BM&FBovespa Drops Most in Two Months as Direct Edge Plans Brazil Platform

BM&FBovespa SA (BVMF3), the operator of Latin America’s biggest securities exchange, fell the most in two months on plans by Direct Edge Holdings LLC to start an electronic stock-trading platform for Brazilian stocks.

BM&FBovespa, which currently has a monopoly on stock trading in Brazil, dropped as much as 4.5 percent and was down 3.4 percent at 10.22 reais at 11:28 a.m. in Sao Paulo, where the company is based. The benchmark Bovespa index lost 1.4 percent.

Direct Edge Holdings, the fourth-largest U.S. equity exchange, plans an electronic stock-trading platform in Rio de Janeiro that will start operating in the fourth quarter of 2012, pending regulatory approval, according to a statement today from the Jersey City, New Jersey-based company.

“This scares people,” Pedro Galdi, chief strategist at Sao Paulo-based brokerage SLW Corretora, in a telephone interview. “But I’m a bit skeptical. I think it’s more smoke than fire.”

Direct Edge faces “difficulties” in its plans to start a stock-trading platform in Brazil as BM&FBovespa is unlikely to allow the company to use its clearing services, Regina Longo Sanchez, an analyst at Itau Unibanco Holding SA in Sao Paulo, wrote in a note to clients today. The company also will have to confront hurdles including approval by the securities regulator, known as CVM, and the central bank, Sanchez said.

“A second stock exchange in the country will spur even greater investor participation through competition that drives innovation and price improvement,” William O’Brien, Direct Edge’s chief executive officer, said in the company’s statement.

BM&FBovespa lost 19 percent this year through last week, compared with an 18 percent for Brazil’s 68-member benchmark.

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net

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