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

Derivatives: Struggling Into the New Era – Outlook 2013/14

The past few years have been challenging for the global economy but it seems as though the derivatives industry sustained more than its share of insults and injuries over the past year or so. Still reeling from the trauma of MF Global in October of 2011, exchange-traded volume went into its first nosedive in decades.

Urgent regulatory requirements added intense cost and time pressures to company staffs that were already stretched. A non-clearing FCM, Peregrine Financial, collapsed in scandal. OTC derivatives struggled with complex regulatory mandates and weak volume.

Perhaps the only positive for the year was that mergers and acquisitions at both the macro and micro level imply that innovation and creativity are still powerful industry drivers. That in turn suggests that the creative dynamism that has characterized the derivatives industry for so many years still has some innings to go.

Read the detailed report about Derivatives market outlook, challenges and issue of big deals, exchange mergers and new start ups, customer protection, Regulatory,Extraterritorial and Tax problems  and more. 

Source: WEF 25.04.2013 by Nicolas Ronalds

Filed under: Asia, Brazil, Exchanges, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

ICE to acquire NYSE Euronext for 8.2 billion USD – Back Ground and Analysis

The overall mix of the $8.2 billion of merger consideration being paid by ICE is approximately 67% shares and 33% cash. The transaction value of $33.12 represents a 37.7% premium over NYSE Euronext’s closing share price on Wednesday.  The transaction is expected to close in the second half of 2013, subject to regulatory approvals.

Investors see plenty of upsides in a takeover by ICE, which would create a powerhouse in cross-asset trading and reduce Nyse Euronext’s reliance on stagnating, hyper-competitive equity markets. Nyse’s share of trading on stocks listed on the Big Board has shrunk from 82% to just 21% in a fiercely competitive market.  For ICE, a tie-up with Nyse Euronext will give the energy trading bourse a leg-up into the expanding market for over-the-counter derivatives contracts and the geographical outreach to take on the Chicago Mercantile Exchange.

The two companies have already inked an agreement for Nyse Liffe to move its clearing operations to ICE Clear Europe. The implications of the deal for Nyse Liffe’s plans to move its clearing from LCH.Clearnet to a newly-constructed inhouse CCP by June 2013 have not been spelled out.

The combined company is expected to save up to $450 million through cost synergies in the second full year post closing. ICE has successfully integrated more than a dozen acquisitions in the last decade.  An earlier bid by ICE to take over Nyse Euronext in tandem with Nasdaq OMX was nixed by the US Justice Department on anti-competitive grounds. Observers see no similar objections being raised to a straight merger, with Nasdaq OMX removed from the equation. FinExtra 20.12.2012

NYSE and ICE: Not So Nice for European Equities

Given the sweeping changes hitting exchanges on the back of growing regulation and falling equity volumes in Europe, the combined entity would increase its chance of success, dominating European energy, commodity and short-dated fixed income trading, as well as OTC credit clearing; and leap-frogging Deutsche Boerse to become the world’s third-largest exchange group, with a combined market value of $15.2 billion.

However, not all divisions would benefit. Whilst a tie up with ICE would enable London-based Liffe to compete more effectively with CME Group in both trading and clearing of OTC products, for Euronext the future looks less certain. According to NYSE’s investor presentation explaining the deal, ICE “intends to explore an IPO of Euronext if market conditions allow and if European policy makers are supportive.” See full article at TABB Forum 20.12.2012.

ICE and NYSE Euronext Enter Clearing Services Agreement; ICE Clear Europe to Clear NYSE Liffe’s Derivatives Markets

ICE and NYSE Euronext agree that their wholly owned subsidiaries, ICE Clear Europe Limited and LIFFE Administration and Management have entered into a clearing services agreement pursuant to which ICE Clear Europe will provide clearing services to the London market of NYSE Liffe (“NYSE Liffe”). The clearing services agreement will allow NYSE Liffe to transition seamlessly from their current clearing arrangements. See full article at Bob´s Guide 20.12.2012

Inside ICE takeover of NYSE Euronext ( Tabb Forum Video Interview)

Exchange Consolidation: Getting Over Merger Mania

At this time last year, NYSE Euronext and Deutsche Bourse were more than midway through a year-long merger push that would have resulted in an exchange operator with an estimated $16 billion in combined market capital and a near monopoly on the European exchange-traded derivatives business. Consolidation, it seemed, was the key to competing in the global exchange landscape.

But dreams of consolidation, synergies and economies of scale were quickly dashed. The two biggest cross-border exchange deals — NYSE/DB merger and the proposed merger of the Singapore Exchange (SGX) and the Australian Securities Exchange (ASX) — were blocked by regulators, and the LSE’s attempt to buy the Toronto Stock Exchange (TMX), which also failed initially due to reluctant regulators, eventually lost out to a domestic bid from Maple Group Acquisition Corp. earlier this year. see full article at TABB Forum 12.12.2012.

Filed under: Exchanges, News, , , , , , , ,

Mexico´s Exchanges take huge steps to boost High-Speed Trading.

The Mexican Exchange, which is the second largest exchange in Latin America, announced a number of strategic and technology initiatives designed to promote foreign investment in the Mexican financial markets and its position as a Latin American leader in high-frequency trading.

While Brazil continues to be the hottest emerging market in Latin America, the Mexican Exchange (BMV Group), is taking huge steps to boost its growth in the high-speed marketplace.

The Mexican Exchange, which is the second largest exchange in Latin America, announced a number of strategic and technology initiatives designed to promote foreign investment in the Mexican financial markets and its position as a Latin American leader in high-frequency trading.

Mexico now provides worldwide participants with seamless, high-speed and efficient access through low touch direct market access (DMA), high speed co-location services, and FIX standard protocol for order routing and market data Part of Mexico’s success is down to its determination to improve its operative rules to better comply with international market standards, as well as adopting new technology.

In 2012, the Mexican Exchange will announce the launch of a new trading engine, internally developed. This multi-market, multi-asset, flexible and scalable trading engine has throughput of more than 200,000 messages per second. The trading engine will be ultra low latency, executing trades in 100 microseconds roundtrip (improvement over 25 milliseconds on legacy trading system). Full deployment is planned for Q2 2012. Further in 2012, The Mexican Exchange will introduce several new initiatives including midpoint hidden order book trading, aimed at institutional investors looking to trade large blocks anonymously with reduced execution risk. Simpler cross order rules will also be implemented; all stocks, global market equity securities and debt instruments will be crossed within the best bid/ask spread with no intervention. And, VWAP executions for the day will be able to be entered from 8:00 AM CT to 2:40 PM CT.

Recently, the Mexican Exchange has established major alliances broadening investment opportunities in the Mexican market. The Mexican Derivatives Exchange (MexDer) and the Chicago Mercantile Exchange (CME) established phase one, “south-to-north,” of its strategic order routing agreement, giving Mexican investors access to CME Group’s benchmark derivatives contracts, including interest rates, foreign currencies, equity indexes, energy, metals and agricultural commodities.

Phase two of the partnership, “north-to-south,” now in place provides CME Group customers with access to MexDer benchmark products, including Mexican Stock Exchange Index futures, bond futures and MXN Peso / US dollar futures contracts.

Source: Wallstreet&Technology, Melanie Rodier, 18.11.2011

Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Brazil: BM&FBOVESPA – News October 2011 – Nr.21

BRIC exchanges announce alliance

The exchanges of the BRIC emerging markets bloc announced a joint initiative on October 12, during the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg, to offer investors access to their dynamic economies. Initially the exchanges – which accounted for over 18% of all exchange-listed derivative contracts traded by volume worldwide as of June this year – will cross-list benchmark equity index derivatives on the boards of other alliance members. Following this, the alliance will develop innovative products to track the BRIC exchanges.

The seven exchanges are:

  • BM&FBOVESPA – Brazil
  • MICEX – Russia
  • RTS – Russia
  • Hong Kong Exchanges and Clearing Limited (HKEx) – China
  • Johannesburg Stock Exchange (JSE) – South Africa
  • The National Stock Exchange of India (NSE) – India
  • BSE Ltd (formerly known as Bombay Stock Exchange) – India

These seven exchanges represent a combined listed market capitalization of USD9.02 trillion, equitymarket trading value/month of USD422 billion and 9,481 companies listed.

BM&FBOVESPA new trading hours

In view of the start of daylight saving time on October 16, 2011, since October 17, 2011, the new trading hours (Brasília Time) for the BM&FBOVESPA markets – BOVESPA and BM&F segments – will be as follows:

Regular session: 11:00 a.m. – 6:00 p.m.

- After-Market: 6:30 p.m. – 7:30 p.m. (pre-opening phase to trading phase);

- Blocking / Exercise on the stock options market
Days prior to expiration: 11:00 a.m. – 5:00 p.m. (exercise of holder position).
Expiration date: 11:00a.m. – 12:30 p.m. – trading of the expired series to the offset of the position, that is, the sale for the holder of the position and purchase for blocking for the writer of the position / 12:30 p.m. – 2:00 p.m.: exercise of the holder position;

- Blocking / Exercise on the Index Options Market:
Days prior to expiration: 11:00 a.m. – 2:00 p.m. (exercise of holder position).
Expiration date: 11:00 a.m. – 2:00 p.m. – trading of the expired series to the offset of the position, that is sale for the holder of the position and purchase for blocking for the writer of the position / After 6:00 p.m. – automatic exercise of the expired series which fit the following situations: call option (settlement index higher than the exercise price; and put option (settlement index lower than the exercise price).

