The discussion about compatibility between market infrastructures, the so-called interoperability, returned to the center of the agenda amid the emergence of new stock exchange projects in Brazil. For Edivar Queiroz, CEO of CSD BR, one of those seeking space in this sector, the lack of connection between depositories and settlement systems tends to create parallel markets and limit competition.
“Without interoperability, islands are created. With interoperability, an ecosystem is created”, he argues.
Queiroz uses an analogy with the telecommunications sector. “Interoperability means you can call anyone from your cell phone without worrying about the operator you receive the call from,” he says. He recalls that the functionality transformed the telephone market, increasing competition and options for users – something that should now occur in a similar way with the capital market.
Opportunity with security!
Interoperability between depositories is provided for in the Central Bank and CVM rules, but in practice the mechanism has not yet been widely implemented. Today, infrastructures operate in a segregated manner, which means that assets registered in one depository do not automatically circulate in another, creating a barrier for new competitors.
“When these infrastructures do not communicate with each other, the investor is limited”, comments Queiroz. “In the end, the investor loses freedom of choice and the market loses efficiency and competition.”
New competition cycle
The debate gains traction at a time of potential competitive rearrangement. In addition to CSD, Base Exchange, linked to the Mubadala group through Americas Trading Group, and A5X announced plans to operate organized markets in Brazil, in different segments.
Together, they have the challenge of enabling competition with B3, which concentrates exchange, clearing and depository activities in the country. For Queiroz, interoperability is the mechanism capable of making market opening compatible with preserving scale, that is, without compromising liquidity and security.
Without this integration, the executive assesses, the entry of new operators could result in fragmentation of volumes. With interoperability, different platforms would compete on price, technology and services, while maintaining the possibility of accessing the same set of assets.
Strategy
CSD focuses on reducing costs – it developed its own technology, instead of licensing a foreign one – and sees room for market growth. In fixed income, for example, the reduction in bilateral negotiations and greater symmetry of information would lower transaction spreads, but would potentially increase trading volume, argues the company.
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The candidate for the Stock Exchange seeks to consolidate itself as a complete market infrastructure. The company has already received authorization to act as a depository and settlement chamber, expanding its scope beyond asset registration. What essentially remains is the central counterparty license (CCP), a necessary step to operate as a full exchange.
The expectation is that the technological structure will be completed before obtaining the license, the schedule of which depends on the regulatory process at the CVM and the Central Bank.
In the short term, the company focuses its efforts on fixed income and derivatives. The CDB trading platform was launched this month, and settlement volumes have increased in recent months. .
