In an effort to boost its presence in the underpenetrated
NYSE Euronext Inc.
) is seeking approval from the Securities and Exchange Commission
(CVM) in Brazil to build a new exchange in the country. The
enterprise may commence by the first half of 2014, subject to
The equity exchange will be launched under the JV with Rio de
Janeiro-based Americas Trading Group (ATG) - Americas Trading
System Brasil (ATS Brasil), which is 20% owned by NYSE and 80% by
Currently, ATS Brasil is in the testing phase and is being
operated on the Universal Trading Platform (UTP), which is
globally used by most of the leading exchange operators,
including NYSE. The UTP trading engine will not only optimize the
trading experience through its risk-averse technology and
increased efficiency, but will also be enable cost discipline in
Initially, ATS Brasil has slated the launch of cash equities
and exchange traded funds (
) on the Brazil platform. Gradually, the list will be expanded to
cover derivative and other securities.
The formation of ATS Brasil is also aimed to break an almost
monopolistic model of the stock exchange in Brazil. The second
largest exchange operator in the US - BM&FBovespa has been
the leader in trading, settlement and clearing services in the
vast Latin American market thus far.
Meanwhile, ATS Brasil even plans to set up its own
clearinghouse as BM&Fbovespa refused to share its
clearinghouse. Hence, ATS Brasil aims to pool in more investors,
in order to raise funds and minimize the cost of the project.
Regarding this, ATS Brasil is mulling over the sale of 24% of its
stake to about 6-8 investors, which include a diverse group of
global bank and asset management firms.
In 2011, New Jersey-based stock exchange DirectEdge had
announced its plans to expand its operations in Brazil.
Therefore, the approval from CVM should offer immense growth
opportunities in the Latin American exchange industry.
Moreover, higher competition among the market players will
allow stable pricing and legal discipline, particularly now when
no definite set of rules are being adhered to in the Brazilian
market. These factors will not only boost liquidity but also
amplify margins, which we believe could turn out to be a valued
proposition for NYSE as well.
While NYSE carries a Zacks Rank #3 (Hold), other outperformers
of the financial sector include
Hilltop Holdings Inc.
Gamco Investors Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
GAMCO INVESTORS (GBL): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
VANTIV INC-A (VNTV): Free Stock Analysis
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