- Over-the-Counter Market: 11:00 a.m. – 6:00 p.m.

> Complete information of the new trading hours (Circular Letters 009-2011-DO-Ofício Circular)

The trading hours for the BOVESPA and BM&F segments are available at this link

Market Makers for Options on the Stock of Banco Bradesco, Gerdau and Banco do Brasil

BM&FBOVESPA announced on August 3rd the start of the bidding process to select up to three market makers for options on stock of Banco Bradesco S.A. (BBDC4), Gerdau S.A. (GGBR4) and Banco do Brasil S.A. (BBAS3). This is the third stage of the Competitive Bidding Process to select market makers in equity options and BOVESPA Index (Ibovespa) options, developed by BM&FBOVESPA. The institutions (including nonresident) that wish to participate have until November 29, 2011 to deliver proposals and the winners will be announced on December 14, 2011.

> More info

Market Makers for Options on Ibovespa and on Stocks of BM&FBOVESPA and Usiminas

BM&FBOVESPA announced on October 11 the winning institutions in the second selection process for market makers for options on stocks and on the BOVESPA Index (Ibovespa). The market maker obligation shall last twelve (12) months as of December 12, 2011. Banco Citigroup Global Markets Limited, Banco Itaú BBA S.A. and Timber Hill LLC shall be market makers for options on the BOVESPA Index (IBOV), complying with a maximum volatility spread of half a percentage point (0.5%). The institutions selected for options on stocks in BM&FBOVESPA S.A. (BVMF3) were Citadel Securities LLC, Citigroup Global Markets Limited and Morgan Stanley Uruguay Ltda, which shall be market makers complying with a maximum volatility spread of four percent (4%). Meanwhile, the institutions selected for options on stocks in Usinas Siderúrgicas de Minas Gerais S.A. (USIM5) were Banco BTG Pactual S.A. and Morgan Stanley Uruguay Ltda, which shall be market makers complying with a maximum volatility spread of twenty percent (20%).

> More info

Options on OGX Petróleo and Itaú Unibanco rise with Market Maker activity

The trading volume for options on the stocks of OGX Petróleo and Itaú Unibanco rose significantly in September, strongly influenced by the fact that they have had Market Makers since September 9. The Exchange launched the Market Maker program for stocks this year in order to encourage trading in options and increase their liquidity, as well as to stimulate longer expiries on these contracts. Options on the stocks of OGX Petróleo and Itaú Unibanco now have three Market Makers.

Comparing the average daily volume in September to that of January to August, there were the following increases: OGX Petróleo ON 51.9% (BRL 13.7 million against BRL 20.8 million) and Itaú Unibanco PN 205.6% (BRL 1.7 million against BRL 5.1 million).

ETF financial volume more than doubles in the past two months

BM&FBOVESPA Exchange Traded Funds (ETFs) reached BRL 1.4 billion financial volume in August and September, at 78,809 and 75,740 trades respectively. This is more than double the BRL 668 million financial volume and 31,997 trades in July.

Common Shares in Desenvix Energias Renováveis start trading on BOVESPA MAIS

The shares of electricity company Desenvix Energias Renováveis S.A. begin to be traded on October 3 on the BOVESPA MAIS segment of the BM&FBOVESPA Organized OTC Market, under the DVIX3M ticker symbol.

USD11 billion in public offerings and follow-ons in 2011

In the year to October, 15, BM&FBOVESPA registered USD11 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).

BM&FBOVESPA on Twitter

BM&FBOVESPA launched its Twitter account in English last week. Please access this link

2011 EVENTS

 The World Cup of ETFs and Indexing Latin America

BM&FBOVESPA is lending its support to the World Research Group’s “World Cup of ETFs and Indexing Latin America.” The event aims at providing attendees with the best practices for ETF use, as well as a comprehensive analysis of market structure, regulations and current and future opportunities. The expected audience includes pension funds, hedge fund managers and investors, investment advisors, financial consultants, and other market participants. A BM&FBOVESPA representative will talk about the Exchange’s ETF products.

Location: São Paulo (TBC)
Date: October 17-18, 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

2nd Brazil–China Capital Markets Forum

BM&FBOVESPA and the Shanghai Stock Exchange are coordinating the Second Brazil–China Capital Markets Forum. This event follows the First Brazil–China Capital Markets Forum, which occurred in February in São Paulo, Brazil. At the event, the Shanghai Stock Exchange shall bring 300 to 500 Chinese asset and insurance managers and representatives of listed companies.

Location: Xijiao State Guest House Shanghai, China
Date: October 27, 2011.

Volumes and trades by Direct Market Access (DMA)

BM&F Segment
In September, BM&F* market segment transactions carried out through order routing via Direct Market Access (DMA) registered 35,144,357 contracts traded and 4,311,865 trades. In August, the volume reached 41,417,494 contracts traded and 4,431,750 trades.

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

  • Traditional DMA – 12,583,334 contracts traded, in 1,366,264 trades, in comparison to 17,540,231 contracts and 1,306,241 trades in August;
  • Via DMA provider (including orders routed via the Globex System) – 13,976,949 contracts traded, in 374,992 trades, compared to 14,088,756 contracts and 435,281 trades in August;
  • DMA via direct connection – 2,636 contracts traded in 447 trades, against 4,210 contracts and 830 trades in August;
  • DMA via co-location – 8,581,438 contracts traded, in 2,570,162 trades, compared to 9,784,297 contracts and 2,689,398 trades in August.

In September, 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 4,685,186 contracts traded, in 1,164,510 trades, compared to 5,308,308 contracts and 1,235,349 trades in August.

BOVESPA Segment
In September, order routing via DMA in the BOVESPA* segment totaled BRL 111.41 billion and 14,298,483 trades, from BRL 138.52 billion and 17,021,408 trades the previous month.

Trading volumes per type of DMA in the BOVESPA segment:

  • Traditional DMA – Volume of BRL 95.77 billion and 11,763,618 trades from BRL 120.45 billion and 14,098,638 in August;
  • DMA via co-location – Volume of BRL 14.29 billion and 2,357,270 trades from BRL 16.69 billion and 2,755,498 in August;
  • DMA via provider – Volume of BRL 1.34 billion and 177,044 trades from BRL 1.37 billion and 167,272 in August.

* 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 September 2011

Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 59,365,524 contracts and BRL 4.35 trillion in volume in September, compared to 78,606,873 contracts and BRL 5.23 trillion in August. The daily average of contracts traded in the derivatives markets in September was 2,826,930, in contrast to 3,417,690 in August. Open interest contracts ended the last trading day of September with 36,620,797 positions, compared to 37,821,302 in August.

BOVESPA Segment September 2011

In September 2011, the equity markets (BOVESPA segment) financial volume totaled BRL 131.437 billion, in 13,551,487 trades, with daily averages of BRL 6.25 billion and 645,309 trades. In August, financial volume totaled BRL 177.906 billion, the total number of trades 16,234,673, and the daily averages BRL 7.73 billion and 705,855 trades respectively.

Source: BM&FBOVESPA, 18.10.2011

Filed under: BM&FBOVESPA, Brazil, China, Events, Exchanges, Hong Kong, India, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , , ,

Brazil: BRIC exchanges form alliance

The exchanges of the Brics emerging markets bloc have announced plans to form an alliance in cross-listing and to expose foreign investors to their dynamic economies and to increase the liquidity of their trading venues (Brazil, Russia, India, Hong Kong (China), South Africa)

This initiative was announced at the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg.

The initiative brings together BM&FBOVESPA from Brazil, MICEX from Russia (currently merging with RTS Stock Exchange), Hong Kong Exchanges and Clearing Limited (HKEx, China) and Johannesburg Stock Exchange (JSE) from South Africa. The National Stock Exchange of India (NSE) and the BSE Ltd (India) have signed letters of support and will join the alliance after finalizing outstanding requirements.

At the first stage of this project the exchanges will begin cross-listing of financial derivatives on their benchmark equity indices. It is planned to launch cross-listed products by June 2012.

“Global investors are increasingly seeking exposure to leading developing markets,” says Ronald Arculli, chairman of HKEx and of the WFE. “Thanks to this alliance, investors will gain easier access to major equity index derivatives of the BRICS markets which will now be offered in local currency on the alliance exchanges”.

This is an important milestone in the history of developing countries, continues Mr Arculli. “The alliance enables more investors to gain exposure to the emerging economies of the BRICS group whose economic power is on the rise. From a global perspective this alliance highlights the growing significance of the BRICS economies and financial markets for the coming decade, and further underlines the importance of enhancing cooperation between the BRICS members”.

At the second stage of the project members of the alliance plan to jointly develop new products for cross-listing on their exchanges. “In addition to measuring market performance, equity indices may be used as underlying assets to create new products, which can be the next step in the alliance development”, says Russell Loubser, CEO of the JSE.

“The products designed at the second stage would then be cross listed and traded in local currencies,” says Edemir Pinto, CEO of BM&F BOVESPA. “They will also ensure easy access for investors to other emerging markets through locally listed products.”

The third stage may include further cooperation in joint products design and new services development.

“Apart from cross-listing products, there are other opportunities for growth and development within this alliance. For example, creation of joint products combining various underliers which will facilitate liquidity growth in the BRICS markets and improve the understanding of other developing markets by local investors,” says Ruben Aganbegyan, President of MICEX.

All the partnering exchanges estimate the potential for cooperation created by this alliance very positively.

