versions of FIX; facilities for proximity hosting for algorithmic trading servers; conformance with widely adopted execution mechanisms and order types; monitoring and publishing quality of service parameters; order validation routines to prevent fat finger problems, among others.

Have regulations recently opened up Chiles market to foreign investment?

The first concept of DMA in Chile began with what we call “direct traders” (buy-side traders) facilitating these specially authorized institutional clients, to send direct orders to the market via a “broker sponsor”. Thus, pension and mutual funds, insurance companies and other institutions, using trading terminals provided by the Santiago Stock Exchange, can trade directly in our market. The next natural step was the incorporation of electronic networks to attract order flow from the U.S., Europe and neighboring countries in Latin America, especially Brazil.

What did BCS prepare its technology to accept order flow electronically?

In 2006, we built the first FIX interface using version 4.0 to connect to International Networks, to attract the order flow of our local equities market. After that, the Santiago Stock Exchange launched its initiative to modernize the equities electronic trading system and developed TELEPREGN HT, jointly with IBM, which went live in June 2010. This system is ready for algorithmic trading flow since it supports a throughput of over 3,000+ orders per second with sub-millisecond latency. In designing the system, we decided to use FIX 4.4 to enable easier connection via DMA with other exchanges, sell- and buy-side firms and market information vendors. This has greatly facilitated the connection to different networks, such as Bloomberg, Fidessa and SunGard, among others. For all these initiatives, FIX has been crucial in facilitating the integration with these listed networks. During 2011 we will announce new network agreements.

I understand that BCS expects the amount of market data being transmitted to go from 500,000 per month up to 6 million messages per day by 2012. Why do you expect your message rates to grow so rapidly? Is this from electronic trading?

Currently, referring to the equity market, 11 percent of order flow comes from DMA which represents an average of a 27 percent increase over the last 6 months, today 19% on average comes from Internet retail order flow and the rest comes from traditional OMS and trade workstations.

Source: Wallstreet & Technology by Ivy Schmerken (Ischmerken@techweb.com)@ischmerken , 24.08.2011

Filed under: Brazil, Chile, Colombia, Exchanges, FIX Connectivity, Latin America, Market Data, Peru, Trading Technology, , , , , , , , , , , , , , , ,

August 19, 2011 • 1:02 am 1

Data Classifications Define Us

We use classifications in many aspects of our daily lives. In the data world, we use classifications to categorize our business data so we can effectively identify a group of similar items. A well-formed classification enables business users to locate and perform analysis on exactly the subset of data they want. A well thought-out classification enables incorporation of new categories as the environment changes.

Before diving into some guidelines for constructing and testing classifications, let’s start with terminology.

Taxonomy: The science or technique of naming, identifying and classifying. This article explains aspects of a general taxonomy.
Domain: A group of items or objects characterized by a specific feature. The two domains used as examples in this article are financial securities and songs.
Classification (noun): A collection of ordered categories (delineated along one or more features) for a specific domain.
Category: A subset of similar domain objects. A category can be of group of more detailed categories.
Level: All the categories with the same parent category (as in multilevel classifications).

As a simple example, consider a classification of music – you might identify the categories (or genres) as classical, rock, country, pop, jazz, or hip hop. Consider food: Vegetables, legumes, fruit, meat, fish and dairy are all categories of the classification. If we wish to have more specificity of vegetables, we might have root vegetables (e.g., carrots, beets), plant vegetables (e.g., collards, lettuce, peas) and so on. When we include subcategories of vegetables, we are now talking about a multilevel classification.

Classification Benefits

The benefits of classifications are numerous. We refer to classifications when we communicate with colleagues. We name classifications so that systems can label them and attach qualities to them.

Well-documented classifications become part of our language. Classifications improve our communication; they reduce probability of interpretation errors or reporting errors, and provide the ability to differentiate, compare and analyze. From a purely utilitarian standpoint, they enable us to more quickly locate a single data item we really want.  A classification enables a tree-based search – for each level we traverse, the closer we get to our desired target domain object.

The larger the universe of data items being classified, the more valuable the classification. A large universe of domain objects lends itself well to a multilevel classification. For a large universe, a single level classification likely has too many domain objects associated with each category, reducing its ability to target a small, targeted group. In financial services, would an asset management firm be happy with classifying all its securities into just one level such as Equities, Fixed Income, Commodities, Currencies, and Derivatives? It is unlikely the firm would b e content with this, because a good-sized asset management firm may keep track of more than 20,000 securities.

Constructing the Classification

When building classifications, ensure all categories apply to the same domain. Getting back to music, categories such as ‘70s or ‘80s songs would not be consistent with genres. However, you could have a separate time-based classification. Both genre and decade would be fair – but separate – classifications.

Here are a few points to consider when building a new classification:

  • Give the classification a name so it clearly represents its domain.
  • When considering a category, ask yourself whether it can apply to all objects. If so, it is probably an attribute of the domain object (like the recording technique of a song or whether a security’s income is taxable).
  • If your new category is Boolean (usually yes or no), it may or may not be a good choice for a classification category. For example, in financial services, IS_TAXABLE is not a good category since it is really an attribute (every domain object has this attribute). However, the Boolean category IS_CONVERTIBLE is acceptable because it only applies to a subset of categories (e.g., fixed income).
  • Each category should not be defined too narrowly (very few domain objects fall into this category); if so, it may rarely (if ever) get assigned to the domain objects and even more importantly, used rarely in reporting.
  • Similar to the previous point, ensure some dispersion. If the expected time frame before a classification is first assigned is relatively long (for instance more than one year) it may be better to keep “unused/future” categories on the drawing board. With several categories having very or no few domain objects, you can expect business users to complain that a search using the category is not working.  Seeing the category implies there are members.
  • Stay brutally focused on the domain. Consider another example from financial services: Many firms tend to consider “municipals” as a type of security, putting it alongside other fixed income categories like convertibles, mortgage backed, floating rate notes, etc. But the term “municipal” actually describes the issuer, not the security. When you test the classification (see below), you’ll see it fails the test. However, “municipal” is a very reasonable issuer classification
  • Socialize it, because feedback will foster consensus. Encourage multiple, frequent reviews to achieve incremental agreement and have several sample domain objects for each category in the classification. This aids understanding by the users of the classification.
  • As a rule of thumb, define no more than 10 to 12 categories under the level above. More than that suggests a higher-level grouping or level in between may be beneficial. For example, you may introduce a level in between, with three categories, where each spans out to four (which equals the original 12). Consider how often manual assignment of the classification will be made.
  • Try to select one or two words to name a category if possible, because they will likely be displayed in an application GUI tree  or displayed on a report. If you make the category names too long, they’ll be harder to refer to, and users will abbreviate them with acronyms.
  • In a multilevel classification, create as few “Other” categories as possible and place them at the leaf (lowest) level.
  • In a multilevel classification, every category should be a formal subset of its parent category. If the new lower category can capture domain objects in any other level above, it is likely not a good candidate (or it may be an attribute of the domain object). An example of this is:
  1. Level 1: Debt
  2. Level 2: Issuer Backed
  3. Level 2: Money Market
  4. Level 3: Commercial Paper

Here is ambiguity because Commercial Paper could arguably fit under both Level 2 categories. One solution is to rename the category from Issuer Backed to something else (like Bonds) which does not overlap with Money Market (or remove it altogether).

