In end of an era, Brazil exchange goes electronic

By Elzio Barreto

SAO PAULO, June 30 (Reuters) - Sandro Carlos Gomes started working at Brazil's commodities and futures exchange 16 years ago as a "bricklayer," a low-level position writing prices of coffee, cattle and dollar contracts on a large chalk board.

After moving up the ranks and working for nine years as a floor trader at the dollar pit of the BM&FBovespa, Gomes left last July as the exchange ended open outcry trading and shifted transactions for most contracts to an electronic system.

Electronic trading, which started in 1990 for stocks and in 2000 for derivatives and commodities, is expected to account for all transactions at the BM&FBovespa as of Wednesday, marking the end of an era as the exchange seeks to cut costs, increase volumes and speed up deals.

"You don't have the excitement anymore of the trading floor, the adrenalin," said Gomes, a desk trader of futures on the Bovespa stock index .BVSP, interest rates and dollar contracts at the Souza Barros brokerage in Sao Paulo.

The demise of open outcry trading in Latin America's business capital follows a path already taken in other major financial hubs such as London, Tokyo and Sydney. But old-fashioned open outcry pits persist in some exchanges, like the Chicago Board of Trade.

In the final hours of open outcry trading, about 30 traders mingled around the nine empty pits on the BM&FBovespa with no deals closed for the only contract still being negotiated on the exchange's floor, futures for the Bovespa index <0#IND:>.

The apathy was a sharp contrast from the peak of the market, when Sao Paulo's two main exchanges bustled with nearly 2,500 traders.

Back at the market's peak 10 years ago, the noise was so loud and the back and forth so intense people strolling through Sao Paulo's old business district often thought fights were about to break out.

"One day, a tourist opened the emergency door to the trading floor by mistake and, just like that, fifteen traders fell out with their phones glued to their ears," said Jusmar Julio Guimaraes, who has been shining shoes outside the old commodities and derivatives exchange for about 19 years.

Only about 4 percent of all trades were done electronically in 2000, when the exchange began offering the new system for derivatives and commodities. By this month, the tables had turned and open outcry trading accounted for just 3 percent.

"We are turning the page," said Andre Demarco, director of operations for the BM&FBovespa (BVMF3.SA). "The market has chosen to trade electronically. Brokerages prefer that because it's more efficient, faster."

BM&FBovespa, the world's fourth-largest exchange operator by market value, has started to offer so-called direct market access for brokerages and will begin algorithmic trading for derivatives and stocks later this year.

Demarco said electronic trading was a natural evolution for the exchange, as investors in other parts of the world seek to buy and sell Brazilian stocks, commodities and derivatives contracts.

"We have invested in electronic trading as a strategy and have increased the different types of access to the exchange," Demarco said.

Traders chatting outside the exchange in downtown Sao Paulo said the mood was somber as they worried about their jobs.

"The feeling is that all that's left is to close the lid of the coffin," said a trader, who declined to be named because his company's policy barred him from talking to the media.

Standing next to Guimaraes, about a dozen men tried to court business at two shoe shine stands near the BM&FBovespa's exchange. Once, so many high-powered shoes needed tending to that business people would ask the stands' workers to stay late. Now they yell at passersby, hawking their services.

"We used to work nonstop until nighttime," said Guimaraes, adding that business was now 50 percent lower than at its peak. "Tips used to be very generous, but now some people will even ask you for a discount." (Editing by Todd Benson and Leslei Gevirtz)