Chile, Colombia and Peru plan to integrate their stock exchanges by the end of the year in a bid to encourage greater foreign investor participation.
“We want to enhance liquidity. By integrating these three markets and putting investors and issuers together, we believe that we will collectively be able to provide better liquidity and a better platform for all,” says Juan Cordoba, president of the Colombian Stock Exchange.
“In time this will provide some sort of incentive for intra-regional trading and, even more importantly, this bigger, more liquid market will hopefully attract more investors from outside the region. The chance to receive more external investors is one of the main incentives driving us to seek this integration.”
Even though Peru and Colombia started talks about integrating their exchanges two years ago, the idea was officially launched, with Chile included, in September 2009. A memorandum between the three exchanges was signed in January.
|
“We believe that we will collectively be able to provide better liquidity and a better platform for all” Juan Cordoba, Colombian Stock Exchange |
A senior banker in New York says: “Each of the markets – Peru, Colombia and Chile – have different focuses. For example, Peru is very commodity focused whereas Chile and Colombia have greater variety in their corporate community. Therefore I think this integration is a good idea as the markets complement each other.” The integration process has been split into two phases. The first should be finished by the end of 2010 and will enable participants in each country to route trades through the other two markets. The second phase, which should take another two years, will allow investors direct access across all three markets. The long-term plan is to include derivatives and fixed-income trades as well.
Cordoba says: “The regulators have been having very positive discussions and they have been very supportive. We all know there are a few key issues that need to be worked through though.”
There are three key regulatory challenges. First, each market will need to adapt its regulations, giving each trade in a different jurisdiction equal validity. Another issue is the rules governing local pension funds. These rules will need to be harmonized before regional trading can begin.
The third issue affects Colombia. Currently foreign investors have a more limited investment horizon in Colombia than locals and these restrictions would need to be relaxed to be in line with Peru’s and Chile’s regulatory environment.