A balanced classification means each branch from the root has an equal number of levels (but not necessarily categories). An example of a balanced classification is illustrated in Figure 1.

 

 

 

 

 

 

A non-balanced classification scheme might look like Figure 2.

 

 

 

 

 

 

 

 

There is no inherent problem in having a non-balanced classification, as long as your GUI/application can adapt and support variable levels. If, for some reason, you’re constrained by the GUI or application, just clone the levels downward until you have a balanced classification. To balance the unbalanced classification in Figure 2, add the following:

  •  Under Category 1.1.1, add Category 1.1.1.1
  •  Under Category 1.1.2, add Category 1.1.2.1
  •  Under Category 1.1.3, add Category 1.1.3.1

The category “Other” is always problematic. When someone recommends including an “Other,” it may indicate more analysis is required to complete the classification. “Other” can be a crutch. It is too easy to assign “Other” rather than conduct the research to assign the correct category. Reclassifying later (from “Other” to the proper category) may affect reports that were previously run – business users tend to distrust a system or its data when they get differing results in repeated runs.

What if you absolutely need “Other”? Put procedures in place to flag when “Other” is assigned to any domain object so you can reassign it as soon as possible. Often, business users will not include the “Other” category in analysis/reporting –  but they may in fact be missing domain objects that they should include. Depending where “Other” is in the classification, it may contain unclassified domain objects from anywhere in the classification.

Data Modeling

To model a multilevel classification it the database, consider creating X tables where X equals number of levels + 1. For example, Figure 3 represents a how the four level classification in the previous section might be modeled.

Table “Class_A_Categories” contains all the category definitions for Classification A, on all levels.
Table “Class A” contains the valid combinations of categories on each level.
Table “Domain_Object” are the objects which take a single classification from table “Class_A.”

A GUI/application can present the categories for selection by starting with ID_Level_1 (and showing the associated Class_A_categories.Desc) then when the user has selected a category, present the associated ID_Level_2 and so on until the leaf category has been selected.

Testing the Classification

Before distributing the classification for comment, find preferably three domain objects that fit into each category and display them in a table. This will give reviewers a concrete understanding of what you mean by each category. It will also give you a chance to verify your category selections.

Seek out edge cases and classify them. Can the domain object arguably fit into two categories? Explain in a short write-up. Fabricate domain objects and step through the decisions at each classification level to arrive at the correct category. This will provide the reviewer with confidence that business rules can be written to ensure accurate and consistent assignment.

Test-drive the category names with the business users. From their point of view, are the category names clear, meaningful, understandable and unambiguous?

Managing Changes

Now that you’ve successfully established and published your classification you will need rules on how to manage it. Basically, this falls under the topic of data governance.

  • If you have a data steward (but no data governance council), this is the person that should own, or at least sign off on any classification changes.
  • If you have a data governance council (DGC), the council will own the classification decisions.
  • Whether the classification assignment is automated or manual (via GUI), ensure all change requests are documented, including justification and examples. Often a little research will show the change request can be accommodated with the existing classification.
  • If your firm is large enough, record the minutes of the DGC meetings/decisions and post them on a website (like ISO does). Keep metrics about when and how many categories were adjusted. This will be informative for new users of the classification and will reveal trends as to how well the classification is serving its purpose.
  • Publish upcoming changes to your classification. Future date them so consumers can make appropriate changes to their systems and reports (if required).
  • Establish guidelines around timing, and include consideration of requests and decisions. If timelines are too long, business users are going to look for other solutions.
  • One of the best ways of implementing a classification change is through software. Not only will you be changing the assignment logic going forward, you may also have to reassign existing domain objects.
  • If you have to add categories, perform the same analysis effort and follow the same rules as when you constructed the classification. A sign of a good classification is when several requests for expansion can in fact be accommodated with the existing classification. But before adding, prove to yourself that the domain objects in question cannot be accommodated by existing categories.
  • Periodically (once a year or quarter, as appropriate for the rate of change in your industry), test the classification with a few of the newer or newly created domain objects to see if they were correctly classified.
  • One rarely builds or encounters a perfect classification. Over time, classifications need to be modernized and adjusted to stay relevant. Governing how the classification is updated must be established, published and consistent. The classification must be strictly focused on its target domain. Most of all, communicate often during the classification building process, seek feedback and stay flexible to changing conditions which require adjustment or expansion of the classification.

Source: Information Management Newsletters, August 16, 2011  by Mike Lapenna at mike@inti.ca.

Filed under: Corporate Action, Data Management, Market Data, Reference Data, Risk Management, Standards, , , , , , ,

August 19, 2011 • 12:43 am 1

Brazil: BM&FBOVESPA News August 2011 Nr 29

BM&FBOVESPA International Financial and Capital Markets Conference features Robert Skidelsky and Michael Pettis

The biennial meeting held as of Thursday (August 25) in the town of Campos do Jordão in the state of São Paulo will host debates on current economic and global financial market issues, including challenges for the derivatives and capital markets, the future of financial intermediation, and algorithmic trading strategies. BM&FBOVESPA Chief Executive Officer Edemir Pinto and Chairman of the Board of Directors Arminio Fraga will receive, for lectures and debates, some of the world’s most influential experts about the matters on the agenda. Among their number are Robert Skidelsky, Emeritus Professor of Political Economy at the University of Warwick, and a specialist on the work of the economist John Maynard Keynes. Michael Pettis, a professor at Peking University’s Guanghua School of Management and expert on the Asian markets will take part in a discussion about the challenges that the Brazil-China relationship will face over the coming years.

