Brazil to Get New Clearinghouse

Terry Flanagan

Americas Trading Group (ATG) has launched a partnership with Risk Office to create a new clearinghouse in Brazil, removing the largest barrier for ATG in its creation of a second Brazilian stock exchange named ATS Brasil. This new stock exchange will be the first competitor to Brazil’s sole stock-exchange operator, BM&F Bovespa. The launch is planned for 2014 and is awaiting final approval by the Brazilian Securities and Exchange Commission.

The clearinghouse will provide the full range of clearing and settlement services for transactions in the Brazilian capital market, according to ATG, a company specializing in electronic trading that offers a multi-broker platform for order execution in key Latin American markets, and Risk Office, a company in Brazil for risk consulting and assessment.

In November 2012, ATG and NYSE Euronext announced plans to launch Americas Trading System Brasil (ATS Brasil), an equities matching platform in Latin America. Last June, ATS Brasil filed a request with the Brazilian Securities and Exchange Commission (CVM) to launch a new stock exchange in Country with the goal of becoming the first competitor to Brazil’s sole stock-exchange operator, BM&FBovespa.

“The objective of ATS Brasil is to develop a new trading platform for Brazilian equities, stimulating the industry´s growth and facilitating investors’ access to global investment opportunities,” said Arthur Pinheiro Machado, chief operating officer of ATG. “The creation of a new stock exchange will increase competition in the domestic stock market, currently highly concentrated, and seek to affect a positive impact on issuers, sellers and buyers of stocks in Brazil.”

Assuming the CVM authorizes the operation of a new exchange, ATS Brasil plans to launch in 2014.

“Our decision to participate with ATG in the project to build a new clearinghouse represents the removal of the main obstacle for the entry of ATS Brasil in the Brazilian market,” said Gustavo Melo, chief operating officer of Risk Office.

While Risk Office and ATG will be the initial investors in the new clearing entity, a third investor is currently in advanced negotiations to become a partner in the project.

The operating structure and governance of the new clearing organization will be totally segregated from other activities performed by Risk Office and ATG. The headquarters will be in Rio de Janeiro and investors are to schedule a meeting with the staff of the Brazilian Central Bank in order to present the project. The organizational structure is still being assembled and the CEO as well as the name of the new company should be announced soon.

“A clearinghouse basically performs the registration, clearing, settlement and risk management of market transactions,” said Melo. “Among these activities, risk management is the most complex activity in the process as it requires the highest investment and know-how. Risk Office has technical knowledge (models and their parameters), technology (software components and market database), and crucial value-added elements to enable the development of a new clearinghouse in Brazil.”

For over 15 years, Risk Office has handled risk management in all its forms (operational, credit, market, foreign exchange, commodities, etc.) and has a team of highly experienced and trained professional for this new venture. Risk Office´s President of the Board has had an active role in the implementation of risk management systems for the clearinghouses of CETIP and CBLC (the clearing and custody organizations for BM&FBovespa).

ATG started a partnership with NYSE Technologies in 2011 to provide stock exchange market technology in Latin America, which evolved into the creation of a Liquidity Hub for the whole Latam. In 2012, ATG and NYSE Euronext announced their plans to create a new stock exchange, called ATS Brasil, with the objective to attract liquidity in the country.

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