By Alfredo Milera
The 3rd Annual FPL Latin America Electronic Trading Conference kindly hosted by BM&FBOVESPA brought together more than 340 participants from across the industry and region, making it the largest event FPL has organised in Latin America to date. Alfredo Milera, Country Manager for Charles River Development and active member of the FPL Latin America Subcommittee shares his experience from the Sao Paulo conference and thoughts on the future of Brazilian electronic trading.
Two sessions specifically drew my attention: ‘High Frequency Trading – The Costs, Risks & Opportunities it presents to the Region’ and ‘How Can Brazil Increase Its offering for International Traders?’
‘High Frequency Trading – The Costs, Risks & Opportunities it presents to the Region’ brought to light the local evolution of not only writing strategies and placing them in black box solutions, but also physically mounting these algorithms closer to BM&FBOVESPA. Colocating your infrastructure closer to the execution end point, in order to shave milliseconds off executions, made it abundantly clear that Brazilian quantitative shops have caught on and are moving in the right direction. ‘How Can Brazil Increase Its offering for International Traders?’identified improvements to the local trading environment that could be implemented to entice more global players. Local panel participants demonstrated that investing in global EMS and OMS platforms that support both local and international liquidity requirements and asset classes benefit the international trading community.
There is no question that this year’s Latin America Conference was not only its most successful (registered attendees up almost 30% from 2009), but also that it attracted knowledgeable and diverse members of the local trading community. There was strong representation from both local and international brokers as well as LATAM exchanges (BM&FBOVESPA, Bolsa de Comercio de Santiago, Bolsa de Valores de Colombia, Bolsa Electonica de Chile, & Rosario Futures Exchange (ROFEX)). The most impressive increase in participation, however came from the Brazilian buy-side, with asset managers looking for answers, while simultaneously sharing concerns. Increased vendor participation addressed local and international connectivity options.
The Future of Brazilian Electronic Trading
With the increase of international order flow, electronic trading has grown rapidly in Brazil over the past 12 months. The sell-side has traditionally been more sophisticated than their buy-side counterparts, and have led – but no longer exclusively control – the growth of electronic trading in Brazil.
Brazilian brokers have been moving away from dated proprietary execution tools and accepting more advanced EMS and DMA offerings. With this migration, more brokers now have the bandwidth to fill more order flow, offer faster and more efficient algorithms, along with TCA and best execution services. The once slow-moving buy-sides of Brazil are venturing outside of their comfort zones, with some already having implemented the FIX Protocol and electronic trading workflows. Local liquidity providers are now receiving FIXand algorithmic- enabled orders from various desks inside of these buy-side firms. The demand has come directly from the quantitative arms of Brazilian banks, which require full automation, TCA, best execution, and algorithmic-enabled capabilities to remain competitive.
With more execution and order management tools readily available to local asset managers, we are seeing the buy-side migrating from manual executions, to sophisticated algorithms. The state of electronic trading in Brazil will continue to grow as the market becomes more competitive, thereby, increasing demand for execution and portfolio management tools.
By Alfredo Milera