By Alexander Ragir
May 29 (Bloomberg) -- ICAP Plc, the newest arrival to Brazilian stock trading, is offering discounts on commissions to attract individual investors in Latin America’s biggest market.
The world’s largest broker of transactions between banks is charging fees as much as 75 percent below those offered by its largest competitor to gain customers in a market where equity transactions climbed to a record and the benchmark stock index rose 41 percent this year.
The London-based firm opened in Brazil in April, trailing behind Goldman Sachs Group Inc., Credit Suisse Group AG and Morgan Stanley. ICAP’s customers can choose the fee they’ll pay, from as little as 5 reais ($2.50) per trade, compared with 20 reais charged by Agora Corretora, the country’s largest electronic broker for individual investors. The strategy is meant to mimick British rock band Radiohead’s pay-what-you-want offer for digital downloads of its “In Rainbows” album.
“The philosophy with Radiohead is that people react by saying: ‘that’s awesome,’” Alan Gandelman, president of ICAP Do Brasil DTVM Ltda, said in an interview from the company’s Rio de Janeiro headquarters. “They like the idea. They like to choose.”
So far, ICAP’s trading of stocks and derivatives totals 7 percent of the volume handled by Credit Suisse, the country’s biggest brokerage, according to BM&FBovespa SA exchange data provided to local firms. Derivatives are financial instruments whose value is based on another security or benchmark.
Video Chats
Equity trading in Brazil rose to an average 339,901 trades a day this month through May 27, a 28 percent increase from January and 0.7 percent above the previous record in October, according to exchange data.
The Bovespa index rebounded from last year’s 41 percent tumble on signs the economy is recovering after the central bank cut interest rates to a record low. Policy makers reduced the benchmark rate to 10.25 percent in April from 13.75 percent at the end of 2008 and 19.75 percent four years earlier, making stocks more attractive relative to bonds, said Gandelman, 39.
ICAP’s discounts may not be enough to gain market share, said Alvaro Bandeira, a director at Agora, a unit of Banco Bradesco SA, Brazil’s second-largest non-government bank.
“Individual investors are looking for help and advice more than a lower price,” said Bandeira, whose Rio-based firm charges 20 reais per online trade. “We have a TV station, analyst reports, forums, chats and even video chats with experts.”
Credit Suisse, Itau
Electronic trading accounts for 14 percent of all volume on BM&FBovespa, according to exchange data. Another 13 percent of trading comes from individual investors who call through to brokerages, said Paulo Levy, the head of investing for private investors at ICAP in Brazil.
Levy, a Radiohead fan who helped set up London-based HSBC Holdings Plc’s online trading in Brazil before joining ICAP, said he pitched the pay-what-you-want campaign to Gandelman. ICAP offers investors a fee range of 5 reais to 20 reais.
“We needed a way to differentiate ourselves,” Levy said.
ICAP Do Brasil, which employs 90 people, traded 935.5 million reais of securities in the first four weeks of operations that began April 22, Gandelman said. Zurich-based Credit Suisse’s average monthly volume in Brazil this year was 12.6 billion reais compared with 9.7 billion reais for Sao Paulo-based Itau Unibanco Holding SA, according to BM&FBovespa data.
Expansion, Consolidation
In addition to setting up services for individual investors, ICAP acquired Arkhe DTVM, a Rio-based brokerage that focuses on futures trading, in November for $17 million. That purchase is still subject to central bank approval.
ICAP fell 1.5 percent to 394.5 pence yesterday and is up 37.2 percent this year, compared with a 1.1 percent decline in the FTSE 100 Index. The stock dropped 60 percent in 2008.
Madrid-based CM Capital Markets Holdings SA expanded its local brokerage in February. Carlos Kawall, the chief financial officer for BM&FBovespa, said in a May 20 interview that more foreign financial firms may move into the country.
London-based Barclays Plc will open a local brokerage this year, Valor Economico reported in February. Sarah Naegele, a New York-based spokeswoman for Barclays, declined to comment.
“Everyone’s now coming in,” said Francisco Mussnich, a mergers and acquisitions lawyer at Barbosa Mussnich & Aragao in Rio. “Expanding will be the first step and consolidation will be the second. It’ll take a few years.”
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net
Posts
No comments:
Post a Comment