June 13, 2023 | Stamford, CT — The combination of increasing demand for Latin American bonds from both international and local investors and continued technology innovation is driving rapid growth of electronic trading in Brazil, Mexico and other major Latin American markets.
The institutional investors taking part in a new study from Coalition Greenwich executed nearly half (46%) of their hard currency Latin American bond trading volume electronically last year.
Three-quarters of those institutions—who reside in Latin America, Europe and the United States—plan to increase their e-trading activity going forward.
“This bodes well for the providers of electronic platforms and for all investors in Latin American bond markets, who will likely see liquidity, transparency and market access improve as the markets continue to modernize,” says Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology and author of The Growth of Electronic Trading in Latin American Bond Markets.
The $3.3 trillion bond market in Latin America has grown significantly over the past decade, with both local and global investors demonstrating increased interest in the region’s debt securities. The continued development of a robust secondary market for trading Latin American debt securities, ideally one that is electronic, is a key piece of the path forward.
Among study participants, a majority expect to increase their use of electronic trading in sovereigns and corporates in both local and hard currencies. These investors see clear benefits to e-trading. One-third of investors in the study see e-trading improving liquidity—in other words, improving execution quality.
“Those benefits will increase over time,” says Kevin McPartland. “The more investors encourage their brokers to interact on the screen, the more liquid those markets will become. And that liquidity will then bring more market participants, investors and liquidity providers alike, online—a virtuous cycle.”
The Growth of Electronic Trading in Latin American Bond Markets presents the full results of a research study with 41 market participants on Latin American electronic bond trading, including data on e-trading adoption rates and usage, projections for growth, what investors are looking for in an e-trading platform, and insights on specifics issues like all-to-all trading and venue selection.