Across Latin America, exchanges, brokers and buy-side institutions are gearing up for a wave of electronic trading that’s percolating both cross-border and between continents.
In the Andean region, firms are replacing legacy vendor and proprietary systems and investing in customizable high-throughput low latency trading solutions to enable high-quality execution and greater operating efficiency.
“The Andean region is very exciting,” said Alice Botis, vice-president of business development, Latin America, at Fidessa, a trading technology firm. “Brokers are taking steps to replace their systems with ones that have enriched functionality. Exchanges also have made significant upgrades to their matching engines.”
Chile’s third largest brokerage house, Banchile, has selected Fidessa’s sell-side trading platform to anchor its institutional trading activity.
Fidessa’s Andean trading platfrom allows Banchile to be able to tailor its execution services to the local regulatory and market needs.
In addition to its order management system, which delivers straight-through processing of international institutional orders, Fidessa will provide Banchile with advanced trading tools, including algorithmic and basket trading capabilities, to augment Banchile’s service offering and facilitate complex trading workflows.
Meanwhile, Perseus Telecom, a provider of trading connectivity, has signed CI Casa de Bolsa, a leading Mexico City-based brokerage house, to its ultra-low latency network between the New York and Mexico City markets. The launch of this partnership represents a landmark development as the fastest trading route between the two marketplaces and creates new opportunities for trading firms across the globe, the companies said.
CI Casa de Bolsa has a global client base seeking liquidity in the Mexican marketplace.
With U.S.-listed stocks displayed in Mexico, CI Casa de Bolsa required a high-speed, ultra low-latency network connection from New York to Mexico City for foreign investors.
"The beneficiaries of lower costs and lower latency are our clients and serving them stands as CI Casa de Bolsa’s primary objective," said Mauricio Suarez, head of international sales at CI Casa de Bolsa, in a statement.
Exchanges are implementing trading technology as part of a major integration project along Latin America’s Pacific Coast.
The Latin American Integrated Market, or Mila, a FIX-based messaging routing network linking the securities exchanges in Colombia, Peru and Chile, aims to produce additional liquidity for traders across the entire region.
“Mila is about the electronic routing of order flow between Chile, Peru and Colombia,” said Botis at Fidessa. “They are still individual markets, but brokers in one region are able to route orders to exchanges in other regions via Mila.”
Cross-border trading entails currency and settlement risk, and traders need to be cognizant of both.
Settlement risk is particularly acute in Latin America because the laws governing settlement in countries like Brazil, Colombia, Mexico and Peru are stricter than those in the U.S..
By definition, in a cross-border settlement at least one of the counterparties to the trade is located outside the country in which settlement takes place.
Consequently, legal risks that arise in a cross-border settlement may be affected by laws in the country in which the non-resident counterparty is located.
“Firms that wish to have a multi-regional presence need a trading platform that can accommodate local laws and customs,” said Botis. “The advantage of having a cross-border platform is that you can have a single technology solution for all regions.”