> Full agenda of the event

BM&FBOVESPA launches eight new currency derivatives

BM&FBOVESPA launched eight new currency futures contracts this week (August, 15). They are six futures contracts and two mini futures contracts. The regular futures contracts are for the Brazilian Real against the South African Rand (ZAR), Turkish Lira (TRY), New Zealand Dollar (NZD), Chilean Peso (CLP), Chinese Yuan (CNY) and Swiss Franc (CHF). The contracts will be authorized for trading as of the September 2011 maturity, between 9:00 a.m. and 6:00 p.m. Each futures contract is sized and formatted so that it is equivalent to the USD 50,000 size of U.S. Dollar futures contract. The sizes of the respective contracts are 350,000 South African Rands; 350,000 Chinese Yuan; 75,000 Turkish Lira; 75,000 New Zealand Dollars; 50,000 Swiss Francs; and 25 million Chilean Pesos. The Mini U.S. Dollar Futures Contract (WDO) is sized USD 10,000, which represents 20% of the size of the regular U.S. Dollar Futures Contract. The Mini Euro Futures Contract (WEU) is sized €10,000, representing 20% of the size of the regular Euro Futures Contract .

> More info

International partnerships mark the expansion of the BM&FBOVESPA Institute of Education

The BM&FBOVESPA Institute of Education has been known as the “Escola para os Mercados Financeiro, de Capitais e de Derivativos” (Financial, Capital and Derivatives Markets School) since its foundation in 1986. Growing demand for professional training, however, means it has broadened its scope since 2010 and it has also begun operating as the “Escola do Investidor” (School of the Investor) and the “Escola de Empresas e Empreendedores” (Enterprises and Entrepreneurs’ School). In the first half of 2011 the Institute of Education signed cooperation agreements with internationally renowned business schools, among which the Endeavor Institute, Babson College and Chicago Booth:

  • Endeavor Institute – the “Bota pra fazer” (Sow to Reap) program of courses aimed at startup companies, in business incubators. This methodology was developed by Endeavor Brazil in partnership with the Kauffman Foundation. The Institute of Education was the first institution in Brazil to apply this methodology for qualifying entrepreneurs.
  • Babson College – Through this partnership, the BM&FBOVESPA Institute of Education offers the “Gestão e Crescimento Empresarial de Alto Impacto” (High Impact Business Management and Growth) program of courses, hand-tailored to enable Brazilian entrepreneurs to lead their companies’ growth. The second group begins in October this year.
  • Chicago Booth – The business school of the University of Chicago. This partnership has resulted in the development of a three-module academic program, focused on the capital and derivatives markets and with an international approach.  Next course in December.

BM&FBOVESPA’s options and capital raising activity

According to the World Federation of Exchanges (WFE) BM&FBOVESPA is ranked as #1 in volume of Equity Option trades and #4 (Capital Raised) in terms of newly listed companies (IPOs). These and other regulated exchange industry numbers are available at:
http://www.world-exchanges.org/statistics

Market Makers for Options on the Stock of BM&FBOVESPA, Usiminas and BOVESPA Index

BM&FBOVESPA announced on August 3 the start of the selection process for up to three market makers for options on the stock of BM&FBOVESPA S.A (BVMF3) and Usinas Siderúrgicas de Minas Gerais S.A. – Usiminas (USIM5) and for options on the BOVESPA Index (IBOV). This is the second stage of the Bidding Program to select market makers in equity options and BOVESPA Index options, developed by the Exchange. Institutions that are interested in taking part – including nonresidents – have until September 26, 2011 to deliver proposals. The winners will be announced on October 11, 2011.

> More information about the Market Makers for Options

Bradesco wins BM&FBOVESPA selection process as Depositary Institution for 10 Unsponsored Level I BDR Programs

Bradesco has won the sixth selection process for depositary institutions authorized to request registration for trading 10 Unsponsored Level I Brazilian Depository Receipt (BDR) programs, backed by shares issued by publicly traded companies with headquarters overseas. Bradesco should simultaneously present BM&FBOVESPA and the Brazilian Securities and Exchange Commission (CVM), within 60 calendar days, with the necessary documentation for submission to register the 10 Unsponsored Level 1 BDR programs. The programs should include foreign companies that do not yet have BDRs traded on BM&FBOVESPA and which are headquartered in the United States and listed on U.S. stock exchanges.

There are currently 30 Unsponsored Level 1 BDR programs available for trading on BM&FBOVESPA, which have Deutsche Bank S.A., Citibank DTVM S.A. and Itaú Unibanco S.A. as their depositary institutions. Another three lots of ten programs shall be presented to the market soon by Banco Bradesco S.A., Citibank DTVM S.A. and Deutsche Bank S.A.

> More info

Up to USD 10 billion in public offerings and follow-ons in 2011

In the year to August 15, BM&FBOVESPA registered USD 10.1 billion in public offerings and follow-ons. There were eleven Initial Public Offerings (IPOs) in 2011: AREZZO&CO (ARZZ3), SIERRA BRASIL (SSBR3), AUTOMETAL (AUTM3), QGEP PART (QGEP3), IMC HOLDING (IMCH3), TIME FOR FUN (SHOW3), MAGAZINE LUIZA (MGLU3), BR PHARMA (BPHA3), QUALICORP (QUAL3), TECHNOS (TECN3) and ABRIL EDUCAÇÃO (ABRE11). At the end of July, the 181 companies that are part of the BM&FBOVESPA’s special corporate governance levels represented 64.96% of market capitalization, 79.04% of financial volume, and 76.84% of trades in the spot market. At the end of June, there were 177 companies, representing 65.56% of market capitalization, 75.42% of financial volume, and 77.57% of spot market trades.

Number of ETF trades grows 25% from June

The financial volume registered in July by the eight BM&FBOVESPA Exchange-Traded Funds (ETFs) reached BRL 667.75 million in 31,997 trades, from BRL 598.43 million and 25,701 the previous month. In July the ETF with the highest financial volume was BOVA11 with BRL 573.83 million and 26,915 transactions.

2011 EVENTS

BM&FBOVESPA 5th International Financial and Capital Markets Conference

The city of Campos do Jordão will once again be the site of one of the year’s most important financial market events, hosted by BM&FBOVESPA. The 5th edition of the International Financial and Capital Markets Conference will have national and international guest speakers, round-table discussions, social activities and an exhibition area providing an excellent venue for participants to debate some of the most significant financial topics. Speakers include: Maria Helena Santana (Securities and Exchanges Commission of Brazil – CVM), Robert Engle (2003 Nobel Prize), Joe Gawronski (COO of Rosenblatt Securities) and Ilan Goldfajn (Chief Economist, Itau Unibanco).

