Brazil is developing its capital markets structure by building modern technologies to compete with developed markets. Brazils’ BM&FBOVESPA (stock and derivatives exchange) ranks as the second largest equity options market and the sixth largest derivatives market in the world. Equinix, a leader in data centres for the financial services industry, is planning to expand its presence in Brazil and set up a new data centre in Rio de Janeiro.
Equinix has announced that ALOG Data Centers of Brazil, a Platform Equinix Company, plans to build a new International Business Exchange (IBX) data center in Rio de Janeiro. Targeted to open in the first quarter of 2013, the first phase is expected to cost $20 million in expansion capital and will have space for 320 cabinets with a total capacity for 1,170 cabinets once all future phases are completed.
Equinix also announced ALOG will begin, in second phase, to construct its SP2 data center in São Paulo, which is expected to be available in early 2013. SP2 phase two will have space for an additional 350 cabinets and is expected to cost $14 million in expansion capital.
Equinix and Riverwood Capital completed the acquisition of ALOG in April 2011, Equinix holds the controlling interest and sits on the board of directors of the company. With its investment in ALOG, Equinix offers colocation, interconnection and managed hosting services from its three existing Brazil-based IBX data centers in São Paulo and Rio de Janeiro. The new IBX, RJ2, will be ALOG’s second facility in the Rio de Janeiro metropolitan area.
“As the seventh largest economy in the world, Brazil is experiencing continued economic and infrastructure expansion, making it an attractive country for multi-national investment,” said Charles Meyers, president of the Americas for Equinix. “With the expansions in São Paulo and Rio de Janeiro, we are in a strong position to support increasing demand for Platform Equinix from key global customers looking to expand in the region.”
The Brazilian Real is trading at 2.02 against the greenback.
Brazil is going ‘auto’ as it is keen to attract algorithmic and high frequency traders to boost liquidity and increase volumes. Foreign investors are allowed to trade in Brazil and the government gave high frequency trading firms an extra boost by removing a financial transaction tax which equated to 200 basis points in 2011. High frequency trading started in mid 2009 in Brazil and has quickly become a norm for traders as HFQT accounts for around 10% of volume.
In addition, Brazil has been ensuring its infrastructure is ‘low latency’ friendly. The exchange has been investing heavily in its trading platform, Puma. Within the last three years, BM&FBOVESPA has quadrupled its processing capacity and upgraded its equities matching engine to enable round-trip latency of 10ms (from 450ms in 2007).
Currency traders can trade USD/RBL via BM&FBOVESPA’s partnership with the CME in 2008. Both exchanges have linked systems to allow currency traders to execute USD Real flow, the average daily volume on Real OTC markets is around $15 to $20 billion.
Margin FX is prohibited in Brazil as the state regulator does not recognise Spot FX as a tradeable asset class. Brazilians have been attracted to FX as online trading is on the increase and FX has low entry costs. The Comissão de Valores Mobiliários – CVM (Securities and Exchange Commission of Brazil) fined a Brazilian IB (in 2005) and has written a warning document to investors trading in Spot FX.
Brazilians can trade with international brokers however they face difficulties when transferring funds outside Brazil. If traders can deposit funds into their brokers trading accounts, then they face difficulties when recalling funds back into Brazil as the ‘tax man’ will ask for an explanation.
FXCM has stopped accepting Brazilian retail traders.
Metaquotes launched MT5 a multi asset platform that is compatible with equities, futures and CFD’s. With the overall growth in Brazilian capital markets Metaquotes sees the potential of MT5 amongst Brazilian equities brokers, thus assigning a sales and marketing office for the LATAM region in Sao Paulo.