“The BRICS exchanges alliance has a great potential as it will create avenues for Indian investors to diversify their portfolios and expand into other emerging markets. It will also provide unique opportunities to investors in other BRICS nations to participate and contribute in India’s growth. BSE will actively work towards bringing world-class products to India as well as developing new products for other BRICS markets.” says Madhu Kannan, CEO of BSE Ltd.

Interest towards the BRICS markets is supported by the above-average growth forecast for these regions, as well as the rising consumer power generated by growing middle classes in each of the participating economies” says Ravi Narain, MD of the National Stock Exchange of India.

According to the WFE these six exchanges represent a combined market capitalization of USD 9.02 trillion, the number of their ussuer companies totals 9.5 thousand.

As per the research by the Futures Industry Association these six exchanges accounted for 18% of the global turnover in financial derivatives in H1 of 2011.

Source: BM&FBOVESPA, FinExtra, 12.10.2011

Filed under: BM&FBOVESPA, Brazil, China, Exchanges, Hong Kong, India, News, , , , , , , , , , , , , , ,

ICE Futures Europe approved for Brazil screens

Intercontinental Exchange (NYSE: ICE), the operator of regulated global futures exchanges, clearing houses and over-the-counter (OTC) markets, has announced the authorisation by Brazil’s financial regulator, the Comissao de Valores Mobiliarios (CVM), to provide access to ICE Futures Europe products via ICE’s trading screens in Brazil.

Direct access and Membership will be restricted to intermediary firms authorized by the CVM, and those accessing ICE Futures Europe’s electronic markets as clients may only do so if they are qualified investors and are executing via an approved Brazilian intermediary. ICE Futures U.S. has been approved to provide screen-based access to its markets in Brazil since October 2009.

Said David Peniket, President and COO of ICE Futures Europe: “We continue to pursue new jurisdictions to broaden our customer base and to access new markets. Brazil is one of the world’s most dynamic economies and an increasingly important producer of crude oil. We are delighted to be able to respond to demand for ICE products, particularly given the increased reliance on the benchmark ICE Brent Crude Oil futures contract.”

Source: Automated Trade, 03.03.2011

Filed under: Brazil, Exchanges, Latin America, , , , , , , ,

China CFFEX Index futures’ gains signal improved market sentiment

Gains in China’s stock index futures may be a signal market sentiment has started to improve as investors’ fears about further credit-tightening ease, Monday’s China Daily quoted analysts as saying.
“The rise in the index futures indicates an improved market sentiment over the long run as investor’s concerns of further policy tightening may have eased,” the newspaper quoted Yang Cui, an analyst at Changjiang Securities, as saying.

The June contract, the most actively traded, gained 1.44 percent last Friday to close at  2,801 points, the paper said, adding that the settlement of the May contract was smooth and without sharp declines or volatility in the spot market.

Market watchers remain bullish on Chinese equities in the medium to long term, despite the recent tumble in the benchmark Shanghai Composite Index that was triggered by stern government measures to cool the property market.

“We are medium-term bullish about the A-share market for the next six to nine months,” said Jan G. Loeys, chief strategist at JP Morgan. He is positive about emerging Asian shares, in spite of the policy tightening in China that created nervousness.

About 20,000 investors have participated in index futures trade and daily turnover is 8.1 billion yuan, according to the China Financial Futures Exchange.

Source: CITIC, 24.05.2010 by Haisn Liang

Filed under: Asia, China, Exchanges, News, , , , ,

Brazil: BM&FBOVESPA Exchange news and events March 2010

SunGard Global Trading authorized as DMA provider

BM&FBOVESPA has authorized SunGard Global Trading to act as a provider of direct market access (DMA) for the BM&F segment (derivatives markets). SunGard offer brokerage houses and its clients an order routing system that allows direct trading of financial and agricultural derivatives traded at the Exchange. BVMF is also working with SunGard to develop a back-office solution for North American clients that trade agricultural and financial derivatives in Brazil.

Voluntary carbon credit market auction

BM&FBOVESPA will hold on 08 April 2010, a voluntary carbon credit market auction. A total amount of 180,000 voluntary carbon units from projects managed by the Social Carbon Company will be auctioned. The auction will be held in three sessions, with a lot traded per session. The initial bidding prices will be indicated by lots that vary in accordance to the vintages and are priced at BRL 10.00 to BRL 12.00 per unit. The first transaction will occur at 1:00 p.m. (Brazil Time) and will be carried out by BM&FBOVESPA’s Carbon Credit Trading System.

White paper on post-trade infra-structure

The Exchange divulged, on March 11th, a white paper entitled “BM&FBOVESPA’s Post-Trade Infra-Structure – Integration Challenges and Opportunities”. The document aims to stimulate debate among market participants, regulatory agents, and others interested in the integration of post-trade activities and systems (netting, settlement, central counterpart, and central depository). BVMF expects the participants to contribute to the consolidation of the path to be adopted in relation to integration opportunities. The white paper can be found at www.bmfbovespa.com.br, in Notices.

BM&FBOVESPA establishes new historic record in contracts traded and in ID futures

BM&FBOVESPA established on 18 March 2010 a new historic record in the total number of contracts traded in the derivatives segment, with 10,157,779 contracts. The previous record of 5,716,789 contracts was set on 17 March 2010. Trading of ID futures contracts also registered a historic record on 18 March 2010, reaching a mark of 6,093,795 contracts. The previous record of 4,544,750 contracts was also set on 17 March.

UN´s Principles for Responsible Investment

On March the 3rd, BM&FBOVESPA formalized its adherence to the Principles for Responsible Investment (PRI), a United Nations initiative developed by financial markets to promote responsible investment. The document was signed during the first international PRI meeting held in Brazil. BM&FBOVESPA intends to set an example for other investors to adhere to the principals and also stimulate listed companies to report their socio-environmental initiatives to the market.

BM&FBOVESPA announces earnings for fourth quarter of 2009

Net income of R$220.2 million increased 8.8% year-on-year, whereas adjusted net income of R$315.3 million. 4Q09 net revenues of R$424.8 million increased 19.5% from the same quarter one year ago (pro forma). In a comparison of the twelve months to December 2009, net revenues dropped 6.2% to R$1,502.5 million. 4Q09 operating expenses reached R$ 160.4 million, a 25.2% increase from 4Q081 (pro forma) and a 21.0% increase from 3Q09’s. In 2009, recurring expenses reached R$446.7 million, a 12.9% drop from 2008 (pro forma), as adjusted by expenses related to employee compensation in 1Q09 (R$ 18 million) and in line with the target of R$450.0 million for 2009. EBITDA totaled R$276.4 million for the fourth quarter, up 17.3% from 4Q08 (pro forma). Click here for full earnings release.

BM&FBOVESPA begins trading three new ETFs

As of 23 February 2010, BM&FBOVESPA began trading three new Exchange Traded Funds (ETFs): iShares Brazil Index IBrX-100 (BRAX11); iShares BM&FBOVESPA Consumption Index (CSMO11); and iShares BM&FBOVESPA Real Estate Index (MOBI11). The new ETFs are managed by BlackRock Brazil. The Exchange also offers four other ETFs, which track the Ibovespa, Small Cap, MidLarge Cap, and IBrX-50 indices. Click here for further information on BM&FBOVESPA’s ETFs.

Exchange’s new communication interface with Mega Bolsa

As of April 20, 2010, the Mega Direct, a new electronic communication interface, will become the only form of access for all automatic DMA connections to the Mega Bolsa, BVMF equities segment trading platform. The tool enables the insertion, modification, and cancelation of offers placed on the Mega Bolsa. The new interface performs up to tenfold faster than the current system.

Exchange’s meeting in São Paulo

BVMF hosted the Ibero-American Federation of Exchanges meeting in São Paulo on March 19. The objective of the event was to bring together member exchanges from Latin America, Portugal, and Spain to debate the latest market trends of the region. The themes discussed were the recent regional integration initiatives; regulation; and the development of the derivatives market in Latin America. The meeting also featured a presentation by BVMF on its current strategic partnerships with CME Group and Nasdaq OMX.

Carbon Efficient Index

BM&FBOVESPA will receive until March 31st comments and suggestions to improve the development of the calculation methodology of the new Carbon Efficient Index (ICO2). The creation of the new index was announced on December 15th, 2009, by the Exchange and the Brazilian Development Bank (BNDES), during the 15th United Nations Climate Change Conference (COP15), in Copenhagen.

Volumes and trades by Direct Market Access (DMA)

In February, derivatives market segment registered a total of 12,537,023 contracts traded via DMA*, with 1,485,032 trades carried out through the GTS trading platform. In January, the total was 9,917,768 contracts traded in 1,203,321 trades. In February, trading via DMA (including all DMA modalities) registered increases both in number of trades and contracts traded, establishing the following records: (1) a daily average of 696,501 contracts traded, compared to the previous record of 497,049 in October 2009; (2) the daily average of orders routed via the CME Globex – BM&FBOVESPA GTS reached 176,216 contracts, compared to the prior mark of 154,600 in October 2009.

Traditional DMA – 5,807,581 contracts traded, in 505,698 trades, in comparison to 4,590,025 contracts traded and 446,674 trades;

Via DMA Provider – 3,200,086 contracts traded, in 75,421 trades, in comparison to 2,723,958 contracts traded and 61,019 trades;

DMA via order routing with Globex (CME Group’s electronic trading platform) – 3,171,892 contracts traded, in 816,205 trades, in comparison to 2,284,904 contracts and 618,746 trades;

DMA via co-location – 357,464 contracts traded, in 87,708 trades, in comparison to 318,881 contracts traded, in 76,882 trades.

