(Corrects new fee to 0.5 basis point, instead of 5 points, in
* BM&FBovespa cuts fees in cash equities by 28.5 pct
* Offers discounts in day trade, progressive fee cut
* Fee cuts spark biggest gain in shares in one month
By Danielle Assalve and Guillermo Parra-Bernal
SAO PAULO, March 5 BM&FBovespa SA,
Brazil's sole financial bourse, took a key step on Tuesday aimed
at protecting its home turf by cutting trading fees and vowing
to review custody and settlement pricing as foreign competitors
prepare to enter the nation's buoyant exchange sector.
It reduced trading fees in the cash equities market by 28.5
percent to 0.005 percent, or 0.5 basis point, from 0.007
percent, Chief Executive Edemir Pinto said at an event. Assuming
no additional volume stemming from the fee reduction, revenue
could fall by as much as 20 million reais ($10 million,) he
The aim of the new policy is to "divide the gains in scale
with all market participants" and not to discourage potential
competition, Pinto noted.
Direct Edge Holdings LLC, the fourth-largest U.S. stock
exchange operator, has announced plans to request a license to
operate a Brazilian bourse.
Shares of BM&FBovespa posted their biggest intraday gain in
about a month, adding 2.4 percent to 13.46 reais. The gains
helped erase some of the 3.8 percent decline so far this year.
The bourse is analyzing a thorough revision of fees in the
BM&F derivatives segment, including contracts for interest rates
and currency futures, as well as for agricultural commodities,
Pinto added. The BM&F segment makes up 41 percent of its net
revenue, while the Bovespa equities segment contributes 48
BM&FBovespa will also offer discounts for day trades and
progressive fee cuts based on market average volumes. In the
case of day trades, which account for 35 percent of equities
trading volume, clients will have access to the same pool of
discounts available to investors in the high-frequency trading
segment, executives said.
"Our main goal is to increase market liquidity," Marcelo
Maziero, head of products at the bourse, said at the same event.
Retail and non-resident investors, as well as banks, will be
beneficiaries of a full reduction in fees, while institutional
investors will see the cost of post-trading fees move up to 2
basis points from 1.8 basis points. Between April 1 and Dec. 1,
the fee cuts will be booked as a discount, while they will be
effective from Dec. 2 onward.
Starting Dec. 2, BM&FBovespa will offer a reduction of 57
percent in fees, to 3 basis points, if average daily trading
volumes are between 11 billion reais and 13 billion reais. If
ADTVs top 13 billion reais, the discount could come at 2 basis
points, the executives added.
With ADTVs between 9 billion reais and 11 billion reais, the
fee would decline to 4 basis points. If trading volumes are up
to 9 billion, the 5 basis points-fee will apply. Implementation
of these specific cuts is pending determination of some details.
Under current rules, BM&FBovespa enjoys a near monopoly on
all trading, clearing and settlement services for most locally
traded shares. While depositary receipts in New York or other
global financial hubs provide a possible alternative to trading
on BM&FBovespa, many investors cannot trade them due to legal or
BM&FBovespa is unlikely to share clearing, custody and
settlement facilities with potential rivals until at least 2015,
Pinto said. Direct Edge does not rule out working with other
so-called post-trading platforms in case talks with BM&FBovespa
over sharing clearing services fail.
There are no legal rules currently in place requiring
BM&FBovespa to sell or rent clearing services, a strategic part
of any trading business that requires a major investment.
Given Brazil's market structure, competitors would only
rival BM&FBovespa's leading position by investing substantially
in a post-trading platform or renting BM&FBovespa's. In both
cases, newcomers may see a payback only after many years.
Pinto said a revision in pricing of custody and post-trading
services for retail investors will soon be announced, without
He also said that, as of now, there are more than 40 plans
for initial public offerings in the exchange in the pipeline.
($1 = 1.97 Brazilian reais)
(Reporting by Danielle Assalve and Guillermo Parra-Bernal;
Editing by Gerald E. McCormick, Jeffrey Benkoe, Dan Grebler and