The jumbo merger between the Brazilian stock and derivatives markets earlier this year highlighted the growing power of Brazil’s capital markets: the new enterprise, BM&F Bovespa, is expected to be the world’s third largest listed exchange. Innovative products are bound to follow the tie-up, with equity derivatives and exotics catching up with the already liquid foreign exchange and interest rate vanilla markets.
Yet the development of Brazilian derivatives continues to be hobbled by protectionist tax laws and the product range is, for now, basic. Trading in areas that should be Brazil’s strongest – such as commodities – is taking place offshore, especially in the US. Moves are now afoot to stimulate markets and bring home the bacon (or at least soya and sugar) from the Americans.