BM&FBOVESPA market performance – February 2010

BM&F Segment

Derivatives markets in the BM&F segment totaled 39,306,238 contracts and BRL 2.47 trillion in volume in February. That compares to 36,217,359 contracts and a volume of BRL 2.65 trillion in January. The daily average of contracts traded in the derivatives markets set a new record in February, with 2,183,679 contracts, in contrast to the previous record of 2,172,046 in March 2008.

Bovespa Segment

In February, equity markets (Bovespa segment) reached a total volume of BRL 118.06 billion, in 7,355,993 trades, with daily averages of BRL 6.55 billion and 408,666 trades, respectively. In January, total volume reached BRL 129.10 billion, 8,051,640 trades, with daily averages of BRL 6.79 billion and 423,771 trades, respectively.

Source: BM&FBOVESPA, 26.03.2010

Filed under: BM&FBOVESPA, Brazil, Chile, Colombia, Exchanges, Latin America, Mexico, News, Peru, Risk Management, Trading Technology, , , , , , , , , , , , , , , ,

CSRC outlines how funds can invest in CSI 300 futures

The regulator releases an early draft of the proposed rules for Chinese mutual funds that want to invest in CSI 300 index futures.

s fund analysts and managers continue to attend futures training courses organised by the China Securities Regulatory Commission, a draft of the CSRC’s proposed rules on how Chinese mutual funds can invest in the upcoming CSI 300 index futures hit the industry’s email inboxes earlier this week.

The regulator is encouraging discussion in the industry; it wants the public to provide feedback on the rules by this coming Monday, March 22.

A first glance through the five-page draft seen by AsianInvestor suggests the rules look straightforward, and its broad strokes read largely the same — both in language and spirit — to the rules for futures investing by fund managers in Taiwan. (This doesn’t come as a surprise; the regulations governing mutual-fund investments in securities, which went into effect in China in 2004, were also modelled after those in Taiwan.)

In the draft, the CSRC does not go into detail on how managers will qualify for futures-investing status. Fund houses, instead, are advised to review their fund prospectuses and contracts agreed with investors back at the fundraising stage and decide for themselves whether futures investing would meet their initial investment objective and risk exposure level as promised to investors.

For the fund industry, use of futures for the purpose of return enhancement is not permitted. The CSRC says the purpose of any fund activities in the futures market should be risk management.

The futures instruments for fund investment must be approved by and listed on China’s securities exchanges, and based on indices tracking only equity prices. (So notions of funds participating in bond futures or pretty much any other type of derivative would be futile at this stage.)

There are 559 mutual funds known to exist in China, according to the latest fund-registrar data tracking numbers published at the end of January. A quick search using the word ‘futures’ in Chinese in a fund database yields only 29 hits, in which ‘futures’ are specifically mentioned in the fund contracts or prospectuses as acceptable instruments for use by these funds.

Should these managers be willing to take up the challenge, they will theoretically be the initial 29 participants able to actually short A-shares domestically in China. (And there are 11 onshore brokerages authorised to serve them.)

Equity funds, balanced funds and principal-protected funds appear largely free to allocate to the CSRC’s approved list of futures instruments. The regulator thus far has made no mention on what it intends to do about segregated accounts and multi-client segregated-accounts, which went live in 2008 and 2009 respectively.

There will be limits on the holdings of futures by close-ended funds, open-ended index funds and exchange-traded funds. At the end of any given trading day, total value of securities held plus futures may not exceed 100% of a fund’s NAV — in short, leverage will not be permitted for these funds.

For open-ended funds, managers will be allowed to hold futures with a total outstanding value that exceeds 10% of the fund’s daily AUM at market closing. Net turnover of equity futures trading in a fund cannot exceed 20% of a fund’s NAV.

At the end of any given trading day, the total value of futures positions plus the value of the securities held in an open-ended fund may not exceed 95% of the fund’s NAV — with ‘securities’ defined as equities, bonds, options, asset-backed securities and repo instruments. Five percent of the fund’s assets must be allocated to liquidity instruments with maturities no longer than the equivalent of one-year government bonds.

Mindful that the funds industry at large is still poring over lecture notes and textbooks this month and that most firms have not yet hired the required techies for back-end support, the CSRC is advising caution and proper understanding; all participants should be adequately prepared before they enter the futures market. The CSRC wants fund houses to set up specific departments covering futures strategies and investments.

Other stakeholders, including guarantors to the ‘principal-protected’ funds (China’s version of CPPIs), are advised to get actively involved and aware of the potential value-at-risk for the funds they have given guarantee to; and that there should be sufficient assets to cover the principal-protected funds promised to investors should any potential losses occur.

Custodian banks are advised to review their own adequacy and strategies accordingly and develop risk-management and technological teams and platforms to support this development.

In earlier interviews with AsianInvestor, fund-rating agencies, including Morningstar and Lipper, have already taken a dim view of the opening moves that mutual fund houses will be able to make. Aside from the anticipated volatility to come, both predict a conservative and difficult early period, in which fund houses will be constrained by a lack of experienced staff and technical knowledge to draw on — for what is supposedly one of the most important chapters in the recent history of capital-market developments in China.

Nonetheless, for now, unregulated private funds, foreign investors with access to A-share markets and high-net-worth clients, and the 11 brokerages authorised to trade futures, are expected to be the largest beneficiaries.

For foreign players, though, CSI 300 futures will just be something to add to the toolbox. Overseas funds have long been able to express their views on A-shares using FTSE Xinhua A50 futures available in Hong Kong or Singapore.

Source:AsianInvestor.net, 18.03.2010 by By Liz Mak

Filed under: China, Exchanges, News, , , , , , , , , , , , , , ,

China: CSRC sets outs rules on CSI 300 margin trading

China’s top securities regulator on Friday unveiled regulations on the pilot programs for the soon to be launched margin trading and short selling business.

Securities firms must have at least 5 billion yuan in net assets and be rated as A-class in order to be qualified for the business. The regulator also required securities firms to have sufficient capital holdings and stocks of their own and have completed test runs of the trading network in order to conduct the business.

“We will gradually loosen the requirements and expand the pilot programs to more securities firms after the first batch of selected firms achieve successful results,” said an official from the China Securities Regulatory Commission (CSRC).

The regulator also asked qualified securities firms to choose clients carefully based on the review of their financial status, trading experience and risk preference. The purpose is to restrict investors with low risk tolerance and insufficient trading experience from the business, the CSRC official said.

In 2008, the CSRC picked 11 top brokerages for test runs of the trading network, including CITIC Securities, Haitong Securities, Guotai Junan, Shenyin Wanguo and Everbright Securities. It was reported that the CSRC would pick six to seven domestic brokerages from the 11 candidates for the initial phase of the trial program.

The CSRC did not reveal what stocks would be the target for margin trading and short Margin trading and short selling will allow investors to borrow money to buy securities or borrow securities to sell.

Once launched, the business is expected to account for 15 to 20 percent of the securities industry’s revenue, analysts said.

Source: http://www.sina.com/Citic-NewEdge, 26.01.2010

Filed under: China, Energy & Environment, Exchanges, News, Risk Management, Trading Technology, , , , , , , , ,

China braces for index futures; Fund experts sceptical about Chinese firms managing futures

China’s fund managers may get some nasty surprises once the newly approved stock index futures market finally kicks off. The main worries are a lack of expertise and limited investment in risk management.


China seems set on delivering market shocks at the turn of a new decade. Not only has it decided to rein in excess liquidity by raising bank reserve rates, it has finally announced its plan to develop stock index futures, after years of delay. (No doubt held back by some of the failed experiments with bond futures in the 1990s.)

On the upside, the general belief is that investors should benefit from enhanced transparency, deeper market development, product enhancement, and so on. This long-standing list was set out by market observers and foreign experts years ago. There’s no need to repeat it all here.

However, the is less consensus from consultants and fund-rating agencies on how stock index futures will affect the fund management sector. Analysts and research heads at Morningstar, Lipper and Z-Ben Advisors appear unconvinced about the ability of Chinese firms to manage these instruments.

Not that fund managers are authorised to join this new development yet. For now, only 11 authorised brokerages that have been approved to participate in the pilot schemes to trade the contracts have the qualifications to do so.

These 11 firms will only be able to express market views at an index level for the CSI 300 index. They aren’t likely to be able to do much at the individual stock level. Indeed, regulators have said little about the actual schedule of the futures market’s development.

The question then arises: If only vanilla instruments are available, will the futures market lead to product diversification for Chinese fund managers now trapped in the strait-jacket of a plain-vanilla world?

Maybe. Li Haiqing, fund analyst at fund-rating agency Morningstar in Shenzhen, says some primitive form of 130/30 strategies is likely to emerge in China. But that will happen first among the private funds that are not regulated by the securities regulator or are under the radar of the State Council’s strategic plans — not among the fund management houses. (Long/shorts, serious forms of arbitrage strategies, are something much further down the road.)

The best fund managers in China work for private houses these days, not mutual fund managers. Because they are not regulated, they are able to put together more flexible products. And they have the support of high-net-worth customers, who can take higher risks and have deeper pockets to support investments in trading platforms and risk management expertise.

The scene at mutual fund houses, meanwhile, is at best uneven. Xav Feng, head of research for China and Taiwan at fund-rating agency Lipper, reckons most fund houses have done “studies” on the new-fangled ideas of hedging tools. More are working their way up the learning curve, and most are simply not ready.

