Regional e-FX perspective on Latin America >>>
and ahead of the Indian rupee, Russian rouble and Chinese renminbi. Mexico leads the Latin American pack, and is the biggest of the “big five” followed by Brazil, Chile, Colombia and Peru. Mexico leads not only in terms of size of turnover, but as a country that over the last three decades has been through the mill of indebtedness, default and rehabilitation with the most developed nations’ financial community and then full currency liberalisation with membership of the wealthier countries club, the Organisation of Economic Co-operation and Development (OECD). It is a path that other Latin countries have yet to follow to its end.
Lessons from Mexico
“Mexico’s presence within the North American Free
Trade Association (NAFTA) definitely opened things up,” explains Simon Jones head of FX e-trading at Citi. “We treat Mexico just as we would treat Swiss francs or sterling.”
“Mexico is in many ways a developed
centre. I don’t think we can call Mexico an emerging market anymore,” says Matt O’Hara,
senior vice president and global head of business operations at Tomson Reuters. “It’s an emerged and developed centre. Tey have been faster adopters of technology in order to enable their connectivity and internationalisation. Tomson Reuters worked with the Mexican authorities to help them meet their internationalisation goals. We helped them do that with our matching service, our interbank electronic brokerage platform, which if you fast-forward to the present day is now seeing a significant amount of global liquidity. We are considered to be the primary pool of liquidity and the reference rate for the Mexican peso. Around 80% of all Mexican volume is traded outside Mexico which shows the power of the forex market when a domestic community that was previously closed, opens up and connects to the global market place. It has grown hugely and is significantly traded in places like London and New York.”
Tat said, even in Mexico, local regulations can seem cumbersome if you are used to market conditions in Europe or the US. For this reason, says Michael Bernal, sales director for Latin America at FXall, multibank
platforms have additional appeal. “It is not only for transparency and pricing that multibank platforms are used, but also for their pre- and post-trade execution capabilities with end-to-end processing and connectivity to corporate treasury management systems. Tis enables them to reduce or eliminate manual interface in the processing of the transactions. For example the “know your customer” regulations in Mexico are quite different than they are in the US. You actually have to visit the customer at their place of business as part of the process” Tis is a theme that recurs again and again when you examine forex trading conditions throughout the LATAM region.
Brazil
If Mexico is the role model, it is Brazil that those inside the Latin American theatre and in financial markets worldwide are watching most attentively.
Te size of its economy, the power of its wealth generation capacity, its rich reserves of natural resources and agricultural production and its booming international trade relations, particularly with China, point to a market that offers massive opportunities for foreign exchange trading. Tat the bulk of this will in
Simon Jones “Mexico’s presence within the North American
Free Trade Association (NAFTA) definitely opened things up. We treat Mexico just as we would treat Swiss francs or sterling.”
july 2012 e-FOREX | 59
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