Location: Campos do Jordão, SP, Brazil
Date: August 25-27, 2011

> Full agenda of the event

*Nonresident investors can apply for an exclusive 50% discount for registration at the event. Please contact the International Business Development team to request your coupon, by email to ysilva@bvmf.com.br or drodrigues@bvmf.com.br

BM&FBOVESPA at Chicago’s FIA EXPO

BM&FBOVESPA will exhibit at FIA EXPO 2011. The event attracts approximately 5,000 people from more than 30 countries, from senior staff at brokerage firms and exchanges, to floor traders, pension fund managers, corporate treasurers, CTAs and CPOs, and individual investors. BM&FBOVESPA staff will present the Exchange’s products, connectivity, DMA access via Globlex, etc.

Location: Hilton Chicago, USA
Date: October 10-12, 2011

> More info

Family Office Summit – Latin America

BM&FBOVESPA is currently sending invitations for this event promoted by the World Research Group and which will be held in São Paulo September 26-28. A BM&FBOVESPA representative is scheduled to talk about alternative investments. The summit will present current Trends for Optimizing Effective Strategies and Alternative Methods to Produce Investments for Single and Multi Family Offices in the Brazilian capital market. There will be a special networking session bringing together managers, single and multi family offices, advisors and consultants.

Location: Intercontinental São Paulo – Alameda Santos, 1123, São Paulo , SP.
Date: September 26-28, 2011.

> Full Agenda and Registration

2nd FX Growth Markets Series: Brazil – Profit & Loss

BM&FBOVESPA will join the Profit & Loss FX Growth Markets conference on October 20, 2011 at the Tivoli Hotel in São Paulo. Profit & Loss has been operating its highly successful series of Forex Network and FX Growth Markets conferences for more than 10 years, with regular annual events held in London, New York, Chicago, Singapore, Brazil, Mexico, Colombia, Chile, Shanghai and Toronto, and comes to Brazil for the second time. A BM&FBOVESPA representative will talk at the event.

Location: Tivoli Hotel São Paulo, São Paulo, Brazil
Date: October 20, 2011.

> Full Agenda

Volumes and trades by Direct Market Access (DMA)

BM&F Segment
In July, BM&F* market segment transactions carried out through order routing via Direct Market Access (DMA) registered 20,009,841 contracts traded and 2,417,398 trades. In June, the volume reached 20,409,252 contracts traded and 2,105,981 trades.

The volumes registered by each access modality in the BM&F segment were as follows:

  • Traditional DMA – 7,440,774 contracts traded, in 797,002 trades, in comparison to 8,168,492 contracts and 775,388 trades in June;
  • Via DMA provider (including orders routed via the Globex System) – 7,040,432 contracts traded, in 258,881 trades, compared to 7,365,306 contracts and 260,441 trades in June;
  • DMA via direct connection – 3,691 contracts traded in 977 trades, against 8,995 contracts and 1,376 trades in June;
  • DMA via co-location – 5,524,944 contracts traded, in 1,360,538 trades, compared to 4,866,459 contracts and 1,068,766 trades in June.

In July, transactions carried out by foreign investors presented by CME to BVMF (who use the Globex-GTS order routing system or access BVMF markets via co-location) totaled 2,897,744 contracts traded, in 688,862 trades, compared to 2,658,361 contracts and 623,653 trades in June.

BOVESPA Segment
In July, order routing via DMA in the BOVESPA* segment totaled BRL 95,030,778,000.00 and 11,225,193 trades, from BRL 88,977,494,000.00 and 10,244,578 trades the previous month.

Trading volumes per type of DMA in the BOVESPA segment:

  • Traditional DMA – Volume of BRL 87,674,861,000.00 and 10,091,956 trades from BRL 82,843,187,000.00 and 9,287,652 in June;
  • DMA via co-location – Volume of BRL 6,381,361,000.00 and 1,007,081 trades from BRL 5,206,388,000.00 and 856,246 in June;
  • DMA via provider – Volume of BRL 974,556,000.00 and 126,156 trades from BRL 927,919,000.00 and 100,680 in June.

* Direct access to the BM&FBOVESPA market segments is carried out through DMA models 1, 2, 3 and 4. In model 1 or traditional DMA, the client accesses the GTS or Mega Bolsa through technological intermediation of a brokerage house. In model 2 or via DMA provider, the client does not use the technological intermediation of a brokerage house, but rather connects to the system through an authorized access provider. DMA via order routing with CME Globex is also a form of DMA model 2. In model 3, the client connects to the system through a direct connection. In model 4 or via co-location, the client installs its own computer within the Exchange’s facilities. 

Notes:

The volumes registered by access modality include both buy and sell sides of a trade.

The volumes by access modality for both the BM&F and the BOVESPA market segments have been reported in a consolidated manner in the BM&FBOVESPA statements since May 2009.

MARKET RESULTS

BM&F Segment July 2011

In July, derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 44,199,125 contracts and BRL 3.35 trillion in volume, compared to 51,023,956 contracts and BRL 3.25 trillion in June. The daily average of contracts traded in the derivatives markets in July was 2,104,720, in contrast to 2,429,712 in June.

BOVESPA Segment July 2011

In July 2011, equity markets (BOVESPA segment) traded BRL 119.63 billion, in 11,016,993 trades, with daily averages of BRL 5.69 billion and 524,619 trades, in comparison to June when total volume reached BRL 124.19 billion, in 10,187,883 trades, with daily averages of BRL 5.91 billion and 485,137 trades.

Filed under: BM&FBOVESPA, Brazil, China, Events, Exchanges, News, Risk Management, Trading Technology, , , , , , , , , , , , , , , , , , , , ,

August 11, 2011 • 11:17 pm 0

Mexico Credit: Beating Brazil Bonds after 2008 crisis

Mexican government and corporate bonds are outperforming securities sold by their Brazilian counterparts as investors bet Latin America’s second-largest economy is better prepared to weather a global slowdown.

The 27-basis point drop in Mexican government dollar bond yields in the past month compares with a decline of 25 for Brazilian notes, snapping five straight months of underperformance, according to JPMorgan Chase & Co. The two- basis point increase in Mexican corporate borrowing costs in the past month compares with a jump of six basis points, or 0.06 percentage point, for their Brazilian peers. Previously, Brazilian corporate securities had outperformed for two consecutive months.

President Felipe Calderon’s administration has lined up a $72 billion credit line from the International Monetary Fund, extended debt maturities and shunned capital increases embraced by Brazil, the region’s largest economy, to protect against a slowdown in the U.S., which buys 80 percent of the Latin American nation’s exports.

“They are strengthening public finances here in Mexico,” Gabriel Casillas, chief Mexico economist for JPMorgan Chase & Co. in Mexico City, said in a telephone interview. “The Mexican market has become much easier and flexible to trade as Brazil boosts capital controls.”