The lack of experienced people who can even understand the risks is a big worry. Talent supply simply to deliver good results from plain-vanilla securities is stretched, let alone expertise in innovative instruments.

Among the industry’s 10 oldest mutual fund houses, for example, only three can claim to employ the local asset management industry’s longest-serving fund managers. China Asset Management Company has Fang Jun, who served as a portfolio manager at China AMC for some five years and Han Huiyong for around six years. Shanghai’s Hua An boasts Shang Jimin, who can claim a little over six years of experience. Harvest has Shao Jian, with close to six years.

There’s an increasingly common polarised structure at these older firms, with a handful of senior managers at the top and a base of young managers with short track records. Hua An may have Shang Jimin, but other than Shang, there is a long list of individuals with experience ranging from around 20 days to little more than a year.

Similarly, at Shenzhen’s China Southern, at the top there is Chen Jian, with nearly four years under his belt, and below him a group of managers, each with one to two years of experience.

“There is a long way to go,” Lipper’s Feng says. Apart from the talent factor, more importantly “there needs to be enough liquidity for index futures. If not, it would be a disaster for fund managers”. Both Feng and Morningstar’s Li reckon the underlying support of margin provisions — the availability to secure leverage — is key to the success of index futures.

As per usual in China, big securities reforms make great promises for the long term. In the short term, the picture lacks clarity and can be worrying.

“Index futures will increase the volatility of the Chinese market in the short term, because investors are not familiar with it,” Feng says. But the market shock likely to come from the launch of futures might just be a stimulus for managers to strengthen their risk management techniques for the longer haul.

At present, Chinese mutual funds’ risk exposure is overwhelmingly centred towards equity risk premium. Over the long term, theoretically, they would do better to diversify to other sources of risks — for example, through credit, liquidity and manager skill.

Yet the reality is that managers have little business in asset classes beyond equities, which is their bread and butter, and managers are mostly unable to deliver returns purely through skill (the fabled search for alpha) that are uncorrelated from market exposure (beta).

Their only current means of managing risk is through asset allocation — managers could sell equities and park their proceeds in cash, bonds or cash-equivalent instruments. (For that reason, overseas investors — or reporters — questioning Chinese managers about their risk management practices often proves futile.)

Stock index futures should help change that.

Zhang Haochuan, analyst at industry research house Z-Ben Advisors, has seen little movement in the hiring of professionals or in the investment in trading platforms specifically in preparation for stock index futures or margin trading.

AsianInvestor sources suggest Beijing-based Harvest and China AMC, Guangzhou-based E-fund and even Shanghai-based Hua An might have been the early movers. These firms have been trying hard to recruit quantitative risk management talent in Hong Kong in recent months, albeit sporadically.

Zhang says larger firms that have been caught in CSI 300 index fund launches over the past year will have more incentive and resources to mobilise suitable expertise.

There are 16 CSI 300 (largely identical) index funds on the market now. Two of these are enhanced products with built-in leverage.

As an unintended result of their multi-billion-renminbi launches last year, these 16 houses have more skin in the game than the rest of the industry. China AMC’s CSI 300 product, for example, raised Rmb20 billion ($2.93 billion) in July. It is their business to start paying attention to these new concepts of securities innovation and risk management.

Source: AsianInvestor.net, 15.10.2010

Filed under: Asia, China, Exchanges, News, Risk Management, Trading Technology, , , , , , , , , , , , , ,

China Index Futures get Regulatory approval

The government on Friday gave the green light for stock index futures, margin trading and short selling in a milestone move that ends the one-way trade in the capital market.

An official with the China Securities Regulatory Commission (CSRC) said on Friday that the State Council has approved stock index futures, short selling and margin trading “in principle”. The regulator said it would take three months to complete preparations for index futures.

The new tools would protect investors against losses and also help them to profit from any declines. Until now, Chinese investors could only profit from gains in equities.  Analysts said the announcements are unlikely to cause any sharp volatility in the A-share market next week as the rumors have already been factored in.  “The market is unlikely to see huge fluctuations next week as the introduction of new financial tools has been discussed for years,” said Zhang Qi, an analyst with Haitong Securities.
Index futures are essentially agreements to buy or sell an index at a preset value on an agreed date. Investors can also borrow money to buy securities or borrow securities to sell under the business of margin trading and short selling.

Zhang said the move would be positive for blue-chips and heavyweight stocks as the contract would be initially based on China’s CSI 300 Index that tracks the 300 biggest shares traded in Shanghai and Shenzhen.

“Index futures are expected to bolster the market value of blue-chips,” he said.  Large listed securities firms such as CITIC Securities and Haitong Securities will also
directly benefit from the new business and could see a surge in their revenues, Zhang said.  Analysts expect the new tools to improve liquidity by attracting more capital into the equity market as the government plans to cut back bank lending to 7.5 trillion yuan ($1.1 trillion) in 2010 from last year’s 9.21 trillion yuan.

China’s securities regulator has been considering the introduction of index futures since 2006 when Shanghai set up the China Financial Futures Exchange to prepare for the running of the new mechanism. The plan had been held up till now along with the proposals for margin trading and short selling.

In 2007, CSRC chairman Shang Fulin said that the infrastructure and regulations needed for index futures and margin trading are in place.  Institutional investors are expected to be the mainstay of the new business as the threshold is high for retail investors who are more vulnerable to potential risks, said analysts.

It is estimated that the trading of stock index futures will take about three months to set up. Investors will need to deposit a minimum of 500,000 yuan in order to open an account to trade in stock index futures.

China will select high-quality brokerages to launch the short selling and margin trading of stocks on a trial basis.

Source: Sohu.com/CITIC NewEdge, 08.01.2010 by Liang Haisan

Filed under: Asia, China, Exchanges, News, Risk Management, , , , , , , , , , , ,

Brazil:BM&FBOVESPA Exchange news and events November 2009

BM&FBOVESPA presents its new Corporate Sustainability Index (ISE) Portfolio

The new Corporate Sustainability Index (ISE) portfolio, which comprises shares issued by companies recognized for their high level of commitment to sustainability and social responsibility, will enter into effect on December 1st, 2009 and will be valid until November 30th, 2010. It contains 43 shares issued by 34 companies that represent 15 sectors and a market capitalization of BRL 730 billion, which corresponds to 32.21 % of the total market capitalization of all the companies listed on BMFBOVESPA (on 11/24/2009).

Three industry sectors have been included in this year’s portfolio: civil works, insurance, and machinery and heavy equipment. Of the 28 companies that composed the previous portfolio, 26 been reselected. The eight companies that were included are: Copel, Even, Itausa, Indústrias Romi, Redecard, Sul America, Usiminas, and Vivo. The previous ISE portfolio contained 36 shares issued by 28 companies from 12 different sectors. Aiming to reduce industry segment concentration, the new portfolio contemplates changes to the index’s methodology, which now limits sector participation to 15%. The previous methodology permitted up to 25% participation per company.

BM&FBOVESPA forms Real Estate Market Advisory Committee

BM&FBOVESPA has launched the Real Estate Market Advisory Committee, which aims to counsel the Exchange on matters concerning this segment, including the development of financial products based on real estate assets. The committee is composed by 20 real estate industry specialists, representing regulatory agencies, companies, entities, financial institutions, and law firms.

BM&FBOVESPA launches new website

The Exchange has launched its new integrated website, www.bmfbovespa.com.br. With a totally renovated design, the portal brings information about the Exchange, its markets, products and services, and regulation.

The website is available in English, Portuguese, Spanish, and Mandarin.

Exchange Traded Funds (ETFs) volume increases in 2009

BM&FBOVESPA offers ETFs that track the performance similar of IBOVESPA, IBR-X 50, Mid-Large Cap Index and Small Cap Index, indexes developed and calculated by the Exchange. These four instruments were issued and are managed by renowned institutions like the Brazilian Development Bank (BNDES) and Barclays Global Investors Brasil (BGI Brasil). They represent an alternative investment strategy for both local and international participants, providing investors with efficiency, transparency, flexibility and arbitrage opportunities. Options on BOVA11 are also available, as well as other BVMF Index futures products.

Index Fund (ETF) Underlying Index Tracks… Ticker
PIBB IBrX-50 Fifty most liquid shares of the cash market PIBB11
iShares Ibovespa IBOVESPA Companies representing 80% of the total trading value BOVA11
iShares MidLarge Cap MLCX Companies representing 85% of the total market value MILA11
iShares Small Cap SMLL Remaining companies not included in MLCX SMAL11

From January to November 24, 2009 the trading activity of ETFs in BVMF totaled BRL 3.89 billion, 136% more than the value traded in 2008. Among these four securities, ETF BOVA11 has obtained the highest financial volume this year, with BRL 3.28 billion, and 32,890 trades.

Exchange creates Institutional Participant Relations Department

The goal of the new department will be to expand the sales activities relating to the segment of fund managers and institutional clients, including pension funds. This is an important step in consolidating BM&FBOVESPA’s strategy to expand its client base.

To head the new department, the Exchange has appointed Mr. José Antonio Gragnani as Institutional Participant Relations Officer. Mr. Gragnani has vast experience in the financial and government sectors

BM&FBOVESPA appoints new sustainability officer

The Exchange has appointed Ms. Sonia Favaretto to head its Sustainability Department. The principal mission of the department is to increase BM&FBOVESPA’s philanthropic activities, social responsibility programs, and stimulate employee participation of such projects.

Ms. Favaretto has a broad professional experience in the area of corporate social responsibility, having worked at Itaú Unibanco Bank and the BankBoston Foundation.

