The Colombian stock exchange proposed curbs stock-repurchase agreements after the nation’s largest broker, Interbolsa SA, used them to finance bets on a textile company and later collapsed.
The rules aim to reduce risk while boosting confidence and liquidity, according to a draft posted late yesterday on the website of the exchange, Bolsa de Valores de Colombia SA. Repurchase agreements on an issuer’s shares would be capped at 25 percent of shares in circulation, according to the draft.
“It’s completely normal after a financial crisis to have a regulation that changes existing rules to avoid something similar going forward,” Bolsa President Juan Pablo Cordoba said today at a press conference in Bogota. “We’ll change them to improve confidence and give more security to operations in the market.”
The exchange is discussing the proposed rules with the Finance Ministry, he said.
Interbolsa was seized by regulators after a liquidity crisis when it was unable to secure funding to cover obligations including stock-repurchase agreements on textile company Fabricato SA, the brokerage’s chief executive officer, Rodrigo Jaramillo, said Nov. 2.