UPDATE: BM&FBovespa Sees Summertime Launch Of New Platform

BM&FBovespa SA (BVMF3.BR) and CME Group Inc. (CME) anticipate a new trading platform developed by the partner exchange groups to launch by August, part of a broader push into technology ventures by the Brazilian operator.

BM&FBovespa also is constructing a new Sao Paulo-based data center that can house the tools of high-frequency traders, brokers and telecom companies, while exploring new linkages with markets in Mexico, Bolivia and Colombia, executives said on a conference call Friday discussing first-quarter results.

"This will be a complete access system for electronic trading in Brazil," said Cicero Vieiera, chief operating officer of BM&FBovespa.

On the call, executives outlined a new program to cross-list derivatives contracts with equity partner CME, and disclosed that Brazilian market regulators will not allow BM&FBovespa to launch a so-called "dark pool" trading platform it has already developed.

BM&FBovespa reported late Thursday a 5.2% decline in first-quarter net profit to 384.2 million Brazilian reais ($237.2 million), down from BRL405.1 million a year earlier. Net operating revenue in the quarter rose 2.5% to BRL472.2 million. Shares recently were down 2.7% at BRL11.38.

Brazil's monopoly market operator, the world's fourth-biggest exchange company in terms of market capitalization, aims to join rivals like NYSE Euronext (NYX) and Nasdaq OMX Group (NDAQ) in efforts to develop a bigger technology arm, adding a new line of business alongside trading stocks and derivatives contracts.

Chicago-based CME and BM&FBovespa over a year ago began building a new platform designed to handle trading across the Brazilian company's stock, derivatives and fixed-income markets, and Vieiera said the project now is largely complete.

As many as 70 brokers are expected to participate in initial tests seen beginning in late May, he said, and a full launch of the system for BM&FBovespa's derivatives market is expected by August. Equities will go online by early 2012 with bond markets following.

Vieiera said the new data center facility, mirroring recent efforts by CME and NYSE Euronext, will sell space and services to electronic traders and companies that connect brokers and other investors to BM&FBovespa's markets. The venture will "create barriers to competition," according to Vieiera, because use of the infrastructure will be allowed only "for the benefit of our exchange."

BM&FBovespa faces potential competition from BATS Global Markets, which joined with Sao Paulo-based investment company Claritas to explore a new stock exchange venture, as well as a new power market backed by IntercontinentalExchange Inc. (ICE) launching next month.

CME and BM&FBovespa separately plan to cross-list of some of the companies' most actively traded futures contracts, which would augment an existing electronic link between the Chicago and Sao Paulo exchanges.

Under the plan, BM&FBovespa would list CME's popular miniature-sized futures on the S&P 500 stock index as well as smaller-sized soybean contracts. CME would list contracts tied to the iBovespa stock index.

"Because of difficulties [for international investors to access] Brazil, and firms from Brazil to trade on the international market, we believe this is a great opportunity for both exchanges," said Marta Alves, BM&FBovespa's head of product development. The structure of the agreement will ensure that it is always cheaper for traders to do business on their "home market," she said.

A plan to launch a private "dark pool" trading platform for transacting big trades is on hold indefinitely, Vieiera said, as the venture requires changes to securities laws that Brazil's market regulators do not intend to alter anytime soon.

"However, since we developed the system and it's been tested, if for any reason there is a change in regulation, BM&F will be first player to launch and operate a block trading facility and a dark pool," he said.

-By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com

--Gerald Jeffris contributed to this article.

CME (NASDAQ:CME)
Historical Stock Chart
From May 2024 to Jun 2024