With a limited exposure to the current financial crisis, Latin America, and Brazil in particular, are both attractive markets for investors who are willing to diversify their exposure and explore new destinations with the potential to generate high returns.
Trading infrastructure and technology has also largely benefited from new investments over the last few years, making trading in regions like South America easier. The consolidation of the BOVESPA and BM&F Exchanges in 2008 prompted the move towards major improvements in the reachability of the financial markets across the globe.
In addition, the emergence of the Financial Information eXchange (FIX) Protocol, and its wide-spread adoption has greatly benefitted trading firms looking to invest in Brazil. Firms can now trade in these new markets with limited adaptation to their existing trading platforms and the once ‘far away’ Brazilian marketplace is now accessible to all major companies in the world through fast communication networks.
As the focus on compliance increases, firms need to ensure that their risk management platform is fully equipped to handle each new market. Being able to monitor your real-time exposure to a given market on a global scale is now the minimum requirement from compliance departments before they will authorise a new trading destination. Strict guidelines are also imposed by the local regulators and it is the new entrant’s responsibility to fully follow these rules.
Establishing a company or trading firm in a new country can be risky without knowing the local landscape. It can also take some time to receive all the agreements before being able to trade in the local market, not mentioning the expertise required to understand the local economy and compliance rules. For all these reasons, international players usually tend to partner with a local firm to exchange research and negotiate brokerage agreements. Firms benefit from a local expert to which they can plug in smoothly and can test their ability to perform in the market before making the decision to trade there.
Receiving market data in real-time is critical to making sound investment decisions. The same applies to trading. Placing your orders on a platform, but being late by only a few milliseconds can result in average results at best, as opportunities are missed. A financial extranet with a strong worldwide community is the perfect way to access all your trading partners globally and with speed.
Several international players have now set up in Brazil and started acquiring local players. Their requirements are increasing as they rely on IT systems to perform checks, analysis and reporting to their headquarters in real-time, for compliance and risk mitigation reasons.
To sum up, access to a real-time fast connectivity solution, is the key to success in a new market place. Peaks in traffic or potential issues have to be planned for. Only a reliable partner can offer such quality of services.