TABB Group: Brazil’s e-trading market has new wave of buy-side firms leveraging global 3rd party vendors


Brazil is facing a decision in how it approaches the future of its capital markets, says TABB Group in new research, specifically the uncertainty of its market structure. But according to TABB, there is good news, in that its improved financial infrastructure is bringing lower latency and more efficient throughput to the local electronic marketplace, where the $5,000 cost of connectivity per buy-side trading desk can be ten times higher than in the US.

“Brazilian institutional investors are becoming more nuanced in their approach to speed, understanding that it’s no longer good enough to just be fast, that to survive and thrive in Brazil’s marketplace, you have to be leaner, meaner, faster and smarter than the competition.”

Recent technology upgrades along with the Brazilian securities regulator Commissão de Valores Mobiliarios easing regulations, such as rules governing IPOs, has sparked interest from global technology providers. As a result, says Alex Tabb, partner, COO, and contributing analyst Marlon Weems, co-authors of “Electronic Trading Outlook for Brazil: Trading Faster, Trading Smarter,” a new wave of local buy-side players in the last 12 to 18 months has shown an increasing appetite for electronic trading tools, including algorithms, transaction cost analysis (TCA) and the switching of direct market access (DMA) methodologies from DMA type 1 to DMA type 4, with derivatives and cash equities comprising the bulk of local electronic flow.

“Thanks to the importation of outside innovations and new methodologies,” says Tabb, “Brazilian institutional investors are becoming more nuanced in their approach to speed, understanding that it’s no longer good enough to just be fast, that to survive and thrive in Brazil’s marketplace, you have to be leaner, meaner, faster and smarter than the competition.”

As more of Brazil’s local participants gain an understanding of the efficiency of these products, TABB expects to see more converts to electronic trading but to accommodate these new adopters, Tabb explains, the sell side will need to right-size their internal infrastructure costs by becoming more familiar with less expensive hosted-technology options.

“We believe there is a tremendous opportunity for Brazil’s brokers to gain market share,” Tabb says, “by creating strategic partnerships with third-party providers and other technology players because, slowly but surely, buy-side traders there are putting down their phones and beginning to use their keyboard and mouse to trade electronically.”

The 18-page, 12 exhibit report can be downloaded by all TABB Group Research Alliance clients here. For the Executive Summary or to purchase the report, write to [email protected].

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TABB Group: Brazil's e-trading market has new wave of buy-side firms leveraging global 3rd party vendors

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