100-Year Bond

Mexican government bonds yield 4.65 percent, or 6 basis points less than Brazilian debt, according to JPMorgan. The gap has swelled from one basis point on July 28. Notes sold by Mexican companies yield 6.31 percent, compared with 5.93 percent for Brazilian corporate securities. The 37-basis point gap is down from 53 on July 28.

Mexico sold $1 billion of 100-year bonds overseas yesterday, taking advantage of a plunge in benchmark U.S. borrowing costs to bring back a record-long maturity it unveiled a year ago. The government issued the notes due in 2110 to yield 5.96 percent, or 242 basis points above 30-year U.S. Treasuries, according to data compiled by Bloomberg.

“Mexico financially has never been as well protected and sound as it is today,” said Alejandro Diaz de Leon, head of the finance ministry’s public debt unit in an interview yesterday. “Mexico has been able to take advantage of a privileged position because of the steps it has taken.”

Standard & Poor’s cut Mexico’s rating to BBB, the second- lowest investment grade, from BBB+ in December 2009, citing declining oil output and “diminishing” prospects for widening the tax base to replace oil revenue. Brazil is rated one level lower at BBB- by S&P.

The Brazilian finance ministry declined to comment in an e- mailed statement.

IMF Credit Line

The IMF renewed and boosted the size of Mexico’s credit line in January from $48 billion. The Washington-based fund originally approved the facility in 2009 to boost confidence in the economy. The central bank has been buying as much as $600 million monthly though options since March 2010 to bolster foreign reserves, which surged 84 percent in the past two years to a record $133.9 billion, according to the central bank. Brazil’s reserves rose 65 percent over the same period to $349.6 billion.

“All these contingency plans and credit lines are favorable factors for an investor, who may say that in the case of another crisis Mexico won’t likely be as volatile,” Eduardo Avila, an economist with Monex Casa de Bolsa SA in Mexico City, said in a telephone interview.

Currency Tumble

The peso tumbled 20 percent in 2008 as U.S. demand for the country’s exports slumped. Mexico’s gross domestic product shrank 6.1 percent the following year, the most since 1995 and the second-worst contraction of the economies tracked by Bloomberg after Russia. The U.S. economy contracted 3.5 percent in 2009.

Yields on Mexican government debt in the two months after Lehman Brothers Holding Inc. filed for bankruptcy in 2008 surged 165 basis points, compared with an increase of 142 for Brazilian securities.

“We are a lot better prepared, especially relative to other countries, for a situation that could deteriorate externally,” Deputy Finance Minister Gerardo Rodriguez said in an interview at Bloomberg’s headquarters in New York on June 2. “All this points to a broad framework of creating additional spaces for a potential adverse scenario going forward. That’s what we are here for — to prepare for negative scenarios.”

Mexico’s total net debt is 35 percent of GDP, below the 40 percent for Brazil. The government has been extending local debt maturities to a record 7.3 years in 2011, from 6.4 years in 2009.

Capital Controls

Brazil imposed a 1 percent tax on some currency derivatives on July 27, the latest government measure aimed at stemming the 42 percent appreciation of the real since the end of 2008. Since October, Brazil has also tripled to 6 percent a tax on foreigners’ purchase of bonds, raised the cost of foreign borrowing by local companies and restricted bank bets against the real. The peso has gained 9.1 percent during the same period.

The extra yield investors demand to hold Mexican government dollar bonds instead of U.S. Treasuries narrowed three basis points to 184 at 7:47 a.m. New York time, according to JPMorgan Chase & Co.

The peso weakened 0.3 percent to 12.5958 per U.S. dollar.

The cost to protect Mexican debt against non-payment for five years rose five basis points yesterday to 161, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent if a government or company fails to adhere to its debt agreements.

Growth Forecasts

Mexico’s central bank lowered its forecast for economic growth this year and next while keeping its consumer price forecasts unchanged, according to its quarterly inflation report published yesterday. It cut its 2011 growth forecast to a range of 3.8 percent to 4.8 percent and its 2012 forecast to 3.5 percent to 4.5 percent. The bank said in its May report the economy may expand as much as 5 percent this year and up to 4.8 percent in 2012 growth. It kept its 2011 and 2012 consumer price forecasts at 3 percent to 4 percent.

“The balance of risks for growth in the Mexican economy has deteriorated,” the bank said in the report, citing lower global growth prospects.

JPMorgan’s Casillas and Iker Cabiedes reduced their 2011 Mexican growth forecast yesterday to 4.2 percent from 4.5 percent.

‘Aversion to Risk’

Economists in Mexico will likely continue to cut growth forecasts this quarter after the Federal Reserve indicated that it will keep rates low through mid-2013, said Javier Belaunzaran, who helps manage about 40 billion pesos at Interacciones Casa de Bolsa SA in Mexico City.

“If the Fed is saying it’s keeping rates steady through 2013, than things aren’t going well at all,” Belaunzaran said in a telephone interview. “There may be an aversion to risk toward long-term securities if the outlook worsens.”

Mexico will wait until November 2012 to raise the benchmark lending rate from a record low 4.5 percent, according to trading in TIIE futures.

While Mexico’s annual inflation rate slowed to a five-year low in March and is within the central bank’s target range of 3 percent to 4 percent this year, Brazil has struggled to contain price increases. Inflation quickened to 6.75 percent last month, the highest in six years and almost double the 3.55 percent rate in Mexico in July.

“There are a lot of factors that make Mexico stand out from the rest of the emerging markets,” Monex’s Avila said.

Source: Bloomberg, 11.08.2011 by  Andres R. Martinez amartinez28@bloomberg.net, David Papadopoulos papadopoulos@bloomberg.net

Filed under: Brazil, Mexico, News, , , , , , , , ,

August 9, 2011 • 4:52 am 0

Bloomberg Pushes Benefits, Value of Data License New Commercial Model

Bloomberg is redoubling efforts to convince customers of the value of its new pricing model for its Bloomberg Data License service of intraday and end-of-day market and reference data—known as the New Commercial Model (NCM)—which it originally introduced in March, and which could see the cost of Data License increase by between 30 and 100 percent over three years.

 The pricing model, which is part of the vendor’s new customer engagement model for enterprise Data License customers, came into effect from the start of June for existing contracts facing renewal and from April 1 for new accounts, according to a letter sent to clients in March by Bloomberg president and chief executive Daniel Doctoroff. However, in recent weeks, sources say the vendor’s sales management team has contacted Data License clients to obtain feedback on the structure of the NCM, and to visit customers in person to re-explain the model.

