Exchange-Traded Derivatives in Brazil
A Focus on Regulations, Market Structure, and Technology
Abstract
The Brazilian derivatives market remains the largest in Latin America and the only Latin American exchange to crack the top ten largest derivatives exchanges in the world. Despite moderate forecasts of future economic growth, Brazil’s prospects for continuing growth in trading volume remain strong. Celent expects the BM&FBovespa to post record derivatives trade volumes in 2011.
In a new report, Exchange-Traded Derivatives in Brazil: A Focus on Regulations, Market Structure, and Technology, Celent examines the landscape for derivatives trading in Latin America’s largest economy. The BM&FBovespa remains the engine through which derivatives trading grows in Brazil, with over 90% of all derivatives in Brazil standardized, exchange-traded, and centrally cleared. By the end of 2010, the BM&FBovespa was ranked the sixth largest derivatives exchange in the world.
Rank |
Exchange |
Volume 2010 (Millions of Contracts) |
Contract Growth |
1 |
Korea Exchange |
3,748.9 |
20.8% |
2 |
Group (includes CBOT and Nymex) |
3,080.5 |
19.0% |
3 |
Eurex (includes ISE) |
2,642.1 |
-0.2% |
4 |
NYSE Euronext |
2,154.7 |
24.6% |
5 |
National Stock Exchange of India |
1,615.8 |
75.9% |
6 |
BM&FBovespa |
1,422.1 |
54.5% |
7 |
CBOE Group (includes CFE and C2) |
1,123.5 |
-1.1% |
8 |
Nasdaq OMX |
1,099.4 |
34.8% |
9 |
Multi Commodity Exchange of India (includes MCX-SX) |
1,081.8 |
180.7% |
10 |
Russian Trading Systems Stock Exchange |
623.99 |
31.5% |
Source: FIA, exchange data, Celent | |||
“There are several reasons for the BM&FBovespa's continued strength going forward. Central to this long-term success is a stable and well-defined regulatory environment, and the BM&FBovespa's continued commitment to developing technology that improves modes of access, latency, and capacity,” says Alexander Camargo, Celent Analyst and author of the report. “The BM&FBovespa's ongoing efforts toward developing a new multiasset trading platform and toward post-trade integration and infrastructure development will be particularly beneficial in the medium to long term.”
This report begins with an overview of Brazil’s regulatory environment as it relates to derivatives trading and market structure. Against this backdrop, Celent provides an introduction to Brazil's derivatives exchange, the BM&Fbovespa, and describes the products offered, market access options, alliances, and clearing and settlement on the exchange. Next, Celent provides a brief look at the exchange and its recent growth. The report concludes with a discussion of economic and regulatory trends and technological advances that will influence market access and trading on the exchange.