BEST Brazil road show meets Asian investors

The BEST – Brazil: Excellence in Securities Transactions road show promoted the Brazilian financial and capital markets to Asian investors, from November 23 to 26. Approximately 250 people attended the event, which visited Hong Kong, Tokyo, and Seoul, besides clients of local financial institutions that organized ten one-on-one meetings with BEST Brazil officials

During the event, representatives from ANBIMA, BM&FBOVESPA, and FEBRABAN conducted seminars on the Brazilian capital markets, especially the equities products available as investment opportunities. The Brazilian Market Profile is a comprehensive and in-depth analysis for international investors and was distributed at the road show.

BM&FBOVESPA announces earnings for third quarter of 2009

Net income of BRL 245.8 million increased 4.3% year-on-year, whereas adjusted net income of BRL 337.3 million rose 6.8% over adjusted pro forma net income for the three-month period to September 2008. 3Q09 net revenues of BRL 383.0 million contracted 6.5% from the same quarter one year ago. In a comparison of the nine months to September 2009, net revenues dropped 13.8% to BRL 1,077.8 million.

3Q09 operating expenses reached BRL 132.5 million, a 4.0%

decline from one year ago. As adjusted by items with no impact on cash flow, such as depreciation and the employee stock options plan, operating expenses for the quarter amounted to BRL 109.0 million, a 16.2% retreat from adjusted expenses for the same period one year earlier, and in line with the BRL 450.0 million target for 2009.

EBITDA totaled BRL 262.0 million for the third quarter, down 6.3% from 3Q08, and BRL 698.7 million for the nine months to September 2009, a year-on-year drop of 18.2%. The EBITDA margin kept a flat line in a comparison of the quarters to September 2009 (68.4%) and September 2008 (68.3%).

DMA trading volumes increases during the month of October

In October, Direct Market Access (DMA) trading of the derivatives market segment at the Brazilian Securities, Commodities and Futures Exchange – BM&FBOVESPA reached a total of 10,438,031 contracts traded, with 1,210,689 trades carried out through the GTS trading platform. In September, the total was 7,800,461 contracts traded in 731,377 trades. The volumes registered by access modality in October in comparison to the previous month are as follows:

Traditional DMA
5,590,649 contracts traded, in 516,459 trades, in comparison to 4,649,846 contracts traded and 455,580 trades;

Via DMA Provider
1,356,018 contracts traded, in 36,414 trades, in comparison to 1,217,992 contracts traded and 25,793 trades;

DMA via order routing with CME Globex (CME Group’s electronic trading platform)
3,246,598 contracts traded, in 617,938 trades, in comparison to 1,785,549 contracts and 233,953 trades.

DMA via co – location
244,766 contracts traded, in 39,878 trades, in comparison to 147,074 contracts traded, in 16,051 trades.

BM&FBOVESPA market performance – October 2009

BM&F Segments
Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 34,670,732 contracts and BRL 2.38 trillion in volume in October. That compares to 31,505,077 contracts and a volume of BRL 2.12 trillion in September. The daily average of contracts traded in the derivatives markets in October was 1,650,987, compared to 1,500,242 in the previous month.

Financial Derivative
Interest rate futures (ID) totaled in October 12,104,485 contracts traded, in contrast to 12,469,090 in September. The US dollar futures ended the month totaling 7,033,995 contracts compared to 5,959,815 contracts in the previous month. The Ibovespa futures traded 2,304,720 contracts in September, compared to 1,443,420 in the last month. The Euro futures contract (EUR) registered 14,970 contracts, in contrast to 5,330 contracts in September.

Agribusiness Derivatives
In October, the BM&FBOVESPA agribusiness derivatives market (including futures and options) totaled 197,101 contracts traded, compared to 151,582 in September. Agribusiness markets totaled 61,356 open interest contracts at the end of the last trading day of October. In September, these contracts totaled 74,238.

BOVESPA Segments
In October, equity markets (Bovespa segment) registered historic marks in financial volume daily averages, which totaled BRL 7.34 billion, with 436,250 trades. The October volume was BRL 154.25 billion, with 9,161,252 trades. Home Broker, a web-based equities trading system, set six trading records, and reached its highest trading volume ever with BRL 60.99 billion and the number of individual investor accounts came to 555,768 for the first time.

Source: BM&FBOVESPA, 01.12.2009

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

Mexico’s MexDer seeks high class global partners

The financial crisis has slowed trading at Mexico City’s derivatives exchange MexDer, and led to some nasty smells in the OTC market. But participants are sure this is a temporary dip. Mexico’s market, led by MexDer, is full of drive. The exchange has up-to-date technology, is easily accessible to foreign traders, and could be on the verge of attracting a wave of new interest. FOW’s Agnieszka Troszkiewicz reports.

Jorge Alegría Formoso, chief executive of Mercado Mexicano de Derivados, is heading for Huatulco, a tourist resort in southern Mexico. But instead of taking some time off, he is attending the annual convention of Mexican pension funds.

As Alegría explained when FOW caught up with him, he is relentlessly working to attract new market participants to MexDer, and pension funds, known as Afores (Administradoras de Fondos de Retiro), are the country’s largest institutional investors.

They are increasingly given permission to use a wider range of financial products, presenting a big opportunity for MexDer.

On October 1, President Felipe Calderón proposed allowing Afores to invest freely in stocks, which would involve using single stock options. The reforms, which also include allowing Afores to invest in infrastructure and IPOs, have yet to be approved by the National Commission for the Pension System (Consar) and by Banco de Mexico, the country’s central bank.

“This is very good news for MexDer,” Alegría says. “Because of the changes in the regulation, we are very bullish on individual stock options, and potentially individual stock futures.”

Big ambitions

For an 11 year old exchange, MexDer has come a long way. “We took, and we are taking, the necessary measures to be the market of choice for the conduct of heavy activity in Mexico and Latin America,” Alegría says.

MexDer’s “dual strategy” for the next few years involves attracting both domestic and international investors.

On the local front, the main challenge is on the training side, Alegría explains: “Teaching funds; teaching the local investor base about the advantages of using derivatives and how to use them.”

He also wants the local banks to start favouring exchange-traded derivatives above the over-the-counter market.

Internationally, MexDer wants to attract high frequency traders and global players. “We’re actively promoting the very easy access to the exchange,” Alegría says. “We have big advantages on the regulatory and the clearing side to attract international players to our market.”

Seeking out customers

Others have noticed Alegría’s eagerness. “He’s been pounding the streets in North America, Europe and Asia about his exchange,” says Gerald Perez, managing director of Interactive Brokers UK, an online broker in London that provides direct market access (DMA) to MexDer.

“He’s been very receptive to hearing about needs from remote members, as well as customers and independent software vendors. The exchange has come up with solutions relatively quickly, compared to other exchanges in the same categories,” Perez says.

Interactive Brokers’ customers include individuals, hedge funds, brokers and proprietary trading firms. Those trading on MexDer mainly come from Europe and the Americas. “As we become more global, they want to diversify their portfolios; they want to take advantage of more opportunities; they want to go into emerging markets,” Perez says.

“It’s easy to connect to MexDer through brokers like us, which creates arbitrage opportunities,” he adds. Mexico’s location also makes MexDer an attractive marketplace for both north and south Americans.

Ryan Keough, managing director at SunGard Global Trading in New York, is in charge of business development in Latin America. He says that SunGard’s clients typically opt to trade more than one market in a region. “In Latin America, we have clients who are Spanish banks; but also some of the American banks, being full service providers, need to have a Mexican presence,” Keough says.

MexDer has been vigorous in its quest to reach out to remote members and increase its volumes. With support from the local authorities, the exchange took the first steps to modify local regulations to create an omnibus account scheme, allowing foreign financial firms to trade through MexDer members. In 2005, the exchange authorised remote trading.

MexDer was helped by the US Commodity Futures Trading Commission, which in 2006 allowed its IPC equity index futures to be used by traders in the US. And the abolition of withholding tax for foreign participants boosted foreign interest in the Mexican exchange.

MexDer accepts collateral in dollars without requiring that it be converted into pesos or transferred to a Mexican-based account. It also allows the use of US Treasury notes, bonds and bills as margin.

The exchange has also worked to improve its technology. “Communication, communication, communication,” says Gloria Roa Béjar, head of BBVA Bancomer Derivados in Mexico City.

She points to connectivity as an area of progress for the exchange. The Fix Protocol has allowed fast direct access to the exchange, encouraging independent software vendors to write to the exchange.

ISVs have used Fix to build gateways and interfaces and add MexDer to the list of exchanges they offer, further increasing participation from overseas. “That’s an indication that the exchange is moving forward and meeting the needs of technology partners,” Perez says.

Technical upgrades

The exchange has chosen software vendor RTS Realtime Systems Group to supply its new front end trading platform. John Dempsey, vice-president for business development at RTS in Chicago, says the platform helped put local players on a more level playing field with the rest of the derivatives markets.

“It gave them a new set of tools to be able to manage their risk and get their trading done, perhaps in a more efficient and faster way,” he says, adding that the front end solution has brought a lot of interest from abroad.

“They really needed to get a single solution into the hands of the options market makers as well as into the traders and their customers, and to have a consistent, current capability to attract traders and so on from the outside and keep in line with the rest of the world. And it’s working!” Dempsey says.

To increase algorithmic trading, MexDer plans to introduce co-location in November. Keough at SunGard is convinced that co-location is an excellent service for MexDer to provide to its members and that it will improve the technical aspects of electronic trading, such as matching engines and the ability to handle big volumes.