Although Bloomberg declines to comment on why it was revisiting customers, banks and buy-side firms have criticized the model, which will lead to unbudgeted price rises of up to—and in some cases more than—100 percent. “Originally they gave us a detailed breakdown of every single security license, back-office license, estimated dollar spend, renewal dates and all the instruments that had been consumed on the feed,” says a source at one sell-side firm. “Then in the last two weeks they came back and said they want to re-present this….  Bloomberg is keen to make sure customers understand everything and show that it is not as bad as it first looks.”

Under the old commercial model, customers paid a monthly charge per security, with prices based on six categories of instrument type and three categories of data type—a security master incorporating corporate actions and prices; derived data; and issuer data—plus a sub-category of price-only data. Under the NCM, Bloomberg has retained the monthly charges and the link between prices and data/instrument type, but has replaced existing categories with a greater number of new categories which result in higher fees overall than in the old model. For example, the security master, corporate actions data and prices for a corporate security were previously bundled together for $1.50 per security per month, but are now sold separately for $1.70, $0.50 and $0.75 per security per month, respectively—a total of $2.95 per security per month.

Bloomberg has also expanded the six instrument categories—including a category covering corporate, government, and money market assets; one for municipals; agency pools; collateralized mortgage obligations, commercial mortgage-backed securities, whole loans and asset-backed securities; equity options, futures, warrants, funds indexes and currencies; and economic statistics—to 11 categories, by splitting out different asset types into new, individual categories, such as separate categories for funds, US government and syndicated loans.

Meanwhile, the vendor has divided issuer data into three component categories—credit risk data, fundamentals and estimates—meaning that monthly fees for a corporate security have more than doubled from $2.50 to $6.50 in the NCM. The cost of derived data has risen by up to 50 percent depending on the asset class, while the vendor now charges for accompanying corporate actions data, regardless of whether a corporate action event actually occurred that month. Under the NCM, multiple requests from firms who wish to view the data more than once per month will also now be charged between one and three cents per security per day, depending on the asset class and data type, whereas previously the first multi-request was free.

More Flexible
Bloomberg officials say the new model is intended to provide more flexibility and value, and to allow clients to “only pay for the data that they want and need.” But one market data manager at a European asset manager calls the change a “pure slicing and dicing” exercise, adding that if a business needs to subscribe to all the content, “You get nothing new or extra—you just have to pay a lot more for the same data.”

To soften the impact of the changes for existing clients, Bloomberg’s Data Solutions group will provide enterprise data license consultants to help clients manage their data usage, and is phasing in the increases, so clients renewing their Data License contract this year and early next year will see stepped cost increments, limited to a total increase of no more than 7 percent in the first year and a further 7 percent in the second. Some clients praise this softly-softly approach but are concerned about the impact after that initial two-year period.

“In our peer group, we are sharing knowledge on how much it will impact us. For some, it’s 2 percent, for others it’s 30 or 100 percent, depending on what data you take and how exposed you are to certain services,” says a market data vendor manager at a second European asset manager. “Seven percent in the first year, then another 7 percent in the second is fine, but after that, when it hits you fully—that’s what we’re worrying about.”

In addition to incremental rises, Bloomberg will also offer “optimization,” whereby if a firm has multiple contracts with the vendor across different branches or business units and requests the same data on the same security in the same month via those contracts, then—excluding intraday and derived data—the vendor will only charge between one and three cents for the second request, rather than twice the full price, which it expects to deliver better value for clients.

However, Jean-Pierre Gottdiener, manager at Paris-based consultancy Lucidine Conseil, says firms who have made the biggest efforts so far to reduce costs and administration by consolidating multiple contracts across branches will not be eligible to take advantage of optimization, and will have to pay the most. “If you only have one contract because you have already rationalized your request to Bloomberg, there will be no optimization and you will support nearly the full increase of the prices,” he says. “Some firms have made no optimization on Bloomberg and their increase was only 30 percent, whereas those who have already made an investment to rationalize Bloomberg face a rise of 100 percent.”

Some acknowledge that the vendor’s prices are fair, given that data volumes have increased considerably since the last time the vendor increased prices—more than a decade ago, according to Bloomberg officials—but Gottdiener adds that Bloomberg’s leading position in the market means “the industry is facing a real issue from the policy, and will probably need to find alternative solutions.”

In fact, the NCM has prompted dissatisfied buy- and sell-side firms to reassess their data consumption. Some participants have even said they will look to alternative parties for cheaper data for some parts of the Data License, such as corporate actions, where plenty of alternative providers exist. “Often with Bloomberg, you just absorb the whole universe and pump it everywhere, so it’s good that we now have to look at what data do we use, where we use it, and why,” adds the source at the second asset manager.

Source: Waters Technology 08.08. 2011

Filed under: Corporate Action, Data Management, Data Vendor, Market Data, News, Reference Data, Standards, , , , , , ,

August 4, 2011 • 11:18 pm 0

Mexico Credit: Banorte beats Brazil´s Itau as acquisition boosts lending

Bonds sold by Grupo Financiero Banorte SAB, Mexico’s fourth-largest bank by outstanding loans, are outperforming debt from financial peers in Latin America after an acquisition helped the company boost lending by 29 percent.

The 6.1 percent rally in Banorte’s dollar bonds due in 2021 this year compares with an advance of 5.7 percent for bank debt in the region, according to data compiled by Bloomberg and Credit Suisse Group AG. Similar-maturity bonds sold by Banco Itau Unibanco SA, Latin America’s biggest bank by market value, gained 6 percent during the same period. Debt due in 2020 issued by Bancolombia SA, Colombia’s biggest bank, rose 5.5 percent.

Banorte, based in Monterrey, Mexico, is tapping into a growing demand for credit in Latin America’s second-biggest economy. Total loans for Banorte expanded 18 percent in the past year, the most since 2008, according to Mexico’s National Banking and Securities Commission. Banorte said on July 25 that its acquisition of Ixe Grupo Financiero SAB helped increase its loan portfolio to 312 billion pesos ($26.4 billion) in the second quarter from 242 billion a year earlier.

“They grew at a healthy pace in the quarter and I’m expecting it to continue,” Natalia Corfield, an ING analyst who recommends investors buy Banorte’s bonds, said in a telephone interview from New York. “The banking sector has a very good growth potential.”

The yield on Banorte’s bonds sank 47 basis points, or 0.47 percentage point, this year to 4.72 percent, according to data compiled by Bloomberg. Mexican government dollar notes that mature in 2020 yield 3.45 percent.

