SAO PAULO NYSE Euronext NYX.N and Americas Trading Group are seeking Brazilian regulatory approval to open a new stock exchange, and the venture's officers said on Wednesday they believe it can boost trading volumes and liquidity in Latin America's largest equity market.
American Trading Systems Brasil, first announced last November, can start operating next year if it gains regulatory approval, the venture's officers said in a statement. They said the exchange can bring down transaction costs, boost liquidity in trading of stocks and lure more investors into Brazil.
Late last year, ATS Brasil executives told Reuters that volumes in Brazil's equity market could increase by 15 percent within its first year of operation. The company is 80 percent owned by Americas Trading Group, a Rio de Janeiro-based trading systems operator, with NYSE owning 20 percent and becoming ATS Brasil's main technology provider.
The statement quoted Chief Executive Alan Gandelman as saying ATS Brasil "will add a new trading platform, incentivize growth in this industry and facilitate access to overseas investors."
It has been more than a year since exchange operator DirectEdge announced plans to open a new bourse in Brazil to challenge incumbent BM&FBovespa SA (BVMF3.SA), which enjoys a near-monopoly on all trading, clearing and settlement services for most locally traded shares.
Shares of BM&FBovespa tumbled 3.5 percent on Wednesday to 12.65 reais, extending this year's drop to 7.2 percent.
Many analysts have said another competitor to BM&FBovespa could help improve pricing of Brazilian assets by attracting high-frequency traders who require a system prepared to receive an enormous amount of trading orders in ultra-high speed.
The statement did not say whether a clearinghouse could be built up as part of the new exchange. Currently there are no legal rules in place requiring BM&FBovespa to sell or rent clearing services, a strategic part of any trading business requiring a huge investment of time and money and in which the São Paulo-based company has a near monopoly.
In Brazil, trading transactions are settled through a central counterparty clearinghouse, a complex and capital-intensive venture. Unlike in the United States, exchanges in Brazil have to identify final buyers and sellers, not brokers, on a given deal and cannot execute cross-country orders.
In November, ATS Brasil executives said the new exchange would rent BM&FBovespa's clearinghouse, even though the Sao Paulo-based exchange has said it is unlikely to share its facilities until at least 2014.
(Reporting by Guillermo Parra-Bernal and Natalia Gómez)