We talk to José Antonio Martínez about the work the exchange is doing on internationalising the Chilean capital market.
What initiatives is Bolsa de Santiago carrying out to promote the Chilean capital market?
We are carrying out several initiatives to create more and better investment opportunities, to encourage the adoption of best practices, and to promote the internationalisation of the Chilean stock market, so as to offer new products and services to attract investors and deepen the liquidity of our market.
We have worked on the promotion and development of the derivatives market, which was launched last year, as part of a constant search for offering the Chilean capital market new investment opportunities, diversification and risk management for both local and foreign investors. We are currently working to develop options over stocks, fixed income securities and indices, which will complete the development of the derivatives market.
Another recent initiative is an agreement we signed with S&P Dow Jones Indices for the development of stock indices for the Chilean debt and equity market. This is a global alliance, which is part of Bolsa de Santiago’s desire to give worldwide visibility to the Chilean stock market through new products that have the support of innovative methodologies and global reach.
The launch of our Venture Market - through an unprecedented partnership between Bolsa de Santiago and Toronto Stock Exchange Venture (TSXV) - established a bridge between the local stock market and the mining sector, opening an entrance to risk capital for junior mining companies at the exploration stage or early production.
Operationally, we have implemented the latest technology for the connectivity of our market, allowing direct market access (DMA) for foreign investors, not only to the stock market but also to the entire debt market.
Likewise, the enactment of a new productivity law puts an end to two regulatory barriers for the internationalisation of fixed income assets issued in the local market: taxes associated to interests - whose simplification will allow the assets to be held by foreign entities such as Euroclear and DTCC - and collateralisation associated to short selling and other operations in these assets - which will reduce the requirements necessary for this purpose.
We believe this will lead to an increase in the local debt market’s liquidity and depth.
How was the derivatives market born in Chile? Could you tell us more about it?
In 2015, Santiago Exchange officially launched the first regulated derivatives market in Chile, to expand the supply of financial instruments and to offer quality service, efficiency and high standards of innovation and technology to all our clients.
We believe derivatives will allow great advances in the process of diversification, risk management, liquidity and depth of the local capital market.
Currently, it is possible to trade futures over stock indices, currency and fixed income instruments, and in the mid-term we expect to include options.
Once we reach the complete derivatives product offer, the daily total traded volume of futures and options could reach around US$1 billion to US$1.5 billion, equivalent to what we trade in the spot equity and debt market.
We are working on internationalising the Chilean capital market, focusing on debt and derivative products
How will the agreement with S&P enhance the Chilean market?
The agreement will allow the creation of new indices that can be useful for domestic and foreign investors. Public companies in the Chilean market will have indices based on the international methodology of S&P Dow Jones Indices, enhancing its exposure and performance worldwide.
Our market will have international standards benchmarks which will make our issuers and local capital market widely visible for foreign investors.
What role is assigned to sustainability in the Chilean stock market?
The adoption of sustainable management that generates value to its shareholders, employees, suppliers, customers and to the communities in which they are embedded is very relevant, and we are committed to promoting these matters.
Since 2014, Bolsa de Santiago has incorporated sustainability issues in its annual reports, which has led to the creation of the first integrated sustainability report, with GRI 4 methodology. This report will be published during the first half of 2017.
Since December 2014, we have been part of the Sustainable Stock Exchanges Initiative (SSE) created in 2009 by the United Nations (UN). In addition, we participated in the second annual sustainability report published by the World Federation of Exchanges (WFE), being members of the Sustainability Working Group (SWG), which works as a research and consultation centre on sustainability issues within the WFE.
We have also assumed our role as an exchange towards our issuers, intermediaries and institutional investors, incorporating the best international standards on issues related to corporate governance and market performance.
Such is the case of the first Chilean sustainability index, the Dow Jones Sustainability Index Chile (DJSI Chile), which currently comprises 21 companies of different productive sectors of Chile. There are nine more companies than the first portfolio disclosed in 2015.
Additionally, we are developing a ‘How to Report on Sustainability Issues’ publication that we expect to launch in Q4 2016, so that issuers have a guideline on how to spread Environmental, Social and Governance (ESG) aspects in which they are working.
Added to this, with EY, we prepared a ‘Responsible Investment Guide’, which seeks to spread the message that sustainability is in every investor’s action and decision.
Within the Latin American context, what are your growth expectations?
We are optimistic. Bolsa de Santiago is part of the Latin American Integrated Market (MILA) which gathers the exchanges and depositories of Chile, Colombia, Mexico and Peru. Together, we represent the financial arm of the Pacific Alliance, delivering more exposure to our markets, and a greater variety of products and opportunities for local and international investors.
The Chilean capital market has all the main characteristics to be the gateway for foreign investors to our region.