With co-location, volumes should increase. But to be really attractive to algorithmic traders, the exchange needs more liquidity.

Falling volume

Although MexDer has taken several important steps to facilitate foreign participation in the past few years, its winning streak has been broken by the global financial crisis. As in most parts of the world, interest rate derivatives, which are at the heart of MexDer’s product suite, were hit worst by the financial crisis.

Alegría admits this. “The deleveraging process outside and inside Mexico affected the activity of the banks and their risk positions, and we were hit by that,” he says.

But he emphasises that the situation was the same everywhere, especially in the interest rate market.

MexDer’s total trading volume fell from nearly 229m contracts in 2007 to 70.2m in 2008, but that figure gives a misleadingly bad impression.

Almost all of the decline was due to a technical reconfiguration of one contract – the exchange’s benchmark future on the main interbank interest rate, the 28 day Tasa de Interés Interbancaria de Equilibrio, or TIIE 28.

A change to the product in September 2007 meant that market participants needed to trade much less often. Annual volume plunged from 220.6m contracts in 2007 to 57.9m in 2008. So far, 28.9m contracts have been traded in the January-August period this year, a monthly average of 3.61m, down from last year’s average of 4.83m.

Roa points out that in times of turmoil, market participants shifted from the TIIE 28 to peso/dollar futures and longer term interest rate swap futures of three and 10 years.

Fight for liquidity

“We were once among the 12 largest derivatives exchanges. We would like to regain our place,” Roa says.

The challenge for the market, she argues, is to raise volumes and liquidity without compromising financial strength. The obstacles to bringing in more traders include the heavy paperwork needed to open an account and the language barrier. But Mexico can compete on speed, Roa claims, and MexDer is changing its servers to be fast enough.

Above all, liquidity remains the main challenge and precondition for winning new customers. But falling volumes have been discouraging, especially to algorithmic and proprietary traders who take large positions.

Due to the financial crisis, several brokers and prop traders, which before the crisis had wanted to get involved in the exchange, delayed their plans to start trading.

One source at an international bank says the bank put its plans to trade on MexDer on hold due to the decline in volume and high connectivity costs.

“Our customers that desire access are high volume, algorithmic proprietary trading groups. They would either need co-location or expensive high bandwidth data lines,” the source says. “So with the lower volumes and high cost of access, we have put MexDer on hold.”

Instead, the bank is now focused on accessing Brazil’s BM&F Bovespa, which even though it has a far more cumbersome process for opening third party omnibus accounts, benefits from an order routing agreement with CME Group. All the bank’s customers have access to the Globex order routing system, through which BM&F’s contracts can be traded.

And although MexDer allows remote non-clearing membership, the cost of accessing the exchange was “the next biggest issue” after the drop in liquidity, the source says.

Alegría disagrees with the notion that connecting to MexDer is costly, arguing that execution and clearing costs are comparable with similar products on other emerging market exchanges. But he admits that connectivity costs may vary, depending on the location of the member.

The exchange has been “adding a lot of efficiencies in terms of access, no taxes and on clearing, that makes our market more easy to access and trade, thus reducing all-in costs as well,” he says. “We are of course exploring some reduced fee schedules for liquidity providers, for certain market making programmes that we will publish in the future.”

On the bright side

Though the crisis has affected the exchange’s activities, market participants believe it has passed the test. “Although our volumes decreased, it was a very solid market,” Roa says, pointing to the fact that there was no default in the clearing house and margin calls were honoured. “The September 2008 crisis was one of these big tests of the market and we survived without problems. A solid clearing house and solid clearing members,” she says.

“The exchange did pretty well from the risk management point of view,” Alegría says. “I guess all the exchanges have demonstrated that the model works well… This is the model that should be used in the future for regulation and preferred use of derivatives.”

Trouble over the counter

Alegría’s confidence about the benefits of exchange-traded derivatives is in sharp contrast with the sour mood in the OTC market.

Last year, as in many emerging markets from Poland to Brazil, some Mexican companies suffered mark-to-market losses from positions in currency derivatives, which totalled about $15bn.

The losses almost led to the collapse of several Mexican household names. Brewer Grupo Modelo, conglomerate Alfa, cement maker Cemex and tortilla maker Gruma were among companies that took heavy losses on the contracts. Comercial Mexicana, the country’s major food retailer, sought bankruptcy protection last year after losing up to $1.1bn on non-deliverable forward contracts it had made with international banks.

In 2007 and 2008, the companies bet against the depreciation of the currency by selling foreign exchange options in the offshore market, due to the strengthening of the peso before August 2008.

The contracts allowed the companies to sell dollars at low cost when the peso rose in value. But, at the same time, they forced them to sell dollars at a loss if the Mexican currency fell beyond a set limit.

A month after the collapse of Lehman Brothers, the peso dropped by more than 30% and the companies were forced to sell double the amount of US dollars at the higher price.

Pablo Perezalonso Eguía, partner at Ritch Mueller law firm in Mexico City, says banks are now more careful about the type of products they offer clients, and about how they document their transactions. “Especially, they are more careful about requesting collateral, because in many of the instances there was no collateral requested in these transactions, which complicated things for banks and broker-dealers,” he says.

There are now discussions about changing a standard local master agreement to make things more clear, Perezalonso says.

Evan Koster, partner at Dewey & LeBoeuf in New York, adds that “From a banker-dealer perspective, there is a lot of hesitancy to do derivatives with Mexican counterparties as a result of that experience.”

The obstacles, he says, are now more than regulatory – they are related to perception and credit.

Smart state

This bad experience of derivatives in Mexico contrasts sharply with the clever use of OTC options by the Mexican government, which successfully hedged its revenue from oil taxes during one of the most turbulent periods for the oil price (see FOW Awards on page 22).

“Here we have an interesting contrast of prudent use of financial products for financial planning and risk management, and not so prudent use of this type of products,” says Gerardo Rodriguez Regordosa, director of public credit at the Mexican Ministry of Finance and Public Credit.

“The fact that some people did not make responsible use of financial products does not imply that the product itself is not something good. I think that people understand that difference very well in the market,” Rodriguez says.

Nevertheless, the Treasury’s success has failed to reverse the poor public image of derivatives in Mexico. Participation in general has been restrained. “When there is turmoil in such hard times, people abstain from derivatives at all,” Roa observes. “They don’t make distinction between the OTC and organised markets. We have seen, as a market as a whole, a decrease in volume in 2009.”

But she asserts that people should differentiate between the organised and OTC markets: “Derivatives got a bad name after the crisis, but the organised markets are transparent, solid and efficient.”

MexDer’s OTC plans

Alegría has a “three-layered” plan that would help MexDer capitalise on market participants’ loss of appetite for OTC products and lure trading to the exchange.

In December, MexDer will list deliverable versions of its two and 10 year interest rate swap futures contract. “You will be able to trade interest rate swaps in MexDer with a central clearing counterparty, which is Asigna,” Alegría says.

Market participants will be able to close open positions before the expiration of the contract, which will be settled by the clearing house.

“This is the first step – to move one step closer to OTC trading [coming] on to exchange trading and clearing,” Alegría says.

The second phase is to develop an OTC clearing service next year. Finally, Alegría wants to see a registry of OTC trades, to serve as a database for the authorities – similar to the way the Depository Trust and Clearing Corp works in the US.

CME on the horizon

Changes might happen soon with a potential alliance with CME Group. In September, Bolsa Mexicana de Valores, the owner of MexDer, announced it had entered talks “of a preliminary nature” with CME Group, which could involve selling a minority stake in the BMV Group to the Chicago exchange. The talks centre, of course, on MexDer.

Bernardo Mariano, an analyst at the Equity Research Desk, an investment advisory firm in Greenwich, Connecticut, says a relationship between the two exchanges could mean an order routing agreement.

“CME has about 150,000 terminals around the world and that will provide MexDer with an audience. For them to achieve 150,000 terminals can take many years, if not even decades,” Mariano says.

For CME the deal could mean being able to offer more products to its clients, as well as reaching new customers in Mexico.

The source at an international bank reckons that MexDer would benefit from partnering with a major global exchange. He says it has been approached by the likes of CME, NYSE, Nasdaq OMX, International Securities Exchange and Eurex. “They just need to choose one and move on or they will miss the party. I believe the MexDer representatives that I have met are smart, conscientious and enthusiastic and they believe a partnership is inevitable,” he says.

Alegría is silent about the potential alliance, saying it is too early to talk about it. But it is widely hoped that the potential deal will bring an increase in volume thanks to CME’s expertise and network. SunGard’s Keough believes MexDer might also gain “additional credibility” owing to CME’s reputation.

The next stage

The exchange might enjoy a similar experience to BM&F Bovespa’s. In October 2007, CME Group acquired a 10% stake in BM&F, which later became a 5% stake in the merged BM&F Bovespa. The Brazilian exchange received 1.7% of CME Group.

The deal has resulted in a mutual order routing agreement, and the two groups have also jointly developed new products.

“We saw the BM&F go through a whole revamp in Brazil and I think [MexDer] would see a similar renaissance occur,” Keough says. “These partnerships help drive innovation within the markets and that will continue especially if this CME partnership goes through.”

The partnership with CME helped the Brazilian exchange push its technology forward. “This partnership means firms trading on the CME can have access to these markets as well. That way the exchange will need to make sure that all the infrastructure is in place to then support the additional users and more electronic trading,” Keough says.

