Author Name: Jose Antonio Martinez, CEO, Bolsa de Comercio de Santiago
1. Could you give us a bit of background about your exchange?
The Chilean stock market is one of the strongest markets in Latin America. There are three Stock Exchanges, being Santiago Stock Exchange, the most important in terms of traded volume, number of brokers and products and infrastructure development. This is confirmed by our market share of 88% in equity, 93.6% in fixed income and 99.8% in other financial instruments, giving us a total participation of 96.9% in all markets. The total market capitalization at the end of 2013 exceeded US$266,000 million.
Santiago Stock Exchange has built a great stock market since it began 120 years ago, with our vision firmly fixed on the future to support dynamic growth. This has required the development of a wide range of financial instruments and services for local and foreign investors.
Santiago Stock Exchange uses a vertical integration business model, and is directly involved in the entire operational value chain in the capital markets and indirectly in custody, providing multiple business opportunities for investors, issuers and brokers. Santiago Stock Exchange has developed as a multi-market exchange, offering equity products (shares, mutual funds), fixed income instruments (long-term and short-term), money market, currencies and soon a derivatives market (futures and options), making us a leading stock market in Latin America.
The stock market is controlled by the Chilean Securities and Insurance Supervisor (SVS), which is part of the Finance Ministry and is responsible for monitoring activities and entities that are involved in the Chilean stock market.
2. How active are foreign investors in your exchange?
How accessible is your market? Santiago Stock Exchange makes significant annual investments in technology, in order to offer local and foreign investors, brokers and issuers, a first class service in tune with current market demands.
Since 2010 the equity market has allowed international customers to route orders via DMA using the FIX communication protocol, as well as to distribute our market data through the largest international vendors and directly to customers. We are migrating our fixed income and money market instruments trading systems to a new platform, which will provide our customers a higher processing speed and capacity, access to new trading functionality, ability to follow-up on orders and their status, automatically record trades and achieve a greater dissemination of information through Market Data. It will also provide international customers access to the market via DMA using FIX technology.
We have developed integration initiatives to provide foreign investors with better access and knowledge, specifically the Integrated Latin American Market (MILA). This has attracted attention from the international financial community, and has become a major investment hub in Latin America. MILA is the integration of stock markets and securities depositories in Chile, Peru, Colombia and shortly Mexico. Its purpose is to achieve better market exposure in these countries, as well as improve the supply of products and opportunities for local and foreign investors.
3. What new projects/products are you currently working on?
Santiago Stock Exchange plays an important public role in the financial markets, and therefore our main interest is to promote the development of the stock market and consolidate its position as a strategic institution supporting the economic growth of Chile. Therefore, we are involved in a significant number of projects, some of which I will mention below.
On one hand, the derivatives market is currently awaiting regulatory approval by the Chilean Securities and Insurance Supervisor. This new market will allow us to significantly improve diversification, risk management, liquidity and the depth of the domestic capital market. Following approval, we will begin with derivatives transactions trading IPSA Futures, Foreign Currency Futures (US dollar/Chilean peso) and Fixed Income Futures.
We have developed this market with the cooperation and consultancy of BM&FBovespa, one of the largest global derivatives markets. We have developed the CCLV Central Counterparty, our subsidiary company, whose objective is to manage clearing and settlement systems for financial instruments, acting as central counterparty for stock markets and derivatives, as well as a clearing house for fixed income market, money market and repos.
At the end of 2013 we entered the ETF market with the creation of "ItNow IPSA", the first ETF that replicates the profitability of the 40 largest companies by equity participation in the local market. This unprecedented ETF will facilitate investment strategies that seek exposure to the Chilean market, and is the first step in the development of a new market for locally issued ETFs. This is a very important milestone for Santiago Stock Exchange, as we play an important role in the development of the market and in its commitment to expand the supply of financial instruments.
A Sustainability Index has been created, which promotes the incorporation of sustainable and socially responsible processes within the companies that participate in the Chilean stock market. This will give greater visibility to those companies that comply with the relevant international standards and provide more information to investors.
Finally, we signed an agreement with TSX Venture Exchange, to work together on the implementation of a venture capital market segment, designed to facilitate the listing of mining companies on an exploration stage. Thus, we are harnessing the experience of Toronto Stock Exchange, in particular its TSXV market, replicating this business model and standardizing it to fit the Chilean market.
4. What are the challenges you see in your market today and in the future?
One of the main challenges we face now and in the future, is to adapt to the dynamism of the market and its requirements.
Therefore, along with developing new products and services, we are working on improvements of the regulations in the areas of trading, market follow-up, broker's conflicts of interest and information from issuers. These initiatives all serve to encourage new participants to enter the market, to generate greater competition, to promote liquidity and to secure high levels of trust and transparency within the market.
5. How do you assess your exchange's position at a time of increased globalization?
The deepening and widening of the stock market, the incorporation of new technologies, the integration of other financial markets and the standardization of operational rules to meet international standards have allowed us to become one of the most important Exchanges in Latin America. While maintaining our leadership in the region and strengthening our internationalization through new markets and products.
Nevertheless, trust, transparency and robustness have been our fundamental drivers and these have been recognized by the markets, thus satisfying the needs and expectations of investors, intermediaries and issuers seeking new alternatives to finance their growth projects.