Bovespa Brazilian Stock Markets

¶ … Brazilian Stock Market's operation and its strategy for expansion.

Use eight sources of information.

The BOVESPA plays an integral role in the economics of Brazil and the Latin American stock market system.

Brazilian Stock Market

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The Brazilian Stock Market, better known as BOVESPA, the San Paulo Stock Exchange was originally founded in 1890 and since then has provided services to the financial market and the Brazilian economy. Initially, BOVESPA and the other Brazilian exchanges came under the state government.

However, all that changed in 1965, when the Brazilian financial system and the capital markets became non-profit self-regulating institutions. The 1960 led to changes in the BOVESPA that has improved the quality of service and upgraded the technology platform making it more user friendly for investors.

The BOVESPA also implemented automated trading software using real-time trades via a computer network. This was an instrumental factor in introducing the options market to Brazil. The 1990s brought with it, computer assisted trading and a new electronic trading system. As evidenced the BOVESPA continuously upgraded and advanced using information technology to develop and expand their markets and presence as a major stock-trading center.

Categorically, the BOVESPA operates through two trading systems under the guidance of member firms. The member firms plan the budget, approve the financials and elect new Board of Directors.

The Brazilian economy is the 11th largest in the world and is considered to be a strong performer. Brazil's political and economic developments have a major influence on global stock markets and bear watching.

When we look at the international picture, particularly in Latin America, we can see how closely tied economies are to each other. When Argentina, Brazil's neighbor defaulted on their debt in 2002, the Argentine peso collapsed and the country went into chaos. Of course this caused a currency panic in Brazil and currency speculators began to flood the market.

In December 2002, the U.S. had to help bail out Brazil from its economic woes. Given Brazil's size and importance as Latin America's largest economy, a Brazilian default could have had disastrous repercussions on already teetering markets.

The Brazilian president, Fernando Cardoso, was given high praise from the IMF for his economic stewardship in trying to avoid financial disaster. Brazilian financial markets came under heavy pressure during 2002 amid fears that a leftwing candidate could win the presidential vote in October jeopardizing Brazil's ability to service its $250bn public debt.

Today, Brazil's currency is holding steady and the benchmark index has rebounded. According to Carlos Henrique Abreu, head of the equities desk at Socopa Corretora Paulista, a San Paulo brokerage, "the market has been overreacting to new measures." "In the long run, this is good for the country, which is in turn good for stocks and the market has realized that."

An interesting international note, one third of all of Brazil's domestic debt is linked to the dollar. This can lead to currency demands and bear out favorably for the dollar vs. The real. "The measures are positive, but I don't think it will do away with the volatility in the currency market," stated Hideaki Iha, a senior currency trader at a local brokerage, Souza Barros.

Because BOVESPA is self-regulated, the powers to establish policies and procedures are conferred upon the organization automatically and they monitor the activities related to trades of:

Brokerage firms

Listed companies

Investors

BOVESPA has remained an innovator of changes that have provided this major stock market center with the ability to compete internationally with seven indexes:

Bovespa Index

Brazil Index

Brazil 50 Index

Valor Bovespa Index

Electric Power Index

Special Corporate Governance Stock Index

Telecommunication Sector Index

There is also a single-stock futures market and an options market that includes, Ibovespa Options, IBX Options and Options on IGP-M, as well as a Corporate Bonds Market. BOVESPA has continued to expand since its founding. This is further evidenced by their development of the Home Broker and After-Market Systems in 1999. These two systems were especially designed with the small and medium-sized investor in mind and allows them to easily participate in the market.