ATS Brasil has partners lined up, eyes Nov. 2014 opening

Reuters

By John McCrank

NEW YORK, Nov 14 (Reuters) - Americas Trading System Brasil(ATS Brasil) plans to open as a stock exchange in Brazil nextNovember with partner firms to be announced within weeks, theCEO of the upstart said on Thursday.

ATS Brasil will be the first competitor to Brazil's solestock-exchange operator, BM&F Bovespa, and aims tosecure a 15 percent market share in Brazilian equities tradingwithin two years of operating, said Alan Gandelman, ATS Brasil'schief executive. Within three years, the exchange aims to enterthe corporate listings business and may even go public itself,he said.

The joint-venture between Rio de Janeiro-based tradingsystems operator Americas Trading Group (ATG) and NYSE Euronext,now owned by IntercontinentalExchange (ICE), filed tobecome an exchange with Brazilian regulator CVM in June. Itexpects regulatory approval to be granted in February.

The launch of the exchange is planned for November 2014, andwill coincide with the opening of a new Brazil-based clearinghouse being formed by ATG. ATG has an 80 percent stake in ATSBrasil.

ATS Brasil may move into derivatives trading in the future,but right now it is solely focused on cash equities, where itplans to be "very aggressive" on lowering trading costs, whichare on average 15 times higher in Brazil than in other majormarkets, Gandelman said.

Within weeks, ATS Brasil will announce deals it has signedwith five partner firms that will give the new exchange tradingbusiness in return for equity stakes of up to 6 percent each.Gandelman said the partner firms are made up of two globalbanks, one Brazilian bank, one European asset manager, and oneU.S.-based broker that specializes in technology.

CLEARING HOUSE

One of the things that has prevented new exchanges fromentering Brazil has been a lack of access to centralcounterparty clearing, which is a capital-intensive venture thatensures trades go ahead even if one of the parties defaults.

BM&F Bovespa has said it would allow other firms to rent outits post-trading facilities - the only current clearing optionavailable - once the bourse has finished integrating its fourclearing houses. That could be as late as 2015, Gandelman said.

ATS Brasil had initially planned on using BM&F Bovespa'sservices, Gandelman said, but after doing its homework, ATG sawan opportunity to create a plain vanilla facility that onlyclears cash equities and exchange-traded products.

With no margining involved, the clearing house will costjust 150 million Brazilian reals ($65 million), includingmandatory capital, spending on systems, and the starting of thebusiness, Gandelman said.

ATG expects to file the application for the newclearinghouse, and to announce a consortium of backers for theproject, before Dec. 15, Gandelman said.

The consortium will include ATG, Brazilian risk consultantRisk Office, as well as one major Brazilian commercial bank, andone clearing house operator - either ICE, LCH.Clearnet, whichis majority-owned by the London Stock Exchange Group, orClearstream, owned by Deutsche Boerse.

ATS Brasil will not be a direct owner of the clearinghouse,which aims to attract other customers, such as U.S.-based DirectEdge, which has said it would like to set up shop in Brazil, buthas been faced with lengthy delays in gaining access to BM&FBovespa's clearinghouse.

NEW STAKEHOLDER

NYSE Euronext, which has a 20 percent stake in ATS Brasil,is providing technology for the new exchange. The New York StockExchange parent was bought by Atlanta-based ICE for $11 billionin a deal that closed on Wednesday. ICE's CEO, Jeff Sprecher,said he will announce which parts of NYSE will be integratedinto ICE next week.

Gandelman said that while he has not yet met Sprecher, he isconfident that ICE, which owns a stake of around 12 percent inCetip S.A., a Brazil-based over-the-counter fixed incomedepository, will make a good partner for ATS Brasil.

"The new owner is known for being aggressive, he is knownfor investing a lot in what he believes, and he wants to beglobal. And Brazil, because of Cetip, has been on his radarscreen. So for us, that sounds great," he said.

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