Argentina’s stock and derivatives exchanges are pushing the government to lift capital controls which they say are preventing them boosting volumes by opening the door to a new breed of high-speed traders that are sweeping global markets.
The move is the latest sign that exchanges in Latin America are joining their more mature rivals in New York, London and Tokyo in gearing up to attract “ high-frequency” traders, who are moving beyond mature markets in search of more trading opportunities.
Diego Fernández, chief executive of the Rosario futures exchange, whose biggest products are dollar and soya futures, said the controls – which include a mandatory year-long deposit at the central bank – were restricting Argentine competitiveness by keeping foreign investors away while forcing domestic investors to use markets outside the country.
Adelmo Gabbi, head of the Buenos Aires Stock Exchange, the Bolsa de Comercio, last month also urged Cristina Fernández, Argentine president, to eliminate the capital controls, saying that would be a vital first step to attract more foreign capital after Argentina’s successful swap of a large chunk of debt still outstanding from its 2001 default.
Mr Fernández said: “We have noted since the swap that there is more openness to talk about the issue [of capital controls]. Previously it wasn’t talked about at all.”
But he said he had “no idea” whether that meant a change was imminent. The government sees the controls as a way of deterring speculators.
However that is not deterring Argentine exchanges from upgrading the way traders can connect to their systems, mirroring similar recent moves in Brazil and Mexico.
The Rosario exchange, also known by the acronym Rofex, was given approval by regulators in March to offer Direct Market Access (DMA),an increasingly common mechanism allowing non-members of an exchange to trade by “piggy-backing” on an existing member’s account.
Mr Fernández said DMA could help to automate trades, attracting hedge funds for algorithmic or high frequency trading, which uses ultra-fast computer trading to eke out profits from tiny discrepancies between prices.
That could boost volumes by as much as 50 per cent in three years or less, Mr Fernández said. “Direct market access is something necessary for them to come,” he told the Financial Times.
To lure more retail investors, Rofex intends to expand its offering of products to include oil and gold, euro and real futures, as well as some currently less liquid contracts like wheat and corn futures.
Ismael Caram, Rofex’s operations manager, said that if capital controls were lifted, if Argentina had more volatility in its exchange rate, and if high-frequency trading were possible, “trade in dollar futures could be 10 times the level now,” judging by the experience of exchanges in Mexico and Brazil.
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