Technology Trends in Brazil’s Capital Markets

Latin America is one of the fastest growing regions in the world. Within it, Brazil occupies the pride of place as the largest and most developed market.

Brazil has seen both rapid growth and improvement in its capital markets infrastructure. From the point of view of foreign participants, financial institutions, and vendors alike, it is an attractive market that can be daunting due to its complexity and its requirement for significant local presence.

In the report Technology Trends in Brazil’s Capital Markets, Celent looks at the growth of the Brazilian capital markets and the opportunities for vendors that have arisen. The Brazilian economy started opening up in the late 1990s. It had high growth for almost a decade after that, but has seen a fall in growth rate since, and is experiencing a downturn at present. As a result, the markets are consolidating, and this is affecting the demand for software and services in the capital markets.

However, Brazilian capital markets are undergoing rapid modernization and have become more electronified and centralized in the last few years. The entry of large foreign brokers and vendors has improved the technological standards, and Brazil is now considered one of the leading emerging markets. New exchanges and clearinghouses are being created, and local sell side and buy side firms are upgrading their technology to become more competitive in the region.

“The Latin American market is understandably different from its European and North American counterparts, but even within Latin America Brazil is quite distinctive,” says Dr. Anshuman Jaswal, Senior Analyst with Celent’s Securities & Investments Group and author of the report. “As a result, it is important for financial institutions and vendors to have significant local implementation capabilities to be successful.”

This report begins with a look at regulatory requirements for both financial institutions and vendors in Brazil. This is followed by a discussion of some of the legal and cultural issues. We then consider the evolution of the capital market IT infrastructure in the last few years. The opportunity for foreign vendors in front, middle, and back office applications is evaluated, along with a discussion of the factors involved in vendor selection and the pricing models employed locally. Finally, we look at the issues of functionality, deployment, and implementation of IT platforms offered by foreign and domestic vendors in the market.