Buck up

9 August 2012 By Raul Gallegos

Bovespa’s been hit by delistings and a dearth of IPOs. Rival exchanges may soon arrive, too, though that’s not easy. And Bovespa has a lock on other business while expanding elsewhere. Operating leverage is wobbly, but the bourse is well placed to weather the economy’s headwinds.

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On Aug. 7 BM&FBovespa, Brazil’s sole listed financial exchange, reported second-quarter earnings of 300 million reais ($147.8 million), a 2 percent increase on the same period last year. Revenue of 541.15 million reais ($267 million) was 15.7 percent higher.

Revenue from securities listings increased just 1.1 percent, a reflection of the slow market for initial public offerings. Several companies have moved to delist from the exchange in recent months, such as private equity firm Laep Investments, internet services provider UOL, logistics company LLX Logistica and Redecard, a payments card processor.

Exchange officials initially expected between 40 and 50 IPOs and follow-on offerings this year with a market value of up to 55 billion reais. BM&FBovespa Chief Executive Edemir Pinto now expects no more than half of that to materialize.

U.S. exchanges Direct Edge and BATS Trading are angling to set up trading platforms in Brazil. A market structure study by UK-based Oxera Consulting, commissioned by Brazil’s market regulator CVM, was largely inconclusive on the benefits of increasing competition in the exchange industry by letting in additional players.

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