With trading hitting historic highs at BM&F Bovespa (BVMF), despite the global financial malaise, institutional investors can maximise arbitrage opportunities by turning to Latin America's third-largest and the region's most sustainable exchange. As one of the brokers appointed to spur cross-trading between BVMF and the Shanghai Stock Exchange (SSE), UM Investimentos ensures that Asia's high-frequency traders feel at home in Brazil.
"Brazil is an ideal growth market for foreign players," says Gustavo Schahin, head of institutional equity sales and trading at UM Investimentos and in charge of the firm's international outreach.
An early adopter of the FIX protocol in Brazil, Schahin helped revolutionise BVMF to a technologically-enabled trading platform. With the universal adoption of the FIX protocol in Brazil by the early 2000s, the market has become an attractive venue for arbitrage trading by global players.
"Foreign investors have a clear access into Brazil across all asset classes available to any local investor," Schahin says. "This is why about 70 per cent of volume trading at BVMF has come from investors in the United States, Europe and Asia over the past 10 years. Their investments are protected by a constitutional law that ensures a level playing field in this market."
Rule 168, issued by the Brazilian stock market regulator CVM, also provides safety nets against erratic price movements or volume trades that insulate against volatility. Additionally, with Rule 419 in place, foreign investors gain easy access to the Brazilian market through intermediary agreements with brokers connected to BVMF. Schahin helped shape Rule 419 in his earlier collaboration with BVMF.
For institutional clients, UM Investimentos provides 24/7 access with smart order routing infrastructure that has complete redundancies required for high-frequency trading. As the first broker to deploy business intelligence software within the firm, UM Investimentos guarantees accurate risk and transaction cost analyses in the algorithmic trades done for institutional investors.
With continuing technological and human resource investments, the firm delivers precision all the way to post-trading such as in reporting, clearing and matching trades - all provided in real time. This dedication to best-quality execution catapulted the firm to BVMF's No 1 spot in order routing in 2011.
UM Investimentos' facilities are readily available to mainland investors with the standing co-operation between BVMF and SSE. Asian investors can also take advantage of cross-listing opportunities offered through the BRICS Exchanges Alliance and BVMF's S&P 500 futures contract.
"Our core business is in exchange-traded opportunities, so we can definitely help Asian investors with arbitrage execution
in Latin America," Schahin says. "Given Chinese investors' appetite for private equity and fixed-income placements, we also have specific resources to address investment banking and advisory needs."
As BVMF's fourth-largest retail broker, UM Investimentos handles about 7.5 per cent of the retail investor trades on BVMF. Its eUM online portal, a best-in-class internet-based platform, has been accessible to local investors since 2004. It peaked with more than 70,000 users before the global financial crisis.
Ranked among BVMF's top 10 broker-dealers, UM Investimentos aims to be the No 1 broker by 2015. The firm manages more than 2 billion reals (HK$7.8 billion) worth of assets. It has 100 offices across Brazil and more than 600 associates servicing more than 40,000 retail clients, 40 per cent of which are high-net-worth individuals. Brazilian finance news portal InfoMoney rated the firm second in client relationships in 2009.
"We like to be close to our clients every step of the way from point-of-interest to post-trade and settlement," Schahin says. "For foreign clients accessing the Brazil market for the first time, there's nothing better than having a local partner with you providing the home advantage."
UM Investimentos www.uminvestimentos.com.br