Credit Expansion

Pedro Rodriguez, a spokesman for Banorte, didn’t return a phone message seeking comment.

Yields on Sao Paulo-based Itau’s bonds due in 2020 fell 41 basis points during the same period to 5.39 percent. Itau declined to comment through an e-mailed statement.

Mexican banks including Banorte are benefiting from the expansion of credit to a larger share of the population, said Alonso Madero, who helps manage about $5.5 billion in debt at Corp. Actinver SAB. The country’s private credit measured as a percentage of the gross domestic product was 21.8 percent in 2009, compared with 45 percent in Brazil, according to ING.

“Banks could lend a lot more,” Madero said in a telephone interview from Mexico City, “It’s very clear that this is how they could grow. There’s a big potential growth to capitalize on because of the low banking penetration.”

Growth Outlook

Banks in Mexico are increasing lending as the economy may grow “a little bit more” than 4.3 percent this year, Finance Minister Ernesto Cordero said in an event in Mexico City yesterday. Gross domestic product expanded 5.4 percent in 2010, the most in a decade.

Slowing growth in the U.S., the destination for 80 percent of Mexico’s exports, may curb demand for credit in the Latin American country, said Araceli Espinosa, debt analyst at Scotia Capital.

A report yesterday showed that service industries in the U.S. expanded in July at the slowest pace in 17 months as orders and employment cooled, indicating the biggest part of the economy had little spark to begin the second half of the year. Economic figures in the U.S. in last two weeks have shown declining home sales, weaker factory orders, waning consumer confidence and the first decrease in household spending in two years.

“If the economy is not growing, the loan portfolio for the banks is not going to grow,” Espinosa said in a telephone interview from Mexico City.

Yield Spread

Yields on futures contracts for the 28-day TIIE interbank rate due in May were unchanged at 4.99 percent, indicating traders expect the central bank will wait until that month to raise benchmark borrowing costs from a record low 4.5 percent.

The extra yield investors demand to hold Mexican government dollar bonds instead of U.S. Treasuries was unchanged at 128, according to JPMorgan Chase & Co.

The cost to protect Mexican debt against non-payment for five years rose 1 basis point to 112, according to CMA. Credit- default swaps pay the buyer face value in exchange for the underlying securities or cash equivalent if the issuer fails to comply with debt agreements.

The peso advanced 0.2 percent to 11.8193 per dollar, extending its advance this year to 4.4 percent.

Banorte is likely to exercise a call option on its bonds in 2016, ING’s Corfield said. The yield to the 2016 call date on the company’s notes may drop 50 basis points from 6 percent yesterday, she said. A call is a contract that gives the holder the right to buy a security at a set price within a set period. The holder of the call is not obligated to buy the security.

‘Well Positioned’

Banorte has used takeovers, including the 2001 acquisition of Bancrecer SA, to grow into a national financial group from a north-Mexican regional lender since the country’s banking industry collapse in 1995.

Banorte reported a 24 percent increase in second-quarter net income to 2.05 billion pesos. Ixe added 119 million pesos to the profit.

“It’s a benign environment for Mexico now and Banorte is well positioned to benefit from it,” Corfield said.

Source: Bloomberg, 04.08.2011 by  Veronica Navarro Espinosa vespinosa@bloomberg.net; Andres R. Martinz amartinez28@bloomberg.net

Filed under: Brazil, Latin America, Mexico, News, , , , , , , , , , ,

August 3, 2011 • 8:46 am 0

CME and MexDer implement north-to-south order routing

CME Group, the world’s leading and most diverse derivatives marketplace, and the Mexican Derivatives Exchange (MexDer), the derivatives subsidiary of the BMV Group and second largest exchange in Latin America, today announced the successful launch of their north-to-south order routing agreement, giving customers in the U.S. access to MexDer’s benchmark derivatives contracts, including Mexican Stock Exchange Index Futures, Bond Futures and MXN Peso / US Dollar Futures Contracts.

The first phase of CME Group’s strategic partnership with MexDer went live April 4, 2011 and gave Mexican investors access to CME Group’s benchmark derivatives contracts including interest rates, foreign currencies, equity indexes, energy, metals and agricultural commodities.

“Mexico is the 13th largest economy in the world and we continue to look for opportunities to provide our customers around the world with the broadest and most diverse range of globally-relevant products to help them manage their risk,” said Phupinder Gill, CME Group President. “This next phase of the partnership demonstrates how we continue to build on our successful track record of growing our business internationally through strategic partnerships.”

“With the successful launch of South-to-North order routing in April, the second phase of the direct order routing connection now makes it possible for both of our customers to leverage access to both MexDer and CME Group, and take advantage of a modern market with a friendly regulatory framework in Mexico and a growing sophisticated local investor base,” said Luis Tellez, Chairman and CEO of BMV Group. “Our goal moving forward is to focus on increasing our volumes together and working more closely with each other to learn how we can meet the needs of our customers.”

In March 2010, the parent company of MexDer, BMV Group, and CME Group entered into a strategic partnership that includes order routing for derivatives products as well as an agreement to pursue potential joint initiatives including product development, marketing and customer education as well as clearing opportunities. CME Group is the exclusive exchange provider of derivatives order routing services to MexDer outside Latin America, and MexDer is the exclusive exchange provider of derivatives order routing services to CME Group in Mexico.

Source: BMV 01.08.2011

Filed under: BMV - Mexico, Exchanges, FIX Connectivity, Latin America, Mexico, News, Risk Management, Trading Technology, , , , , , , , , , , , , , , , ,

August 2, 2011 • 11:36 pm 0

Brazil: New Brazilian Derivatives Market Regulation

On July 27, 2011 the Brazilian Finance Minister, Guido Mantega, announced two new prudential measures aimed to avoid currency speculation in the derivatives market, in order to stem the United States Dollar’s fall and prevent the overvaluation of the Brazilian Real. These two measures are commented below.

The first measure is Provisional Measure No. 539, of July 26, 2011 (MP 539/2011), which basically authorizes the Brazilian Monetary Council (Conselho Monetário Nacional – CMN) to establish specific conditions for the negotiation of derivates contracts, for monetary and exchange policy purposes, regardless of the nature of the investor, with powers to also (i) determine deposits over the notional value of the derivatives contract; and (ii) set forth limits, terms and other conditions for the negotiation of such contracts.

