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Electronic Trading Reaches Maturity in Brazil, Says Exchange

CEP platforms are increasingly connecting to Brazil's BM&FBovespa, which is now the sixth largest derivatives market in the world with growth of 67% in the first quarter of 2010.

The Brazilian market continues to see strong growth in electronic trading, with hedge funds and high frequency firms in Brazil increasingly deploying volatility and arbitrage strategies.

"We are coming to a stage of great maturity in our markets, after three years working hard to promote electronic trading. As a result of this maturity level, we see more and more CEP tools ready to connect to our markets," Marcio Castro, IT officer of trading systems at BM&FBovespa, tells WS&T.

"We are increasing [our capacity] in terms of latency and throughput. We have collocation available for all BM&F Bovespa markets. Last year, we doubled our capacity for the equities business," he noted.

The Brazilian exchange is also working on a project with CME Group to build a new matching engine for Bovespa, Castro said.

Castro's comments follow the announcement that Streambase's Complex Event Processing (CEP) platform has been extended to connect to BM&FBOVESPA, Brazil's derivatives and equities exchange and one of the world's largest exchanges in market value.

This will allow StreamBase to provide algo trading firms with low-latency connectivity to the Brazilian exchange, enabling them to trade on an extensive range of Brazilian products and hedge their risk across international markets, according to BM&FBovespa.

Trading volumes on Bovespa, the cash exchange, and the BM&F derivatives exchange in have grown ten-fold in the last 10 years, while the stock exchange value has gone up four times, says Martin Koopman, an independent analyst to the securities industry who recently wrote a TABB Group report entitled "Latin American Electronic Trading: Caliente!"

In his report, Koopman noted that BM&FBOVESPA is now the sixth largest derivatives market in the world with growth of 67% in the first quarter of 2010.

"I found that locals are trading more," he says. "You have a blend of institutions, a growing number of hedge funds and quite a sophisticated group of broker dealers. But now there is a lot of international interest in the [Brazilian] market too. Hedge funds are looking at it, high frequency firms in Brazil are deploying volatility and arbitrage strategies. You can collocate at both Bovespa and BM&F today. There's low latency data available from the exchanges. So broker dealers and hedge funds are using low latency strategies. It's a very exciting time," he adds.

"Brazil is an interesting market," Richard Tibbetts, CTO of Streambase, agrees. "There are parallels with the Canadian market and how its equity market has matured."

Last week, StreamBase also announced a partnership with Sao Paulo, Brazil-based Alphastream, a provider of professional services and tools to building next- generation electronic trading systems.

Hamilton Araujo, managing director of Alphastream commented that StreamBase's visual development environment would allow the company to work with customers - both business analysts and developers - to create "sophisticated strategies with an event-driven trading infrastructure."

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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