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CAPITAL MARKETS

Exchanges: BM&F Bovespa feels fee pressure

Brazilian exchange faces multiple competitive threats; Enters exclusive talks with Nasdaq OMX

Carlos Kawall, BM&F Bovespa

"Our model is more like Deutsche Börse or Hong Kong’s Hang Seng where all the services are offered. We know we need to start being more efficient and make costs go down"

Carlos Kawall, BM&F Bovespa

For the first time in many years Brazil’s stock and derivatives exchange, the BM&F Bovespa, is facing growing competition for equities and fixed income business. "The BM&F Bovespa is in a very solid position," says Evandro Pereira, head of global capital markets at UBS Pactual. "However, there will be competitive threats for the exchange, coming from international players developing new products and foreign exchanges trading American Depositary Receipts, as well as from the Cetip, which now has professional management in place that have ambitious plans for the year ahead. The central bank is keen to promote some level of competition."

In recent years the BM&F Bovespa has been accused of using its local monopoly in equity trading to keep exchange fees high. There are now signs that Brazilian investors that want Bovespa exposure are choosing to trade Bovespa exchange-traded funds in the US with the corresponding currency hedge because it is cheaper and more efficient, despite the seemingly long route round, than trading directly on the Bovespa.

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