MP 539/2011 also amends the Tax on Exchange Transactions (IOF) legislation, namely Decree-Law No. 1,783, of April 18, 1980 and Law No. 8,894, of June 21, 1994, in order to clarify that:

  1. the entities authorized to register derivatives contracts are responsible for collecting the IOF, which is calculated on the amount of the transaction;
  2. in the case of securities transactions involving derivatives contracts, the maximum IOF rate will be 25%. Up to this ceiling (25%), the Executive Branch can amend the applicable rate at any time, considering the monetary and exchange policy goals of the Brazilian Government. However, the current applicable IOF rate for derivatives transactions is 1%, as explained below when the second measure is commented;
  3. the amount of the securities transaction, for IOF purposes, is the adjusted notional value of the derivatives contract. The adjusted notional value is the reference value of the contract (notional value) revised to reflect the difference resulting from the derivatives´ price variation with respect to the underlying assets´ price variation; and
  4. the taxpayer is the holder of the derivatives contract.

As of July 27, 2011 (date of the publication of MP 539/2011 in the Official Gazette of the Union, when this measure came into force), in order to be valid all derivatives contracts must be registered with duly authorized entities, i.e. clearing houses or service providers which have been accredited by the Central Bank of Brazil (Banco Central do Brasil – Bacen) or by the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) to operate with clearing, settlement and registry.

The second measure is Decree No. 7,536, also dated July 26, 2011 (Decree 7,536/2011), which amends the IOF regulation approved by Decree No. 6,306, of December 14, 2007. This decree repeats many of the same terms already defined in MP 539/2011.

Pursuant to Decree 7,536/2011, the current applicable IOF rate to derivatives contracts is 1% and it is due in the purchase, sale or maturity of financial derivatives contracts, whenever the settlement amount is affected by the exchange rate variation and results in increase in the net short exposure in relation to the amount calculated at the end of the previous business day within the same entity authorized to register derivatives contracts.

The net exposure is calculated as the sum product of the amount of financial derivatives contracts whose settlement amount is affected by the variation of the exchange rate set by the adjusted notional value of each contract.

Netting is permitted between exposures of the same holder cleared by different entities accredited to register derivatives contracts, provided that the holder expressly authorizes such entities to access information necessary for the calculation of the consolidated net exposure.

The applicable rate is reduced to zero in the case of the above mentioned netting as well as in any purchases, sales or maturities of derivatives contracts that at the end of the day result in net short exposure below US$ 10 million made with the same entity accredited to register derivatives contracts. Above this figure, the 1% rate will apply.

Furthermore, Decree 6,306/2011 contains a provision which is not related to derivatives contracts and deals with foreign currency loans. This provision establishes that the 6% IOF rate which is due in the case of transactions contracted for a term of less than 720 days must also be paid in the event of prepayment of loans with maturity exceeding 720 days, plus interest in arrears and a fine, which may vary from 5% to 100% of the total amount of the transaction, and a penalty of up to R$ 100 thousand to be imposed by Bacen. This measure aims to avoid that a Brazilian borrower contracts a long-term loan benefited with zero IOF rate and then agrees to reduce the term of the transaction immediately afterwards.

Source: Mondaq, 01.08.2011

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, Risk Management, , , , , , ,

August 2, 2011 • 10:08 am 0

NYSE Euronext Accelerates Growth in Asia with Strategic Acquisition of Metabit, a Leading Provider of Market Access Products

– Strategically complements NYSE Technologies’ product portfolio and Asian offerings

– Addresses growing customer interest and expanding Asian financial marketplace

– In-line with NYSE Technologies’ strategy of building a global liquidity network

 New York and Tokyo – August 1, 2011 – NYSE Euronext (NYX) announced today it has entered into a definitive agreement to acquire Metabit, a leading Tokyo-based provider of high performance market access products throughout Japan and Asia. Metabit will operate as a product line within the NYSE Technologies portfolio. The transaction is expected to close in third quarter of 2011. Terms of the acquisition were not disclosed.

Skilled with in-depth experience and understanding of financial markets in Asia, Metabit specializes in streamlined, low-latency technology solutions that enable industry-leading access to financial markets across Asia. Metabit’s products connect buy-side order flow with sell-side exchange participants and are designed exclusively for low latency direct market access (DMA) and exchange connectivity to markets through-out Asia. The company is headquartered in Tokyo, with offices in Australia and Hong Kong. Metabit has built a trading community of more than 140 trading firms in Asia.

“Metabit’s products are built in Asia for Asia, and this combination fits our strategy, our connectivity business and our customer interests,” said Stanley Young, CEO of NYSE Technologies. “Metabit has a highly experienced and respected management team, and we recognize and value the success Metabit has had in Asia, especially in Japan. We will continue the further development of this local focus while also maximizing the value of the NYSE Euronext brand and relationships.”

Mr. Young continued: “Furthermore, Japan and Asia are priorities for NYSE Euronext and we believe this is absolutely the right time to further invest in the region. We fully expect this transaction to accelerate our efforts as a leading technology provider across the Asia-Pacific region. We look forward to welcoming Metabit and its customers to NYSE Euronext, and to delivering the benefits of Metabit to our customer community.”

Daniel Burgin, CEO of Metabit, said: “Our combination with NYSE Technologies will be highly beneficial to delivering innovative solutions to our customers and to accelerate achieving our long-term business goals. We remain committed to our local business focus and service quality in Japan and throughout Asia, whilst being strengthened by NYSE Technologies’ product suite that is highly synergetic to our local solutions. The people and products of our combined companies will provide significant expertise and scale to NYSE Technologies’ business in the region. Joining forces represents a truly exceptional opportunity to build on our local success in order to increase our value proposition to our Japan and Asia customer base. We now have the opportunity to leverage our assets with NYSE Technologies and move to the next level. For the benefit of Asia-based customers, we will now expand our reach and capabilities globally.”

 Metabit’s Asia franchise has seen excellent growth as a result of a persistent product and client strategy and investments into Asia. Today, Metabit covers all DMA sectors outside Japan, ranging from China (“B” shares), India, Hong Kong, Korea, Singapore, Taiwan, Thailand, Philippines, Malaysia, Indonesia, Pakistan, Australia and New Zealand. Metabit’s products, being built in Asia for Asia, focus to connect the local broker community in each country, in combination with the traditional group of global trading firms. Metabit will continue to resell and provide support to users of CameronFIX as they have since 2002.

 Upon closing, Mr. Burgin will head the NYSE Technologies Asia business and report to Mr. Young. Peter Tierney, Managing Director of NYSE Technologies will become the Chief Operating Officer of the combined business in Asia, and together they will lead the business operations.

Source; NYSE Tech, 01.08.2011

Filed under: Asia, Australia, China, FIX Connectivity, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, News, Trading Technology, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Follow

Get every new post delivered to your Inbox.