REGIONAL e-FX PERSPECTIVE
traded on the BM&F market. Tere is a domestic spot market and we see that growing, but the majority of the liquidity is in the futures market just as there is liquidity in the NDF market offshore. So there are domestic capabilities in Brazil that work very well and electronic in nature. Ten in Chile there are domestic trading platforms that are for the domestic spot market which have relationships with the local bolsas – or exchanges.”
We will look at regulatory issues in more detail later, but there are two other important areas that are in growth phase as far as electronic capabilities are concerned. Te first is in speculative money and second is in retail. Tese are both “emerging markets” in their own right.
Prime brokerage and hedge funds
“Tere is not a lot of movement in the G10 space at the moment,” says Citi’s Simon Jones. “Tere has been central bank guidance in CHF and JPY, EUR / USD has hovered either side of 1.30 all year, threatening much but delivering little. For a long while now our customers have been looking for other areas of interest. Brazil, Chile, Colombia and Peru to some extent, while among the deliverables, Mexico is our
Michael Bernal
“You see relaxation of regulations in Brazil, then you see an increase in regulation in Argentina and Venezuela.
Even in Mexico there are some regulations that are being placed on funds for financial reporting purposes.”
biggest pair in the emerging market space. Te majority of the market is Asset Driven or Speculative flow with spot and forwards against the dollar accounting for the bulk of it.”
He goes on to add that where such flows are provided by hedge funds they are accustomed to using electronic trading platforms and expect them to be available where Latin American currencies are concerned.
Caio Blasco
“..we believe that prime brokerage is generally still under used in the region. Te cross margin ability and netting facilities that an FX prime broker can offer clients can make execution much smoother while requiring fewer margin allocated to different banks.”
64 | july 2012 e-FOREX
FXall’s Michael Bernal sees developments in the prime brokerage area. “On the prime brokerage side we are definitely seeing more high frequency traders (HFT) using prime brokers for liquidity and credit purposes. We are also seeing a very careful selection process with regards to who HFTs are using for prime brokerage as they tend to concentrate their exposures with only one or two institutions. Tere has been a strong growth in PB business in LATAM over the last couple of years, offered by the 5 – 10 major US and global institutions with a strong presence in LATAM.”
“We currently have a number of LATAM hedge funds based mainly in Rio de Janeiro, São Paulo and Santiago trading FX through our platform,” says
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