Guillermo Camou Hernandez, director at Scotia Capital, which clears futures and options on MexDer, reckons: “Once Mexico makes some structural changes, as other emerging countries have, it will be a target of many foreign investors, and with the synergy with the CME, MexDer will increase the participants, customers and then the volume.”

Source: FOW, 06.11.2009

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

BM&FBOVESPA market performance- October 2009

  • Bovespa segment sets records in financial volume daily averages, number of trades, Home Broker, and individual investor accounts.
  • In the BM&F segment, Ibovespa futures market surpasses 2 million contracts traded.

In October 2009, equity markets (Bovespa segment) registered historic marks in financial volume daily averages, which totaled BRL 7.34 billion, with 436,250 trades. The October volume was BRL 154.25 billion, with 9,161,252 trades. Home Broker, a web-based equities trading system, set six trading records, and reached its highest trading volume ever with BRL 60.99 billion and the number of individual investor accounts came to 555,768 for the first time.

Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 34,670,732 contracts and BRL 2.38 trillion in volume in October. That compares to 31,505,077 contracts and a volume of BRL 2.12 trillion in September. The daily average of contracts in the derivatives markets in October was 1,650,987, compared to 1,500,242 in the previous month. BM&F segment highlight for October was the Ibovespa futures market that jumped from 1,443,420 contracts traded in September, to 2,304,720 traded in October.

BOVESPA Segment (Equities)

Volumes and Trades – Equities, Equities Derivatives and Fixed Income
The Bovespa markets reached a total volume of BRL 154.25 billion in 9,161,252 trades in October, with daily averages of BRL 7.34 billion and 436,250 trades, respectively. In September, total volume reached BRL 114.23 billion in 7,143,911 trades. September daily averages reached BRL 5.43 billion and 340,186 trades.

The most traded stocks in September were: Vale PNA, with BRL 15.05 billion; Petrobrás PN, with BRL 12.77 billion; Itauunibanco PN, with BRL 5.26 billion; BMFBovespa ON , with BRL 5.23 billion; and OGX Petróleo ON, with BRL 5.16 billion.

Indexes
The Ibovespa ended October 0.04% higher at 61,545 points. Best performing stocks were: CCR Rodovias ON (+14.81%); Bradespar PN (+11.81%); Gerdau PN (+10.74%); Vale ON (+9.95%); and TAM S/A PN (+9.78%).Worst performing stocks were: Rossi Resid On (-17.26%); Aracruz PNB(-16.71%); VCP ON (-16.41%); Embraer ON (-12.78%); and BMFBovespa ON (-12.71%).

In addition to the Ibovespa, the following stock exchange indexes also ended September up: IBrX-50 (+0.22% at 8,709 points); IBrX-100 (+0.35% at 19,642 points); ITEL (+0.74% at 1,362 points); INDX (+1.40% at 9,100 points); Small Cap (+2.62% at 993 points); MidLarge Cap (+0.20% at 874 points); and Iconsumo (+1.49% at 1,207 points). The remaining stock exchange indexes ended September down: ISE (-3.56% at 1,701 points); IEE (-1.09% at 22,086 points); IVBX-2 (-0.79% at 5,008 points); IGC (-0.43% at 6,033 points); ITAG (-1.76% at 7,835 points); and Imobiliário (-4.42% at 817 points).

Market Value
Market capitalization of the 387 companies listed on BM&FBOVESPA in October was BRL 2.11 trillion, compared to BRL 2.09 trillion, which represented the 386 companies listed in August.

Special Corporate Governance Levels
The 159 companies that compose BM&FBOVESPA’s special corporate governance levels represented, at the end of September, 64.65% of the market capitalization, 78.83% of trading volume, and 81.87% of the trades in the spot market.

Market Participation
The spot market accounted for 93.3% of total trading volume in September, followed by the options market, with 4.9%, and by the forward market, with 1.8%. The after-market traded BRL 1.66 billion with 124.268 trades, compared to BRL 1.46 billion and 118,653 trades in the previous month.

Investor Participation
In October, foreign investors were responsible for 33.67% of the total volume, compared to 32.70% in September. Individual investors came next, with 30.53%, compared to 31.01%; institutional investors had 24.80%, compared to 25.90%; financial institutions, with 8.99%, compared to 8.20%; companies, with 1.95%, compared to 2.12%; and other types of investors, 0.06%, compared to 0.07%.

Foreign Investment
The net flow of foreign investment into the Brazilian stock market in 2009 as of October 30 is a positive BRL 32.88 billion, which is the combined result of the amount of BRL 13.73 billion in acquisitions carried out by foreign investors in the stock offerings and the positive balance of BRL 19.15 billion in direct trading at BM&FBOVESPA.

In October, the financial volume traded by foreign investors in the stock market is a positive BRL 1.14 billion, which is the net balance between stock sales of BRL 51.13 billion and stock purchases of BRL 52.27 billion.

The foreign investor participation in stock offerings, including IPOs, represented 57.6% of the total BRL 23.84 billion in transactions related to the publication of the closing announcement dates ending on November 4, 2009.

Individual Investors
BM&FBOVESPA ended October with 555,768 individual investor accounts in custody. The stock exchange had 515,506 such accounts in September.

Investment Clubs
BM&FBOVESPA ended August with 2,854 investment clubs and 50 new registrations. Total liquid asset reached BRL 12.31 billion and the number of participants reached 144,049, according to the latest available August data.

Home Broker
In October, trading via Home Broker registered the following records: volume totaled BRL 60.99 billion, compared to BRL 44.20 billion in September; average daily volume reached BRL 2.90 billion, compared to BRL 2.10 billion; total number of trades reached 5,973,285 compared to 4,474,883 in September; the daily average of trades stood at 284,442, in contrast to 213,090; the average amount per transaction totaled BRL 12,813, compared to BRL 10,862 ; participation in the stock market’s total volume in September was 19.80%, compared to 19.40% in August.

The total number of trades reached 32.60%, compared to 31.30%. The number of investors placing orders stood at 249,027, compared to 215,861in September. In October, the number of brokerage firms offering Home Broker was 67, compared to 68 in September.

Securities Lending
The financial volume of stock lending transactions in the Securities Lending Bank (BTC) reached BRL 29.54 billion in October, in comparison to BRL 28.74 billion in September. The total number of trades reached 63.642, compared to 63,477 in the previous month.

Fixed Income
In October, the trading volume for the secondary market, counting both the Bovespa Fix and the Soma Fix, totaled BRL 10.42 million, compared to BRL 66.83 million in September. Of this total, debentures accounted for BRL 4.19 million, Real Estate Receivables Certificates (CRI) accounted for BRL 5.35 million, and Credit Receivables Investment funds (FIDC) accounted for BRL 0.88 million.

ETFs
The financial volume registered in October by the four BM&FBOVESPA Exchange-Traded Funds (ETFs) reached BRL 537.95 million, in contrast to BRL 557.86 million in September. ETFs BOVA11, SMAL11, MILA11, and PIBB11 registered 7,411 trades. In the previous month, the number of trades was 8,366. ETF BOVA11 reached the highest financial volume in October, with BRL 435.64 million, in comparison to BRL 484.17 in September.

BM&F Segment (Derivatives and Futures)

Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 34,670,732 contracts and BRL 2.38 trillion in volume in October. That compares to 31,505,077 contracts and a volume of BRL 2.12 trillion in September. The daily average of contracts traded in the derivatives markets in October was 1,650,987, compared to 1,500,242 in the previous month.

Volumes and Trades – Financial Derivatives
Interest rate futures (ID) totaled in October 12,104,485 contracts traded, in contrast to 12,469,090 in September. The US dollar futures ended the month totaling 7,033,995 contracts compared to 5,959,815 contracts in the previous month. The Ibovespa futures traded 2,304,720 contracts in September, compared to 1,443,420 in the last month. The Euro futures contract (EUR) registered 14,970 contracts, in contrast to 5,330 contracts in August.

Open interest contracts ended the last trading day of October with 21,153,325 positions, compared to 21,993,232 in September.

Volumes and Trades– Agribusiness Derivatives
In October, the BM&FBOVESPA agribusiness derivatives market (including futures and options) totaled 197,101 contracts traded, compared to 151,582 in September. Agribusiness markets totaled 61,356 open interest contracts at the end of the last trading day of October. In September, these contracts totaled 74,238.

Volumes and Trades – Minicontracts
The derivatives market for mini contracts traded 1,334,414 contracts in the month of October, compared to 1,177,213 in September. Of this total, the futures market for Ibovespa mini contracts traded 1,264,865 compared to 1,103,632 contracts in the previous month. Mini U.S. dollar futures traded 68,272 contracts, compared to 72,085 in September. Mini futures contracts ended October with 18,575 open interest contracts, in contrast to 27,498 in the previous month.

Volumes and Trades – Spot Gold
The spot gold market (250 grams) traded, in October, 1.137 contracts, compared to 1.216 contracts in September. Spot gold market volume totaled BRL 16.66 million, compared to BRL 17.70 million in the previous month.

Investor Participation
In October, financial institutions led derivatives trading (BM&F segment), being responsible for 42.49% of contracts traded, compared to 43.86% in the previous month. Institutional investors were responsible for 27.12%, compared to 26.77%; foreign investors represented 21.66%, in contrast to 20.31%; individuals represented 6.83% compared to 7.16%; and companies, were responsible for 1.90%, the same as the previous month.

Individual Investors
In October, there were 87.089 individual investors with at least one account registered at the Derivatives Clearinghouse, compared to 85,033 in the previous month.

Source: MondoVision, 06.11.2009

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

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