BM&FBovespa Falls Most in Two Months on Competition Concern

BM&FBovespa SA, 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 trading platform for Brazilian equities.

BM&FBovespa, which currently has a monopoly on stock trading in Brazil, dropped 4.4 percent to 10.11 reais at the close in Sao Paulo, where the company is based. The benchmark Bovespa index lost 0.8 percent.

Direct Edge, 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.

The U.S. exchange has spoken with BM&FBovespa about using their clearing service, Chief Executive Officer William O’Brien said today on a conference call, declining to comment on the outcome. “We have a variety of clearing alternatives we could pursue,” he said.

The company hopes to take “substantial” market share, O’Brien said in a telephone interview.

Bats Global Markets said in February it was discussing plans with Claritas Investments to build a new equities exchange in the country. Bats declined to comment on how those plans stand today, according to an e-mailed statement.

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

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